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A beer truce is declared

Well, glory be.

Beer brewers and distributors and have been battling for years over what can be bought and sold at breweries across Texas.

This week, two key groups in the fight finally signed a truce.

The Texas Craft Brewers Guild, which represents the interests of local breweries, and the Beer Alliance of Texas, which represents the interests of beer distributors, have inked an agreement proposing that Texans be allowed to buy up to two cases of beer per person, per day in places where beer is brewed.

[…]

Regulatory reforms passed in 2013 allow breweries that produce fewer than 225,000 barrels, or about 3 million cases, of beer each year to sell up to 5,000 barrels for on-site consumption. Proposed bills filed by Rep. Eddie Rodriguez, D-Austin, and Sen. Dawn Buckingham, R-Lakeway, would expand the law to allow the beer to be taken to-go from local taprooms.

The agreement between the two sides came in the form of a proposed new version of the Rodriguez and Buckingham bills. The added provisions include keeping the 5,000 barrel cap, limiting the amount that can be taken home and for packaged beer to have alcohol content posted clearly on its labels.

The compromise would also require breweries to report beer-to-go sales to the Texas Alcoholic Beverage Commission on a monthly basis.

And the groups agreed to refrain from lobbying to change the fluid-ounce caps of malt beverages for 12 years.

As you may recall, I discounted the possibility of this happening as the session was starting. I’m delighted to be proven wrong, though as the story notes the bill still need to pass. The other lobbying group, the Wholesale Beer Distributors of Texas, are not part of this agreement and thus could work to defeat it. It does feel like there’s an end in sight, which would be good news for everyone. Let’s get this done.

Is the craft brewing business in a slowdown?

Item one.

Alluring as those wide-open skies and rugged vistas may be, the hardscrabble life in West Texas can be unforgiving. And so it was last year for the region’s popular and award-winning craft brewer, Big Bend Brewing Co., despite a planned expansion to San Antonio that might have turned its luck around.

In December, the 6-year-old brewery surrendered to multiple challenges and announced it was shutting down Big Bend Brewing’s hometown operations and taproom in Alpine and abandoning the move to San Antonio.

“We had high aspirations and lofty goals, and we did everything we could to achieve them,” read the Dec. 21 Facebook post announcing the closure. “We remain hopeful and are working hard to make the stoppage temporary. The goal is to come back better than ever. We are no stranger to adversity – forging a craft beer brand in the rugged frontier of West Texas is no easy task.”

[…]

“The main trend is if you’re a local brewery doing small-batch beers, with an old-school small brewpub and restaurant model – those that are still popping up – if they are well-enough financed, they seem to be doing OK as local or hyperlocal places,” said Travis Poling, co-author of San Antonio Beer: Alamo City History by the Pint.

“But the time of the large regional breweries seems to have kind of come and gone,” Poling added. “Everybody wants to be the next Sierra Nevada or Sam Adams, but … the barrier to entry is a lot higher because there’s a lot more competition not just from larger regional brewers, but also the regional breweries bought up by Anheuser-Busch, Coors, and others.”

The Brewers Association reports there are 6,372 breweries in the nation, and of the $111 billion overall beer market, craft beer accounts for $26 billion, up 5 percent in 2017. Texas ranks ninth in the country for most craft brewers with 251 total breweries, or 1.3 per capita. The industry had a $4.5 million impact on the state’s economy in 2016.

In March, Brewers Association Chief Economist Bart Watson wrote, “Compared to many parts of the U.S. economy, craft’s 5% growth rate [in 2017] is quite strong. That said, it’s probably not as strong as many breweries expected as they built their business plan.”

“It’s a difficult time to invest in craft beer,” [Mahala Guevara, vice president of operations for Big Bend Brewing] said. “There’s been an enormous number of breweries opening in the last five years, and we’ve seen a lot of high-profile closures and reductions-in-force and layoffs. Five years ago, the market was going wild, everyone was making money, experiencing tremendous growth. Now there’s depressed investment in craft beer, so even though people are interested, everyone wants to wait out the business cycle.”

I don’t think the cash flow problems of one brewer in a rural part of the state is representative, but I’m keeping an open mind. Item two:

“I think people think Houston is getting saturated, because they haven’t been to a big beer city,” Platypus Brewing’s head brewer Kerry Embertson told me last week during an interview. “Like, Houston’s beer scene is relatively new. Yes. There are the St. Arnold and Southern Stars that have been around forever. But there’s a bunch of people like us that have been around three years or less. There’s plenty of room to make good beer, and customers will come to your place. Especially as spread out as this city is.”

John Holler, who co-owns Holler Brewing along with his wife Kathryn, just a couple blocks from Platypus echoed his colleague’s thoughts.

“I think Houston can definitely accommodate more breweries,” Holler said, during that same interview for an upcoming story. (Sorry! No spoilers!) “The key is, you know, we can accommodate probably 20 or 30 more Platypuses or Hollers. But not 20 or 30 more Saint Arnold.”

This story was based in part on a recent NYT story on the slowdown in growth of the craft brewing industry, and noted the switch from beer to cider at Town in City Brewery. As far as Houston goes, I think John Holler is exactly right. There’s still plenty of room here for small breweries that mostly serve the neighborhoods they’re in and a few bars and restaurants in town. Very few, if any, of those places are going to grow up to be Saint Arnold, or Karbach. Nothing wrong with that, and no reason to panic. Just a bit of perspective.

Time again for craft brewers to get their legislative hopes up

We’ve seen this movie before. I hope for a better ending, but I’m keeping those hopes modest.

Texas is the only state in the country that prohibits some breweries from selling six-packs, bottles and growlers of beer to-go, but a pair of bills filed for consideration during the 86th legislative session aim to change that.

Sen. Dawn Buckingham (R-Lakeway) and Rep. Eddie Rodriguez (D-Austin) introduced companion bills SB 312 and HB 672, respectively, which would allow manufacturing breweries to sell beer to drinkers for off-premise consumption.

[…]

In 2015, North Texas’ Deep Ellum Brewing Co. and the now-defunct Grapevine Craft Brewery sued the Texas Alcohol and Beverage Commission over the issue and lost. Earlier this year, the court ruled in favor of the TABC, citing the potential impact to Texas’ three-tier system, which aims to avoid conflicts of interest between alcohol manufacturers, distributors and retailers.

In the decision, however, the judge noted that off-premise sales were granted to distilleries and wineries by the legislature, not the courts. That and the support shown for to-go sales during both the Republican and Democratic conventions in 2018 is giving the Texas beer industry hope that the legislation will pass.

I noted the lawsuit back in 2015, but missed that it had been decided. The story here has always been that the beer distributors’ lobbyists are mightier than everyone else. Maybe this year it will be different – hope springs eternal – but it is always safer to bet on the house. Alas.

A switch to cider

Some craft brewing news of note.

The taps, they are a-changin’ at Town in City Brewery, where owner Justin Engle has decided to pause beer brewing and focus instead on creating hard cider.

The folks at Town in City began building their reputation in cider about a year ago, when they launched Houston Cider Co., in a shared space with the beer-brewing operation. But this month, Engle said he decided not to renew his brewer’s permit when it expires.

“We were given legal advice that if we were to renew our brewer’s permit prior to the TABC Sunset hearings, that we may be stuck for two years in old TABC rules,” Engle said of the current fight between brewers and legislators to modernize state laws for alcohol sales. “If the new rules are passed, it would still take us two years to get to the next rules. So we decided not to take that gamble, and so we’re not going to renew right now.”

But that doesn’t mean things at the brewery on Cavalcade near the Heights are going quiet.

On Dec. 18, Houston Cider Co. took a leap that Town in City never attempted: It began canning. Now, three of the cidery’s mainstays — Dry, Cherry and Rosé — are available at Whole Foods and a few other shops across the city.

Cider production began outpacing beer production at the Heights brewery back in August, Engle said.

Still, cider isn’t exactly a sure thing — especially not when compared with the ever-growing popularity of craft beer. According to Drizly, an eCommerce marketplace for alcoholic beverages, only 7.1 percent of sales in the beer market went to cider in October, the most recent month for which data are available. At that same time, 26.7 percent of sales were for craft beer.

But there’s another way to read that: Cider isn’t as crowded a space.

See here for some background on the ongoing legislative battle, which begins again in earnest as the Lege reconvenes. I note that one of the two incumbents that CraftPAC had been supporting as of that January publication date was defeated in November (Tony Dale of HD136). Sure hope they backed some other winners, or the slog will be harder than it needs to be. As for cider, the story notes that there are only eight such breweries in the state, with Houston Cider Company being the only one in our fair city (there is another one based in Dickinson that is the nearest neighbor). Here’s a Leader News story from January about their debut.

I blogged about Lerprechaun Cider Company, the first local cider company, back in 2011; they had a product relaunch in 2015 and according to a footnote at the end of this 2017 Houstonia story were never brewing here and had stopped distributing here. Their domain has expired, which I think tells you all you need to know. That Houstonia story was about Permann’s Cider Company, which as of last July was on track to have a taproom downtown. Not sure where that stands – they have a Facebook page that’s had five posts since February and a Twitter account that hasn’t tweeted since last August. I guess this is a longwinded way of saying that I wish the Houston Cider Company good luck, and that hopefully some day they’ll be able to brew beer again, too.

The beer boom continues

Raise a glass.

There were a dozen craft breweries across the Houston metro before 2013, and that seemed like a lot at the time.

Now, there are 52.

The new breweries have added 344,487 square feet of industrial space — roughly the size of a 14-story office building — to the local market, according to a new report from commercial real estate firm NAI Partners.

[…]

NAI said cities in Texas are “wildly underserved.” Only 12 of the 52 breweries are inside the 610 Loop, the report said, citing data from the Houston Beer Guide.

The report is here. On the one hand, I’m a little surprised there aren’t more breweries inside the loop, since they’re very much a neighborhood business and benefit from having a lot of potential customers in close proximity. On the other hand, real estate prices are such that it’s practically a miracle any breweries are inside the loop. However you look at it, I do agree there’s room in the market for further growth. We were behind the curve on this trend for a long time, and we’re still catching up.

Beer delivered to your home

Who needs groceries, am I right?

Favor, founded in Austin in 2013, prides itself in delivering almost anything in under an hour. But until now, beer and wine — long the No. 1 request from customers — was among the missing.

Favor finalized all the proper permits and licenses to deliver beer and wine in late 2017 or early 2018. But it was the partnership with H-E-B — and the grocery company’s wide selection — that made the delivery service possible, [Jag Bath, Favor CEO and H-E-B chief digital officer] said.

Favor will offer H-E-B’s entire beer and wine selection with no minimum order size. Because every H-E-B store is tailored to its neighborhood, the selection will vary by city. Houston-area selections will include such craft brands as Buffalo Bayou Brewing, No Label Brewing, Lone Pint Brewery and 8th Wonder Brewery, and wines from the Texas Hill Country.

This isn’t the first beer delivery service in Houston. HopDrop launched late last year to provide local craft and hard-to-find beers.

Oftentimes, it delivers brews that are available only on draft.

HopDrop also provides on-demand delivery in under an hour. Customers place an order online, and a driver is dispatched to a partner bar. That bar fills a 32-ounce can, called a crowler, with beer and gives it to the driver for home delivery. HopDrop has partnered with bars throughout the Houston area, from Spring to Katy, from downtown Houston to Webster, to ensure customers receive their orders in less than an hour.

The delivery fee is $5.99 plus the cost of beer. HopDrop also offers a monthly subscription service that waives the delivery fee and provides customers same-day orders from any partner bars throughout the greater Houston area. This allows a customer in Katy to get beer from a bar in Spring.

Its focus on beers typically unavailable in grocery stores will differentiate HopDrop from the new delivery service provided by Favor, co-owner Steven Macalello said. He isn’t worried about the competition. In fact, he thinks it’s good publicity for beer delivery overall.

I get the market for home delivery of groceries. Not used it myself, but I see why people do. This one’s a little less clear to me – are there really that many people who need an on-draft microbrew brought to their door? Maybe that’s just a failure of imagination on my part. I guess if you’re the grocery-delivery consumer anyway, or maybe if you’re just grocery-delivery-curious, being able to add a six-pack to the order sweetens the deal. Is this something you would use?

Microbreweries organize again

About time.

Craft brewers are asking beer fans to put their money where their thirst is.

Six weeks before state primary elections, the Texas Craft Brewers Guild on Monday launched a political action committee to raise money and awareness to challenge “archaic, anti-competitive beer laws” it says are holding back an industry poised for dramatic growth.

The PAC already has raised more than $40,000 from among its approximately 250 brewery members, with the largest individual donations coming from the owners of Austin Beerworks and Saint Arnold, Live Oak and Deep Ellum Brewing Cos. Much of the money raised by the new CraftPAC will go to support state legislative candidates who support the brewers’ agenda, guild executive director Charles Vallhonrat said

CraftPAC so far has donated $1,000 each to two incumbent legislators – one Democrat and one Republican – in the Austin area.

“We intend to influence where we can,” Vallhonrat said.

Here’s the CraftPAC finance report for January. The legislators in question are Reps. Eddie Rodriguez and Tony Dale, though I’m sure there will be more. It’s one thing to give money to a friendly incumbent in a friendly district, but it’s something else altogether to contribute to someone who’s looking to take out an enemy. We’ll see how seriously they decide to play.

Brewbound has more details:

Initially, CraftPAC will focus on legalizing of to-go sales from production brewery taprooms, which Texas law currently outlaws. Although the state’s manufacturing breweries are not allowed to sell beer for off-premise consumption, the state’s brewpubs, wineries and distilleries are allowed to sell their products to-go.

Speaking to Brewbound, Texas Craft Brewers Guild Executive Director Charles Vallhonrat said Texas distributors have had a financial edge over brewers after giving more than $18 million in political contributions to lawmakers. CraftPAC, he added, is a way to level the playing field.

“We want to be on the same field,” he said. “We know that they have big bats, but we need to be on the same field to say we’re in the game.”

CraftPAC board chairman and Austin Beerworks co-founder Adam DeBower added that Texas’ brewers haven’t had a voice in the legislature since 2013, when several lawmakers who supported brewers retired or moved on.

“We don’t have any champions left,” he said.

[…]

Vallhonrat said last year’s passage of House Bill 3287 — which put tighter restrictions on how beer that is sold for on-premise consumption at brewery taprooms — was the catalyst to the formation of CraftPAC.

“The blow we received from 3287 showed the overwhelming power that the distributors wield,” he said. “That they could influence a bill that absolutely no brewery supported, and they could go around saying this was for the protection of breweries and convince the Legislature and get it passed, that really demonstrated what we’re fighting against.”

In 3287, Texas lawmakers changed the way the state’s barrel cap is calculated, adding production across multiple brewing operations rather than from individual facilities. Now, breweries making more than 225,000 combined barrels annually will be required to repurchase their own product from a wholesaler in order to continue selling beer for on-premise consumption in their taprooms.

In the announcement of CraftPAC, the Guild also cited the 2013 passage of Senate Bill 639, which prohibits breweries from selling their distribution rights to wholesalers, and led to a lawsuit that will be decided by the Texas Supreme Court.

Vallhonrat told Brewbound that CraftPAC will also work to make other “common sense updates” to Texas’ alcohol code such as eliminating the distinction between “ale” and “beer.” According to the Texas code, an ale is a beer above five percent ABV while a beer is under five percent ABV. Such distinctions are costly, and add market confusion and work for brewery owners, he argued.

DeBower added that CraftPAC would work to equalize licensing differences between breweries and brewpubs. Currently, brewers are required to have a manufacturer’s license while brewpubs receive retail license and are afforded different privileges, such as off-premise sales.

If you’ve read this blog for any length of time, you know what I think of this state’s ridiculous, anachronistic, and extremely consumer-unfriendly beer laws. (If you’re new here, you can now probably guess.) I support all of this, of course, but I’m shaking my head a little because this is at least the third separate effort to organize and whip up public opinion in favor of modernizing the beer codes. There was a bipartisan blog-based effort in 2007, of which I was a part, and the now-dormant Open The Taps group that helped spearhead the 2013 laws that represented the one step forward we have taken. The experience since then shows that a movement can never take anything for granted – what has been done can be undone, or at least undermined. I wish CraftPAC all the success – their Facebook page is here; give it a Like – and I especially wish that they stay around and keep at it well after they do have success.

The year in beer

It was pretty good overall for Texas craft brewers, especially in Houston.

Texas craft brewers will close the books on 2017 having made more beer, opened more breweries and garnered more national recognition for the state than ever.

Looking ahead to 2018, Houston appears positioned to keep the party going. Commercial real estate services firm Cushman & Wakefield recently identified Harris County as second in the nation for number of breweries in planning.

Many of these newcomers are likely to be small, inviting people to walk or bicycle from nearby homes or workplaces. But at least two established local companies recently announced major expansions that should continue the trend of making breweries bona fide tourist destinations.

Such developments have craft industry leaders upbeat about the future, though they are still seething over a law change enacted last spring that they believe has hurt the value of breweries and penalizes those seeking to grow significantly.

The law now forces breweries that reach a certain size to sell and buy back their own beer before they can offer it in their taprooms, cutting into profit margins. Because the size restriction includes production totals of parent companies, brewers fear it could deter future acquisitions – not just by global giants but from other craft breweries as well.

Charles Vallhonrat, executive director of the Texas Craft Brewers Guild, this week called the measure “nonsensical” and pledged to continue efforts to “modernize” the alcoholic beverage code.

Regardless, for the most part and in spite of a historic flood that knocked much of the Texas Gulf Coast onto its heels, it was a year of rewards and resilience for local brewers.

The trend these days is for the breweries to focus on taproom sales aimed at neighborhood customers. I’ve had a hard time keeping up with all the new construction, but I know there are more options near where I live now, and more are coming. One of those expansions mentioned above will be pretty close to my home, more of a bike ride than a walk but exactly the sort of thing that would be appealing on a warm day. Saint Arnold is building a beer garden in the space next door to their facility, which ought to be awesome. Maybe one day we’ll get our Legislature to fix the idiot anti-consumer beer laws we have in this state, but until then it’s on us to support these vibrant job (and beer) creators.

Microbrewery legal setback

Kind of a lousy Christmas present.

Three Texas brewers are going back to battle with the state after an appeals court reversed a decision that would have allowed them to sell their distribution rights for monetary compensation.

In 2014, Peticolas Brewing Co. (Dallas), Revolver Brewing (Granbury) and Live Oak Brewing Co. (Austin) sued the Texas Alcohol and Beverage Commission, saying a newly passed law related to who could sell a brewery’s distribution rights was unconstitutional. The mandate, which passed in 2013 with a bundle of other beer regulation reforms, said breweries may not accept payment for contracting with a distributor, but that a distributor could get a payout if it sold those same territorial rights to another distribution company.

Last year, a judge served victory to the breweries. But on Dec. 15, the Texas Third Court of Appeals reversed that decision. It stated, in part, the law does not prevent the brewers from successfully operating their businesses and that it also upholds the industry’s three-tier system, which aims to avoid conflicts of interest between alcohol manufacturers, distributors and retailers.

The decision will be appealed to the Texas Supreme Court, according to a statement from Institute for Justice, which is representing the breweries.

“It is well established that the Texas Constitution protects economic liberties, and these rights do not cease to exist when the government begins licensing and regulating individuals and businesses,” said Arif Panju, managing attorney for Institute for Justice’s Texas office, in a statement. “Every business in Texas should be concerned with the court’s ruling in this case. It is dangerous and we will ask the Texas Supreme Court to reverse.”

See here, here, and here for the background. You know how I feel about this. The three-tier system is an anachronism and a travesty, a glaring counterexample to any politician’s paeans to how Texas has a great business environment. Yet it persists, a lasting tribute to the lobbying efforts of the beer distributors and the big breweries that support them. As with so many things in this state, the ultimate solution is going to have to be a political one. Nothing will change until we elect enough people who want it to change. Austin360 has more.

Buffalo Bayou Brewing to build new facility

We remain in a craft beer renaissance.

Buffalo Bayou Brewing Co., which launched nearly six years ago with a beer called 1836 honoring the date of Houston’s founding, is preparing to break ground on a $14 million brewery and restaurant that would be one of the largest and most visible of its kind in the city.

The announcement marks another milestone for the industry, as breweries continue to pop up and civic boosters market them more heavily.

The three-story, 28,000-square-foot Buffalo Bayou Brewing facility is planned for Sawyer Yards, an artist studio-anchored development just south of Interstate 10 near downtown, the Woodland Heights and other bustling neighborhoods. The brewery would boost production capacity significantly and take fuller advantage of state laws that allow it to sell some beer on-site.

Founder Rassul Zarinfar said his business outgrew its original location, a converted warehouse near Memorial Park that is expected to ship about 8,000 barrels this year. The new facility, 3 miles away and expected to open in 2018, will provide immediate relief and could be expanded over time to a 50,000-barrel capacity.

The company has begun the permitting process and expects construction to take nine months.

The new site will include a taproom and 200-seat restaurant that would be larger and more comfortable for visitors, who currently squeeze into an un-air-conditioned corner of the brewery and a small outdoor patio to sample the wares and snack from food trucks.

Full- and part-time employment would approximately double, to about 100, Zarinfar said.

[…]

[Last month], Houston tourism officials began selling one-day, three-day and 90-day Brew Passes at VisitHouston.com that purchasers can redeem for a sample flight of beers and other discounts at six Houston breweries.

Maureen Haley, director of strategic tourism initiatives at Visit Houston, said locals and tourists alike seek out unique experiences.

“As more breweries that have smaller production get into the game, you have to go there to get the beer,” she said.

I’ve been to a few events at the current Buffalo Bayou location. Good beer, but definitely crowded and loud as a result, and parking – it’s on one of the narrow streets a block south of I-10 between Shepherd and TC Jester – is a problem. The new location sounds great, and I look forward to visiting. Also, I need to get a couple of those three-day Brew Passes for the next time my dad is in town. Best of luck with the construction, y’all.

The taproom bill is in effect

And it’s lousy, as expected.

The latest draft of beer legislation in Texas has left a bitter taste in the mouths of some craft brewers.

HB 3287, which lawmakers passed during their regular legislative session earlier this year, requires craft brewers that produce more than 225,000 barrels per year to pay a distributor to deliver their beer — even if the destination is inside their own facility.

Proponents of the legislation say it will maintain the state’s three-tier system — Prohibition-era regulations that legally separate brewers, distributors and retailers — and properly regulate large companies that purchase craft breweries. To opponents, though, the law targets newer craft breweries across the state, discouraging investment in their businesses while protecting larger and more established beer companies.

[…]

“When you get to a certain point, you’re no longer the little guy that needs the incentives,” said Rick Donley, president of the Beer Alliance of Texas, which represents distributors and supported the legislation. “Once they get to a certain annual production level, they’re really not new entrants into the marketplace.”

But [Charlie Vallhonrat, the executive director of the Texas Craft Brewers Guild] says craft brewers weren’t asking for any help from distributors, who he charges will benefit most from the new law. Carve-outs written into the law allow three craft breweries recently purchased by larger breweries to avoid the 225,000-barrel cap: Karbach in Houston, bought by Anheuser-Busch InBev; Revolver in Granbury, purchased by Miller-Coors; and Independence in Austin, bought by a Heineken-owned subsidiary.

“They claim that this is to protect the three-tier system,” Vallhonrat said. “This has nothing to do with protecting the three-tier system.”

See here for the background. As you know, I think the three-tier system should be ashcanned, but it remains the case that no one has asked me. I don’t know why it is that we can’t have a truly open, consumer-friendly market for beer in Texas, but clearly we can’t. The success that microbrewers have had in this state has been despite the existing regulatory environment, not abetted by it.

Weird taproom bill gets final passage

Bummer.

A bill that would force Texas breweries, once they’ve grown beyond a state-limited size, to sell and buy back their own beer before offering it in their own taprooms has now passed both houses of the state Legislature.

“To say that today’s outcome was incredibly disheartening would be to put it mildly,” the Texas Craft Brewers Guild said in a statement following a 19-to-10 vote in the Senate.

The House approved the measure May 6.

House Bill 3287 has been blasted as “anti-competitive,” “anti-beer” and a potential job killer by an unlikely coalition that includes Anheuser-Busch InBev and the state’s 200-plus craft brewers, which often find themselves at odds with the global giant. The Texas Association of Manufacturers and the conservative Texas Public Policy Foundation also opposed the measure.

The bill was supported by the state’s two distributor groups.

See here for the background. This all basically happened under the radar, when there was no organized grassroots efforts on behalf of the microbreweries. I suppose that says something about the power of the distributors’ lobbyists, but it’s also a reminder that what was won can be lost, and defense is at least as important a offense.

Weird taproom bill passes the House

I don’t understand this at all.

The Texas House on Saturday voted overwhelming to place new constraints on craft breweries that grow beyond a set size or become acquired by a larger beer company.

Supporters of House Bill 3287 also fought back efforts to amend the legislation to give craft brewers the right to sell some beer on site for consumers to take home – something the smaller brewers have tried to secure for years.

HB 3287, blasted as anti-competitive by critics, is opposed by the Texas Craft Brewers Guild and Anheuser-Busch InBev as well as pro-business groups and a conservative Texas think tank.

“Now we prepare for the Senate battle,” guild executive director Charles Vallhonrat said after the vote.

A 2013 package of laws gave breweries that produce less than 225,000 barrels of beer annually to sell up to 5,000 barrels directly to customers, who must drink the beer in the taproom before they leave.

As originally written, House Bill 3287 would have extended the prohibition against on-site sales to any brewery that is acquired by another company that collectively exceeds that limit.

That group includes Houston’s Karbach Brewing Co., acquired last fall by A-B InBev, which makes many of millions of barrels of Budweiser and other products across the globe.

A revision to the bill allows Karbach and the other larger breweries to continue to operate taprooms, but it would force them to sell their beer to a distributor and then buy it back for sale to the public.

The brewers say the bill would discourage investors and will hurt their ability to grow.

The only beneficiary, they say, are the distributors who already exert near-total control over how beer gets from producers to retailers.

Here’s an earlier version of this story from before the House vote and here for a story from two weeks ago when this was in committee. I can only presume the distributors were behind this bill, which should tell you all you need to know. I guess this should remind us all that despite the 2013 bill that allowed on-premises beer sales at microbreweries, the big beer distributors can still throw their weight around when they want to.

Crowler conundrum concluded

Finally.

Mike McKim held an empty aluminum can under a tap and pulled the handle, filling the can with Real Ale Brewery’s Helles beer. He fitted a pull tab lid on top, slotted the can into his “crowler” machine, and pushed a button. He told the story of the equipment’s origins, invented by Colorado-based brewery Oskar Blues.

Then the founder of Cuvée Coffee in Austin explained how the state of Texas took it away from him, fined him more than $30,000, kept it for months after judges told them to return it and sparked a lawsuit that cost him more than $40,000 in legal fees.

“[TABC charged us with] illegally manufacturing an illicit product,” McKim said. “Basically, brewing beer. We’re not brewing beer. We buy beer, put it on tap, and put it in a can. Who cares whether I’m putting it in this little Dixie cup or in a bottle or a can, what difference does it make? And that’s why we went to court.”

McKim’s battle with the Texas Alcoholic Beverage Commission officially drew to a close on Thursday, when he got his crowler machine back after more than a year of separation. The coffee bar sold its first crowler since 2015 on Friday. And McKim’s story has inspired two pieces of legislation this session.

[…]

Cuvée Coffee’s story became the impetus for HB 908, which allows draft beer to be sold for off-premise consumption in both crowlers and growlers. Its author, state Rep. Ramon Romero, Jr., D-Fort Worth, wrote a letter to TABC Executive Director Sherry Cook early March this year admonishing the agency for its failure to return Cuvée’s machine months after a judge ordered them to do so.

“TABC has so many other things to worry about,” Romero said. “We’ve been working with TABC to crack down on human trafficking, bars taking advantage of women, to some degree creating environments that are very dangerous for women. We’ve been working on all these things and if it was up to me, that would be what they’re focusing their attention on — not small businesses trying to innovate.”

On Monday morning, McKim testified in support of SB 813 and told the Senate Affairs Committee he had to spend $41,300 fighting the TABC over the crowler machine. Sen. Bryan Hughes, R-Mineola, said he filed the bill to give individuals and businesses the ability to sue regulatory agencies for unreasonable regulatory actions. He hopes it will deter agencies from pursuing potentially frivolous regulatory actions.

“If I’m an agency and I’m messing with a Texan, there is no downside, no risk from the agency’s standpoint,” Hughes said. “There’s nothing keeping the agency from pursuing a frivolous action. If they lose in court and appeal like they did with Mr. McKim, there’s nothing keeping them from pulling out all the stops and punishing a business owner. The idea behind SB 813 is to even things up a bit.”

See here and here for the background. This was always a ridiculous difference-without-a-distinction action by the TABC, and it’s good that they have admitted defeat. I support HB908, though I’d like to know more about SB813 before taking a side on it. The bottom line is that our beer laws and how we enforce them continue to be silly, though hopefully now slightly less silly. There’s a lot more room for a lot less silliness, if we want there to be.

The craft brewers’ legislative agenda

Same as it was last time.

Now that the 85th Texas Legislature is in session, lobbyists for the Texas Craft Brewers Guild, the organization that advances the interests of the state’s craft brewers, are going to push for more. Namely, they want production breweries to be able to sell beer to-go from their taprooms.

“Having off-premise sales in breweries is our No. 1 priority,” Charles Vallhonrat, the director of the guild, said.

The Texas Craft Brewers Guild had hoped to make that bill law in 2015, but that didn’t happen. As a result, the Dallas-based Deep Ellum Brewing sued the state in fall 2015 — a lawsuit that has yet to be resolved.

Currently, Texas law permits brewpubs, but not production breweries, to sell beer in bottles, cans and growlers to-go from their facility. Brewpubs can also offer beers from other breweries on-site, but they are limited in the amount of beer they can produce each year: no more than 10,000 barrels.

The inability to make off-premise sales is something brewery owners believe is unfair, and as a result, some breweries have made the switch to a brewpub license, including Austin’s own Jester King in 2013, Adelbert’s last year and, now, Blue Owl Brewing, which recently started offering cans and growlers to-go.)

[…]

“We’ve been speaking with the distributor lobbies,” Vallhonrat said. “There’s certainly opposition to it, but we’re working through it. We’re also closely watching the Deep Ellum lawsuit. But we will bring a bill about off-premise sales to the Legislature.”

Distributors, he said, are opposed to the idea because allowing consumers to buy beer to take home directly from the breweries could, theoretically, take away some of their business. That’s not how the guild sees it, however.

“We don’t see it as an alternative to retail sales,” Vallhonrat said. “People aren’t going to start buying their beer at the brewery all the time. They’ll go for special occasions, when there’s a big release or they have friends in town. Off-premise sales can drive beer tourism. It’s a great way to promote Texas beer.”

See here for some background, and here for more on the Deep Ellum lawsuit. Microbreweries won the right to sell their beer to visitors in 2013, but only for on-premises consumption. It’s still not legal to pick up a six pack to go after taking a tour at whatever microbrewery you happen to be visiting. They tried again in 2015 but got nowhere, and much as it pains me to say I’d bet against them this time as well. The argument that allowing this would negatively affect the distributors in any meaningful way is ludicrous – who would ever choose to drive to a microbrewery to buy a case as opposed to picking one up at a retail location? It makes no sense, but that’s what they’re going with, and it’s always easier on issues like this to play defense, since running out the clock is all you need to do. I don’t know if any specific bills have been filed for this yet, so check with the Craft Brewers Guild for further information and any action items to take up.

A win for beer

Hooray!

All you want for Christmas is a crowler to go? It probably won’t happen that quickly, but an administrative judge’s recommendation could move the state a step closer to letting bars and restaurants sell takeaway beer in the sealed, 32-ounce aluminum cans that sparked a passionate debate last year when officials cracked down on retailers who used them.

“I’m ecstatic,” said Todd Hayden, owner of Hop Scholar Ale House in the Spring area. ” … We sold a ton of beer in crowlers.”

Until last fall, that is, when Texas alcohol regulators ordered bars simply to stop using crowler-filling machines or risk losing their sales licenses or facing thousands of dollars in fines. Seven retailers, including three in the Houston area, received written warnings.

Selling beer for off-premise consumption in growlers, typically glass or stainless-steel bottles that are capped by hand, remained legal for retailers with the proper sales license. But the Texas Alcoholic Beverage Commission declared the crowler machines require a manufacturing license to operate. Only licensed brewpubs that make beer and can sell it to-go were allowed to continue using them.

Hayden and others put the machines in storage, but Cuvee Coffee of Austin challenged regulators by continuing to sell crowlers. TABC agents seized its equipment in September 2015. The company eventually sued in state District Court, but it was ordered to go through the administrative hearings process first.

Round 1 goes to Cuvee. In a decision dated last week, administrative judge John Beeler sided with the retailer on all counts and recommended that TABC return the equipment and change its rules.

See here for the background. Basically, the administrative judge agreed that crowlers are not usable in a manufacturing process and thus should not be subject to this requirement. The TABC can accept this ruling and adjust accordingly, or it can file an exception in the hope of getting the judge to change some part of his ruling. The deadline for that is December 2. It may still be awhile after that before the crowler machines come out of storage, but barring anything unusual this is a great result for Texas and everyone who drinks beer. Austin 360 and the Current have more.

Anheuser-BuschInBev to buy Karbach

If you can’t beat ’em, buy ’em.

Fast-growing Karbach Brewing Co. of Houston is the latest U.S. craft brewery to be acquired by a global beer giant, announcing Thursday morning that Anheuser-BuschInBev is buying it for an undisclosed amount.

The 5-year-old Karbach will be part of the company’s U.S.-specific High End business unit, joining the likes of Stella Artois and Shock Top; Goose Island, Breckenridge, Elysian and five other craft breweries; a cider company; and a hard seltzer company.

Ken Goodman and longtime business partner Chuck Robertson, who founded the brewery in a building they formerly used in their beer distributorship on Karbach Street, said existing management and brewers will remain in place and the company will retain much of its independence while also gaining access to the resources that will help it continue to grow.

“The financial piece wasn’t that important at the end of the day,” Goodman said. “It was the resources.”

High End president Felipe Szpigel cited Karbach’s Love Street Kölsch as an example of a lower-alcohol, or “session,” beer that will fill a niche in the AB-InBev portfolio.

He said he first visited the Karbach brewery during a site visit to Houston about a year and a half ago and as he talked with the owners and brewers, “I really fell in love with what they are doing.”

Brewmaster Eric Warner said the move will allow his team to collaborate with those other craft breweries.

“The High End wants to see us innovate,” he said.

Szpigel and the Karbach team said they will continue to focus on developing the Texas market for the next couple of years.

I’m sure that quote about “resources” is a reference to the ABinBev distribution network, which is more a comment on Texas’ byzantine and archaic beer laws than anything else. I’m sure the Karbach founders (and I hope their employees) will nonetheless make a nice chunk of change off of this, and more power to them if they do, but a peek at their announcement of the deal on Facebook shows that the reaction from their customers is overwhelmingly negative. This is no surprise – ABinBev has openly mocked craft beers and the people who drink them in their advertising, and well, anyone who drinks Karbach almost certainly thinks ABinBev products are exactly what’s wrong with beer and the reason why breweries like Karbach needed to exist and have done so well. From a brand perspective, it’s at best a shotgun wedding and at worst a complete hash. I’m sure that Karbach will sell a lot more beer as a result of this deal. I just suspect that very little of that beer will be consumed by people who had ever drunk it before today. Swamplot and Houstonia have more.

Have we reached peak beer in Texas?

Maybe not, but we are surely testing the limits of the market.

beer

Owners of Eureka Heights Brewing Co. signed up 40 bars and restaurants to sell their beer during their first three weeks in business. The taproom was drawing such crowds that they quickly expanded hours. Saturday afternoons are now quite a scene, especially when a tour bus drops off a clutch of beer explorers.

They made opening a brewery look so easy, it’s perhaps no wonder others continue to jump in.

In late June, the Chronicle published a comprehensive list of 36 breweries operating between Galveston and Bryan-College Station, including 12 in Houston proper. In the three months since, five more breweries have opened within the city limits. Two were hosting opening events Friday night alone.

It’s a startling number, even given the surging interest in locally made beer.

“We often do see little bursts of activity as people get excited and open at the same time,” Brewers Association chief economist Bart Watson said Friday.

Brock Wagner, who founded Saint Arnold Brewing Co. 22 years ago, called it “the type of coincidence that is likely to occur when you have so many breweries in planning.” He cautioned that the new brewers may find it tougher to find shelf space in stores or room on a tap wall for their draught products.

“I think we may be at peak brewery opening,” he said, adding that it may still be two to three years before a shakeout begins and some breweries close. “I’ve been predicting a slowdown in brewery opening for a while and been proved wrong. I think we are at that point.”

Jason Armstrong, vice president, sales and distribution, and co-owner of Buffalo Bayou Brewing, sees room for more breweries. But he agreed it’s an open question.

“How many people can you fit in the boat?” he said. “I don’t think we know that yet.”

I confess I’ve lost track of the microbreweries in the Houston area. There are a few brands I buy – mostly but not exclusively Saint Arnold – and a bunch that I’ve never tried. I hope they all make it, and I hope they take an ever-increasing share of the market from the big conglomerates, but the odds are that in five or ten years’ time, the total number of micrbreweries will be smaller than it is today. In the meantime, I need to do some touring and sampling. I’ve been missing out.

Microbreweries win their distribution rights lawsuit

Excellent news.

beer

A Texas law that prohibits brewers from selling territorial rights to distribute their beer is unconstitutional, a judge ruled Thursday, serving up a major victory to beer companies seeking to expand their presence in stores, bars and restaurants throughout the state.

The decision says the government has no compelling interest in prohibiting brewers from seeking cash compensation when negotiating a contract with distributors, who have almost exclusive authority to handle sales between producers and retailers.

“This law, it was written by beer distributors to enrich big beer distributors and that is not a legitimate state interest,” said Matt Miller, senior attorney and head of the Austin office of the Institute for Justice, which litigated the case on behalf of Texas craft brewers Live Oak, Revolver and Peticolas.

The law, passed three years ago, allows brewers and distributors to negotiate for things like equipment and marketing efforts, but not direct compensation. That denies brewers who have worked to build up their business the ability to “capture the value of their brand” once they are large enough to require a distributor, said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild.

A cash infusion from a distribution contract also would allow smaller breweries to expand operations, hire new employees and build up marketing teams to increase sales, Vallhonrat said.

Thursday’s ruling by state District Judge Karin Crump in Austin came after both the brewers and the Texas Alcoholic Beverage Commission sought summary judgments in the lawsuit. After considering depositions from both sides, Crump declared the law violates state constitutional protection for economic liberty.

[…]

Plaintiff Chip McElroy, founder of Live Oak Brewing Co. in Austin and one of the law’s most vocal critics, called it “unjust … unconstitutional … just plain wrong.”

“It took our property and gave it to them for free,” McElroy said Thursday.

Arif Panju, another Institute for Justice attorney in the case, said the ruling applies to out-of-state breweries as well. Miller said it protects all entrepreneurs looking to build up their businesses.

Miller said the ruling will help breweries going forward but does not address those who struck distribution deals while the 2013 law was in effect.

The Texas Alcoholic Beverage Commission has 30 days to file an appeal. A spokesman said agency lawyers are in touch with the Texas Attorney General’s Office and likely will appeal.

See here and here for the background, and here for a copy of the ruling. I hope the TABC will reconsider its inclination to appeal. This law serves no one’s interests except those of the Wholesale Beer Distributors of Texas. The state should not be spending its own resources pursuing a reversal of this ruling. As noted elsewhere in this story, if the original bill that forbade the microbreweries from selling their distribution rights had been about any other commodity, it would have been laughed out of the Capitol. Surely we have better things to do than this.

More from Austin 360:

Brewers and their fans might be rejoicing their victory right now, but they’re still holding their breaths over two other beer-related cases in Texas courts.

One case involves an issue that brewers unsuccessfully pushed for in the 2013 legislative session. As a result, Dallas’ Deep Ellum Brewing sued the Texas Alcoholic Beverage Commission last year to try and get breweries the ability to sell beer to-go from their facilities — something that wineries and distilleries in Texas are both able to do. (Operators of brewpubs, which sell food in addition to beer, also can sell their products to the public.)

Also, Cuvee Coffee decided to go to battle with the TABC over the issue of whether retailers can sell crowlers, which the TABC argues are one-use cans, rather than aluminum growlers, that only manufacturers of beer can sell.

Both cases are expected to be resolved within the next couple of weeks.

See here for more on the Deep Ellum lawsuit, and here for more on Cuvee Coffee. Let’s hope for a clean sweep. I’ll keep my eyes open for further news. The DMN has more.

Microbrewery lawsuit heard in court

I can’t wait to see how this turns out.

beer

Just how much is it worth for that Velvet Hammer or other local craft brew to make it to your favorite bar or convenience store?

That’s one of several key questions that came before a state district court Monday, as a group of craft brewers — including Peticolas Brewing of Dallas and Revolver Brewing of Granbury — challenged a contentious component of the state’s arcane alcohol regulations.

Namely, the craft brewers want to overturn a 2013 law that says they cannot accept financial compensation for their distribution rights.

In Texas and in many other states, the alcohol industry operates under a three-tier system: producers, distributors and retailers. That arrangement, which dates to the end of Prohibition, seeks to eliminate potential problems by keeping each operation independent from the others.

[…]

In 2013, the Legislature passed several new alcohol laws, many involving the burgeoning craft beer scene. Though multiple bills helped the upstarts, particularly brew pubs, there’s little doubt that the distribution rights piece boosted that middle tier of the system.

Consider that at least one brewery — Live Oak Brewing in Austin — sold its distribution rights for the Houston area for $250,000 before the law went into effect. Now, that would be impossible.

Some craft brewers, if they meet certain criteria, can use what’s called self-distribution as a work-around. But the restrictions that come along with that practice can make it difficult for some brewers to expand their reach, particularly across the state.

Adding to the frustration of the craft brewers is that a distributor, once it has the territorial rights to a certain brewery, can then sell those rights to another distributor. So what can’t be measured, by law, in dollars on the front end carries significant value on the back end.

“There’s just no rational basis for the law,” Michael Peticolas, owner of his eponymous brewery in the Design District, said in an interview after Monday’s hearing.

See here for some background. The lawsuit was filed in 2014, and its root is in SB639, which passed during the 2013 session at the same time as the other bills that allowed microbreweries to sell their wares at their home locations. The Statesman adds on:

Karen Watkins, a lawyer from the office of Texas Attorney General Ken Paxton, defended the law on behalf of the Texas Alcoholic Beverage Commission and said the state must not weaken the current regulatory system.

In Texas, the sales of beer and liquor are governed by post-Prohibition rules that maintain strict boundaries between manufacturers, distributors and retailers. In the three-tier system, makers of beer, wine and spirits create their products, distributors sell them, and bars and other retailers peddle the beverages to the public.

“The government’s interest is in preserving the integrity to the three tier system,” Watkins said. She said the state intends to prevent any overlap between the manufacturing tier and the distributing tier.

Watkins said the law helps the Texas Alcoholic Beverage Commission, for example, quickly remove tainted products from store shelves, if needed.

Arguing the case for the brewers, Matt Miller, an attorney for the Arlington, Va.-based Institute for Justice, said the case isn’t about the three tier system, but about fairness.

“It enriches distributors at the expense of craft brewers,” Miller said.

Miller said the law prevents many brewers from selling their products in some markets, which has the effect of providing less choice to consumers and fewer opportunities to expand for craft brewers that choose not to give away distribution rights.

As you know, I think the three-tier system is an archaic holdout from the Prohibition days that do nothing to enhance competition. Quite the reverse, in fact. Attorney Watkins went so far as to imply that success by the plaintiffs in this case would lead to organized crime, which thankfully the judge pushed back on. I’m rooting for the plaintiffs, as I’m sure you could guess. The judge says she expects to make a ruling in the next few weeks.

Tesla tries another approach to getting access to Texas

If at first you don’t succeed, change your strategy.

Tesla Motors’ Lone Star ambitions won the blessing of the Texas GOP at the party convention in Dallas this month, paving the path towards a possible end to the three years of drama over the electric car manufacturer’s right to sell in Texas.

It’s a dramatic incremental victory for Tesla in Texas, the nation’s second-largest auto market, coming less than a year after the state’s top Republican, Gov. Greg Abbott, told Bloomberg that Texas wasn’t interested in the California car company’s direct sales.

[…]

The coming 2017 session seems poised to provide a breakthrough for Tesla, now that the company has courted the sentiments of Texas republicans.

With a booth at the party’s state convention in Dallas in May, a Tesla rep argued that repeal of franchise law amounted to a truer free market system. And the party agreed, adding a Tesla-friendly plank to its 2016 platform.

“We support allowing consumers in Texas to be able to purchase cars directly from manufacturers,” the addition said.

That will make it very hard for the state’s ruling party to continue to resist the years-long push when lawmakers convene again in Austin in January.

See here, here, and here for some background. Tesla has tried logic, and they have tried lobbyists, so why not try platform management? I hadn’t seen Abbott’s remarkable comment to Bloomberg before now – gotta love that commitment to free-market principles – but if he’s not on board with this, that’s a potentially significant obstacle for Tesla to overcome. Not impossible, of course, but that’s a challenge. I’ve often compared the Tesla/auto dealers fight to that of the microbreweries and beer distributors. That took multiple sessions, and a significant amount of grassroots engagement for the microbrewers to win the fight, even if it was a mostly qualified victory. While this action by Tesla is a step in that direction, I still feel like they haven’t done enough of it yet. We’ll see how it goes when the Lege reconvenes.

The latest example of how nuts our beer laws are

Ridiculous.

The latest flashpoint between Texas beer lovers and state beer law is a 32-ounce aluminum can that bars and restaurants fill with beer and sell to be consumed off-site. The can, called a crowler, is praised for its convenience and ability to keep beer fresh for longer than traditional to-go packaging.

The problem, state regulators say, is that the law prohibits retailers who do not have a manufacturing license from operating the filling machine.

On Tuesday, the Texas Alcoholic Beverage Commission made its most forceful statement to date, sending in agents to seize one from a bar that failed to cease operations after being ordered to do so.

The Cuvee Coffee Bar in Austin recounted the event on social media, giving it a Twitter hashtag of #crowlergate and setting the stage for another potential legal fight in the ongoing effort to change the alcohol code in Texas.

The friction began in late spring, when regulators heard about the growing popularity of crowlers and began investigating, often undercover. Several bars and restaurants were told to stop crowler sales and seven, including three in the Houston area, received letters threatening fines and a suspension of their beer and wine licenses.

They were given 30 days to remove the machine, which retails for $3,600.

In announcing Tuesday’s seizure at Cuvee, the TABC acknowledged the likelihood of a legal challenge.

“We know this issue is important to craft beer retailers and their customers, and we support all citizens’ right to petition the Commission, the Legislature or the courts if they feel a provision in the Alcoholic Beverage Code is unfair,” assistant chief for audit and investigations Dexter K. Jones said in a statement.

“However, we do not support the continued violation of the law just because a retailer disagrees with it. Cuvee Coffee ignored our repeated warnings and discussions, and that conduct resulted in TABC seizing the illegal equipment and subjecting its permit to a civil penalty. Other retailers who engage in illegal canning risk similar consequences.”

Local bar owners say crowlers have several advantages over growlers, the glass or metal containers more commonly used for to-go sales. Sealed cans keep beer fresher by insulating it from oxygen and any sunlight, they say, and they are convenient because customers don’t have to plan ahead and bring a growler with them when they go out.

This was the latest chapter in this story, but the first shots were fired back in July, and got heated up earlier this month. At its heart it’s a question of semantics – is a sealed one-use can fundamentally different than a reusable glass bottle? – but however you look at it, the bottom line is that our current laws make something that ought to be allowed illegal. This needs to change, partly because we’re not in 1933 any more, partly because the state allows wineries and distilleries freedom to operate that breweries and brewpubs don’t have, but mostly because it’s a bad deal for consumers. There’s already litigation over the state of Texas beer laws – it’s unclear whether this action will turn into a separate lawsuit or not – and I suppose there’s always hope for further change from the Lege. But one way or the other, this needs to change. Austin 360 and Eater Austin have more.

Craft beer lawsuit

This ought to be interesting.

On the same day merger talk surfaced regarding the world’s two biggest beer companies, a small Dallas brewery announced its own effort to shake up the industry in Texas.

Deep Ellum Brewing Co. launched the crowd-funded “Operation Six-Pack to Go” on Wednesday and said it had filed a federal lawsuit this week attempting to accomplish what multiple efforts in the Texas Legislature have failed to do: Give in-state breweries the right to sell their beverages directly to consumers for off-premise consumption.

While such sales are allowed at wineries, distilleries and brewpub restaurants, brewery visitors must drink any beer they buy before they leave.

John Reardon, the Deep Ellum founder leading the latest charge to allow these so-called dock sales, said antiquated laws hinder growth in the state’s rapidly expanding craft-beer industry. He and other craft brewers have long contended that to-go sales would provide startups with extra capital to expand and give all brewers a powerful marketing tool as people who visit the breweries take their product home and share with friends.

[…]

The lawsuit, filed in federal court in Austin against the Texas Alcoholic Beverage Commission and its three commissioners, calls the ban unconstitutional.

“The U.S. Constitution prohibits a state from creating irrational and arbitrary distinctions between similarly situated entities,” the lawsuit reads. “Texas, however, does just that by creating distinctions between various types of alcoholic beverage producers, which in turn harm those directly involved, including Texas businesses, citizens and tourists, and ultimately the Texas economy.”

Danielle Teagarden, a Seattle-based attorney who specializes in brewery law, said in these types of lawsuits states must provide some “rational” reason for the different treatment and show that it helps meet a legitimate state goal, such as facilitating taxation or maintaining orderly operation of the market. She said it is not a high standard and states have successfully defended their laws.

“It just has to move the dial a little bit toward that goal,” said Teagarden, who writes and edits the Brewery Law Blog.

[…]

The craft brewers should not expect any support from the wholesalers, said Rick Donley, president of the Beer Alliance of Texas, which represents some of the state’s biggest distributors.

Donley worked closely with craft brewers in 2013 to develop a package of successful bills that, among other things, gave production breweries the right to sell a limited amount of beer on site as long as it is poured and consumed there. This March, when the craft brewers returned to Austin in hope of lifting the ban on dock sales, Donley fought back strenuously. On Wednesday, he again insisted that the laws are not harming the craft segment of the industry.

“My god, they’re growing at 20 percent (annually),” he said. “Most companies would love to have that kind of growth.”

Donley said the crafts should wait until the 2-year-old reforms have been in place long enough to see their full impact in the marketplace before trying to further tinker with the three-tier system.

“We have done everything in the world, bending over backward to help craft brewers,” Donley said. “They’re just never satisfied. … They want more, more, more.”

Teagarden, the legal expert, noted that in 2011 a federal judge in Austin ruled against an importer that made similar claims about the different ways breweries and wineries are treated. However, Judge Sam Sparks said the company had failed to provide any evidence the TABC reasons were not rational. The regulators do not have the burden of proof, he wrote.

In another aspect of that same case, the plaintiffs claimed victory because Sparks overturned a TABC requirement that beer be labeled either “Beer” or “Ale,” a distinction that had no scientific basis and was often cited by out-of-state breweries as a reason they could not afford to do business in Texas.

At the time, fellow plaintiff Jester King Brewery of Austin highlighted one of the judge’s comments regarding the failed part of the lawsuit: “The State of Texas is lucky the burden of proof was on (the plaintiffs) for many of its claims, or else the Alcoholic Beverage Code might have fared even worse than it has.”

You can go here if you’d like to contribute to the crowdfunding effort for the lawsuit. There was another lawsuit filed in state court in December 2014 over the requirement for microbreweries to give away their territorial distribution rights for free. I don’t know where that stands right now, but keep it in mind when you read Rick Donley’s words about what a bunch of whiners the microbrewers are, as opposed to those paragons of virtue the distributors and big brewers who are only just trying to hold on to the advantages they’ve always had. We’ll see what the court makes of this one.

A brewpub comes back to Houston

In my ‘hood, no less.

beer

A new brewpub will open in the Heights with an accomplished veteran of the Texas craft-beer scene at the helm.

Delicious Concepts Restaurant Group, which owns Lola, Shepherd Park Draught House, Witchcraft Tavern and seven Pinks Pizza locations, announced Monday it has closed its Tex-Mex spot El Cantina Superior near the White Oak dining and entertainment area and will reopen in the same building as a restaurant that makes and sells its own beer on site.

The as-yet-unnamed “American kitchen”-style restaurant will have a pizzeria and butcher shop in-house. But the rotating lineup of lagers, India pale ales and Belgian-style and other beers – including guest beers and beers made in collaboration with other local breweries – will distinguish it from most Houston eateries.

Brewmaster Erik Ogershok, an industry veteran who helped develop the award-winning portfolio of beers at the Hill Country-based Real Ale Brewing Co., joins Delicious Concepts as a partner for this and any future brewing projects.

“This particular part of the project is just the beginning,” he said, declining to elaborate on other plans.

El Cantina Superior, 602 Studewood, had a rocky history after it launched last summer. The restaurant struggled, and Delicious Concepts brought in the management team from F.E.E.D. Texas, including the well-regarded chef Lance Fegen, to retool the menu and supervise kitchen and service.

The ambitious restaurant with colorful, quirky decor earned a positive review from Chronicle critic Alison Cook. But in May, the two restaurant groups suddenly parted ways.

Ken Sheppard, Delicious Concepts’ marketing chief, on Monday acknowledged the problems. He said the restaurant likely opened too quickly and was probably too different and too much larger physically from the others in the group. He said he was proud of El Cantina Superior’s recent work but admitted it was tough to overcome the early travails.

Plus, he said the group has wanted to open a brewpub for “a long time.”

I can attest to the El Cantina’s rocky history. It generated a ton of scathing reviews on Nextdoor Heights when it first opened, then a bunch of “no, wait, it’s really good now” emails after F.E.E.D. took over, and then back to the bad after they left. Our personal experience with the place matches that pattern. It’s a shame as far as that goes, because when it was good it was really good, and there wasn’t anything quite like it nearby. Oh, well. This will be Houston’s first brewpub since 2010 when Two Rows in the Rice Village closed down. There are a lot of good options for both food and beer within walking distance of this location, so they’re going to have to do well on both counts to survive. Not clear when the new place will be up and running, but I look forward to it.

Eltife not running for re-election

He will be missed.

Sen. Kevin Eltife

After 23 years in elected office, state Sen. Kevin Eltife, R-Tyler, said he will not run for re-election in 2016 to devote more time to family, friends, his work and his community.

Eltife said he’s loved every minute of his service in the Senate and is proud to have worked with fellow Senators and their staffs. But he said he did not want to hold a title or office without being 1,000 percent committed to the job and fighting for Senate District 1.

“After 23 years, I have to honestly say I need to take a step back, spend more time with my family and friends and recharge my batteries,” Eltife said during an Editorial Board meeting with the Tyler Morning Telegraph. “I will continue to be involved and volunteer at the local and state level to try to help others.”

Senators, both Republicans and Democrats, are hard-working, well-intentioned people who sacrifice time from their families and lives to try to make Texans’ lives better, he said.

“I’m going to stay plugged in,” he said. “I want to make sure northeast Texas voices are heard, and I don’t have to be in public office to do that.”

[…]

Eltife said when he arrived his primary focus in Austin was killing bad legislation that preserved local control. But he proved effective navigating bills and lending helping hands to other legislators.

He was instrumental in the creation of a pharmacy school and doctorate nursing program at the University of Texas at Tyler, expansion of craft beer brewers’ access to the market and, most recently, pass of a bill to give epileptics in Texas access to cannabis-based oils.

Those and other bills made a difference for his district, the state and Texans, he said.

Eltife said hearing the testimony from families of suffering epileptic children motivated him to pass the bill they saw as their only hope.

Eltife’s drive to make a difference many times has left him as a lone wolf legislator.

Eltife has been watching, not so quietly, as the state’s debt more than doubled since he arrived in Austin to about $46 billion from $17 billion.

The state used debt to fund road projects and meet needs he said could have been funded if legislators had been honest with Texans and used their political capital to make tough decisions.

Eltife said doing the right thing can mean going against the party line. He’s worked with both sides of the isle to move legislation he felt would benefit his district and the state.

Sen. Elife also spent a lot of time presiding over the Senate in the latter years of Lt. Gov. David Dewhurst’s tenure. By all accounts, the chamber ran a lot more smoothly with him wielding the gavel in Dew’s absence. The Trib adds on.

Several Republicans have already been mentioned as potential candidates for Eltife’s seat.

State Rep. David Simpson of Longview will announce later this month that he is launching a bid for the job.

“Advancing liberty and promoting prosperity in Texas will take conservative leaders who are ready to tell the truth,” Simpson said in a Sunday statement. “We are excited to announce our campaign for Senate District 1 and intend to officially launch our efforts on June 22.”

Rep. Bryan Hughes of Mineola, who was waiting to see whether Eltife would run for re-election, is also considered a likely contender for the post. Thomas Ratliff, the outgoing vice chairman of the State Board of Education, has said he would not rule out a run for the seat if Eltife gave it up. And Dennis Golden, a Carthage optometrist, has said he intends to run.

Eltife has often been a swing vote in a Texas Senate dominated by Republicans but governed by rules that give political minorities more power than their numbers would suggest. It takes consent from 60 percent of the state’s 31 senators to bring most proposals up for debate; issues that can only attract small majorities often languish as a result. And Eltife has found himself in the position of holding such proposals hostage more than once.

He was a rare Republican vote against repeal of the Texas Dream Act, which allows undocumented immigrants who graduate from Texas high schools and who have lived here for more than three years to pay in-state tuition at Texas colleges and universities. That repeal never made it to the full Senate. He opposed so-called sanctuary cities legislation that would require local police to enforce federal immigration laws. And he was a no vote on one of Lt. Gov. Dan Patrick’s pet bills, which would have allowed businesses to direct their taxes to scholarship funds for private school students.

Early in the legislative session that ended June 1, Eltife tried to tap the brakes on what he called “a bidding war” between the House and Senate over tax cuts, insisting that lawmakers should be using surplus funds for deferred maintenance, debt reduction and the like. The tax cuts went through, but so did some of what he had pushed for. By the end of the session, he declared himself satisfied with that partial victory.

This is a deep red district (Romney 72.1% in 2012), so it’s all a matter of the Republican primary. Thomas Ratliff would be fine if he ran. David Simpson is an odd duck, a teabagger but not quite cut from the same cloth as the rest of them. He’s just unpredictable enough to at least be a pain in Dan Patrick’s rear end on a regular basis. Bryan Hughes would be bad, and I can’t imagine anyone else would be any better. We’ll just have to see how it shakes out. The one thing I do expect is for there to be a lot of money spent on that campaign, mostly by outside groups. Good luck and best wishes for the next stage of your life, Sen. Eltife. Trail Blazers and RG Ratcliffe have more.

Keg dispute

Your beer choices at certain fancy restaurants in Houston have been curtailed.

beer

A dispute over deposit fees for kegged beers could slow the flow of several craft brands, including a few that are made locally, at some of Houston’s best-known bars.

The issue boiled over this week when Silver Eagle Distributors instituted an unannounced 20 percent hike in the deposit it charges retailers when they purchase kegs filled with beer, local proprietors said.

Two said they will stop purchasing kegged beer from Silver Eagle, at least temporarily. Affected brands include Houston’s Saint Arnold, Karbach and 8th Wonder, and such national brands as Firestone-Walker and Sierra Nevada. Because of state laws governing how beer is sold in Texas, no other wholesalers are allowed to carry those beers in Houston.

“It’s a really hard decision,” said Kevin Floyd of the Montrose craft beer bar Hay Merchant, referring to the decision to not have the local beers on tap.

But he said the $10-per-keg increase, to $60, double what it was just a few years ago, has prompted him and other bar owners to act.

Although the deposit technically is refunded when a keg is returned to the distributor, the retailer typically doesn’t see the money because the credit is immediately applied to the next keg. Depending on the size of the bar, the deposits could tie up thousands of dollars.

“That’s money that’s just caught up,” said Ben Fullelove, owner of the Petrol Station in the Garden Oaks/Oak Forest area. “You’re not going to see that money again unless you close down.”

Fullelove, who usually has 70 to 100 kegs on hand from various distributors, said he will be out of those supplied by Silver Eagle by the end of the weekend and does not intend to purchase more unless the deposit hike is rescinded. He said he wants to support local breweries as well as the national brands his bar is known for carrying. But he, too, cited the steep increases over the last six years and said enough is enough.

“How does it end?” he said. “Suddenly I’m paying $100 a keg? $200 a keg after a year?”

In an emailed statement attributed to John Johnson, executive vice president of sales and marketing, Silver Eagle Distributors cited increases in the deposit fees it has to pay when it receives the kegs.

“These deposit fees are a standard operating procedure in the industry and from time to time are increased by suppliers, resulting in an increase by distributors,” the statement read. “As a result, Silver Eagle recently increased the amount of its refundable keg deposit.”

Hope this doesn’t ruin anyone’s dinner plans. For a perspective from one of the microbreweries affected by this, read what Scott Metzger of Freetail Brewing has to say. From my perspective, this just highlights another flaw in Texas’ byzantine tiered distributorship model for wholesale beer sales. In a sane world, there would be more than one way to get their beer from the breweries to the retailers. Microbreweries won some freedoms from the Legislature two years ago, but they still don’t operate in anything resembling a free market. This is just one illustration of that.

Karbach’s new brewery

As we know, Houston has a lot of craft breweries, with the venerable Saint Arnold being the biggest, oldest, and best known. With the forthcoming opening of their new facility, I’d say Karbach is making a strong case to be next in the pecking order.

Karbach, founded four years ago by a pair of longtime distributors/importers who brought resources as well as experience to the enterprise, stands out even in an industry where rapid growth is the status quo and where production volume soared in double digits again last year.

In 2013, Karbach was cited in a New Yorker analysis as the second-fastest growing craft brewery in the U.S. and 2014 was a scorcher as well. Crews worked around the clock to brew 32,600 barrels of Hopadillo, Weisse Versa and other beers, and the only thing that kept them from making more was capacity.

The size of the new brewery, which faces Dacoma, around the corner from the original facility at 2032 Karbach, just outside Loop 610 in northwest Houston, addresses the immediate needs and leaves room to add on later. [Brewmaster Eric] Warner said the new equipment and automation upgrades also should improve quality and virtually eliminate inconsistencies between batches.

He and his team are already making beer there and plan to open the brewery to the public on or about May 15, slightly behind the originally announced first-quarter target date.

The facility goes live as the industry continues an enviable upward trajectory. In 2014, craft sales rocketed ahead 18 percent even as overall beer production rose a mere half-percent, the industry trade group reported at this month’s Craft Brewers Conference. A record 3,418 breweries are now in operation, figures compiled by the Brewers Association show, and 2,051 more were in the planning stages as of Dec. 31.

Across greater Houston, 29 brewery and brewpub licenses are on file with the state and most of those operations are up and running. In addition, strong brands from other states continue to expand into Texas.

Warner, who came to Houston in 2011 with a nationally recognized résumé in craft brewing, sounded nothing but confident about Karbach’s growth plans in this environment.

“Craft is here to stay,” he said. “I have no doubt about that. Craft is growing and will continue to take share.”

The primary challenge ahead will be to maintain shelf space at stores and tap handles in bars and restaurants, Warner said. In that regard, he thinks high-quality local brands will have a distinct advantage. He said Karbach plans to expand to the Dallas area this year but has no out-of-state plans until at least 2017.

“There are 30 million people in Texas,” Warner said. “A lot of beer drinkers.”

Another potential challenge, he added, would be if global giants such as Anheuser-Busch InBev, which last year made 13 million barrels of beer at its Houston plant alone, stop “dabbling” in craft beer styles and begin competing seriously with the Karbachs and Saint Arnolds.

Again, Warner sounded confident about the future, describing his company’s success in less than four year as “surreal.” He readily acknowledges the advantages Karbach has over many of the young breweries that are starting with far less capital.

I like Karbach, though Saint Arnold is still my favorite locally. I do need to take a tour of their new facility, which is one of several near where I live. As far as the macrobrewery threat is concerned, I just don’t see the AB-InBevs of the world seriously competing in that space. It’s not who they are, and I don’t see the type of person who drinks craft beer being lured to a craft beer-style product they might market. I think it’s more likely the big boys might try to buy up a bunch of craft brewers, like Microsoft or Google acquiring startups. I don’t know why they haven’t been doing that all along, to be honest. Be that as it may, congrats to Karbach on the new digs, and best of luck with the restaurant venture.

Who’s up for a macrobrewery tour?

This used to be a thing in Houston, and now it is once again.

beer

The local Anheuser-Busch plant was under construction at the same time as the Astrodome, and its ambitions were just as grand. With an annual capacity of 900,000 barrels of beer, it would be the biggest brewery Houston had ever seen when it opened in 1966.

It would draw its fair share of visitors as well. For a couple of years in the early 1970s, the 105-acre plant grounds were home to an avian-themed park called Busch Gardens, which included an Asian-style pagoda, boat rides and a domed ice cave. College students in miniskirts worked as hostesses during the summer.

Even after the park closed, Houstonians curious about malt, hops and “beechwood aging” made their way east down Interstate 10 to tour the brewery and hoist complimentary beers in the hospitality room.

But by 1996, attendance had fallen to the point that the corporate owners decided to do away with regular tours. The workers would remain focused on producing Budweiser, Bud Light and other well-known beers by the hundreds of millions of cans and bottles, but the public would be kept at bay.

Nineteen years and a sea change in the U.S. beer industry later, the company is throwing open the doors again in an effort to reconnect with consumers. An array of craft breweries unheard of two decades ago has nibbled away at market share, gaining fans not just with innovative products but also with wildly popular tours and special events that pack in crowds and send them home in branded T-shirts and ballcaps.

Damola Oshin, general manager of the Anheuser-Busch brewery, credits Houstonians’ growing interest in beer with the decision to reinstate tours here next week.

“We are the largest brewery in the state and we do need to get people in through our doors and show them what we do,” he said Thursday.

Beginning April 10, the brewery will be open from 10 a.m. to 6 p.m. daily. Visitors will be guided through the brewing and packaging areas and wrap up in a renovated tasting room for complimentary samples. A gift shop includes souvenirs from hats, T-shirts and coolers to stuffed Clydesdale toys.

[…]

Saint Arnold Brewing, the only local craft that was open in 1996, draws an estimated 70,000 visitors annually to its tours and tastings and another 30,000 to other events at the brewery, owner Brock Wagner said.

Now Anheuser-Busch wants the public to know its employees are as passionate and as proud of their work as are craft brewers, Oshin said.

Good for them. My wife, who grew up in Houston, has some fond memories of the bird park at the brewery that kids played in while their parents could quaff a cold one after a tour. I’d be interested in touring the place just to see what it’s like; I vaguely remember a visit to Busch Gardens in Tampa while on spring break in the 80s, which included a brewery tour. I have no desire to sample or buy any of their product, but I’m sure the operation would be cool to see.

More on this session’s beer bills

A story from the DMN about the state of microbreweries and beer-related legislation in Texas.

TexasCraftBrewersGuild

Brewers say they rely on word of mouth among diehard enthusiasts, so they want drinkers — particularly those from out of state — to introduce their beers to friends, neighbors and other connoisseurs. A measure offered by Sen. Kevin Eltife, R-Tyler, would let brewery visitors purchase beer on site to take home with them.

The financial gains from such sales would be minimal. But the ripple effects from word-of-mouth promotions could be big and even promote tourism in the state, said Michael Peticolas, owner of Peticolas Brewing Co. in Dallas who helps keep tabs on legislative issues for the brewers guild.

“Breweries get a huge number of tourists coming in,” Peticolas said. “So often they try something that they like and want to take a stout or a six-pack home for them or their friends. Right now, we can’t sell to them, but Texas wineries and distilleries already get to do this.”

Another bill would make further inroads in self-distribution by allowing brewers to store ale in a different county, expanding a provision that already applies to other beer styles.

Currently, if Peticolas wants to reach out to retailers in Austin or San Antonio to sell his Velvet Hammer Imperial Red Ale, a driver would have to return unsold products to Dallas that same day.

Read that last sentence and remind yourself of it the next time you hear someone go on about how much we love free markets here in Texas. While craft brewers are working to build on the gains they made in 2013, there are also efforts to restrict things further.

Peticolas, along with Granbury’s Revolver Brewing, is among a handful of brewers suing the state to have more control over distribution.

In 2013, the Legislature prohibited brewers from selling distribution rights. Before, distributors would pay brewers for the right to sell their beer in certain markets. Craft brewers say they would then use that money to reinvest in their brew.

But now, they must give those rights to distributors for free, although the distributors can sell the rights for profit.

Legislation offered by Sen. Senfronia Thompson, D-Houston, would slash distribution rights further. Her bill would reduce the number of barrels that microbrewers could self-distribute from 40,000 to 5,000. Each barrel is the equivalent of about two standard kegs.

Rick Donley, president of the Beer Alliance of Texas, said his group helped bring craft brewers and others together to compromise on legisation two years ago. So industry representatives were surprised when craft brewers sought legislation such as Eltife’s bill this year, he said.

“They made no attempt to engage those same stakeholders,” Donley said. “So there is a natural reluctance to not support it, especially when we don’t see the benefit for us. The legislative process is the spirit of compromise, and we certainly feel some of these bills violate the spirit of that agreement.”

Donley said craft brewers are thriving in the current system.

“They already have every tool they need now to have access to the market,” he said.

Brewers believe Thompson’s bill “would be a huge blow for us,” said Steve Porcari, a co-founder of Four Corners Brewing in Oak Cliff. “The day it was filed, one of my drivers asked what it meant, and I said it meant he’s out of a job if it passes.”

[…]

In a written statement, Thompson said her bill is meant get brewers back into the long-standing system of checks and balances.

The 2013 agreement “was intended to give craft brewers access to the market and move them to the traditional three-tier system as quickly as possible,” Thompson said. “There is a movement afoot to break the agreement, and I trust all sides will make good on their promise.”

[Charles] Vallhonrat, of the [Texas Craft Brewers Guild], acknowledges that craft brewers worked with distributors and others two years ago, but he disputed that the agreement included a cut in self-distribution rights.

Distributors, he argued, could be hurt by the new plan, too. They might have to take bigger risks on new brews before they’ve proved popular.

“I don’t know what it is we’re not honoring,” Vallhonrat said. “Business is growing, and we want to help it grow on both sides, for brewers and distributors.”

See here for more on that lawsuit. I don’t know where things are going to go from here in this session, but it seems clear that the brief period of consensus that we had in 2013 has passed. Also unlike 2013 and sessions before that, I’m not aware of any organizing efforts by the craft brewers. They have the Guild and I’m sure there’s a lobbyist or two on the ground for them, but there’s been little to nothing to engage the public as there has been in the past. I hope that doesn’t work against them this time.

Beer legislation 2.0

Just because craft brewers succeeded in passing a bill allowing them to sell beer for consumption on their premises last session doesn’t mean there isn’t more that can be done to advance the cause of beer freedom.

TexasCraftBrewersGuild

Twinned bills introduced this week would extend direct sales for breweries. The proposals by state Sen. Kevin Eltife, R-Tyler, and state Rep. Jim Keffer, R-Eastland, would let customers buy beer that they could take away and drink later.

“This gives Texas breweries the same rights already enjoyed by wineries, distilleries and many of their out-of-state competitors,” Keffer said in a written statement distributed by the Texas Craft Brewers Guild.

Under the bill, consumers would be restricted to a single purchase of no more than the equivalent of two cases of beer each month at a brewery. Advocates say this type of “souvenir” beer, often sold following tours or special events, can be an effective marketing tool.

“This legislation is designed to finish what we started last session and bring people from around the country to this state which is rapidly becoming the epicenter of craft brewing quality,” Eltife said in the statement from the Brewers Guild.

[Rick] Donley said the Beer Alliance [of Texas] is still digesting the details of this and other legislation affecting alcohol sales in Texas, but he sounded skeptical.

The Beer Alliance and major wholesalers have contributed many hundreds of thousands of dollars to numerous political campaigns in Texas since the beginning of 2013. Major recipients include Gov. Greg Abbott and Lt. Gov. Dan Patrick, but the Beer Alliance of Texas PAC also gave a total of $5,000 to Eltife in June 2013, Texas Ethics Commission reports show.

Donley said it has been only a year and a half since the most recent law changes went into effect, and his organization would like more time to see how that plays out in the marketplace.

He also said he thinks the two-case-per-month limit is too high and he would want an annual cutoff on how much breweries could sell this way. The exemptions approved in 2013 limited breweries to selling no more than 5,000 barrels of beer on site. While the bill currently does not specify an annual limit, a spokesman in Eltife’s office said the 5,000-barrel limit would still apply to all beer sold on site, whether it was sold for on- or off-premise consumption.

Donley said the ongoing success of Texas craft brewing further suggests the industry does not need additional help.

[…]

Brock Wagner, owner and founder of Houston’s Saint Arnold Brewing Co., insisted the craft brewers are not seeking to replace traditional retailers. Rather, he said, this legislation would address the most common question from tour and special events visitors – why they are not allowed to buy beer to take home – and boost awareness of the brands.

Wagner also said lawmakers are probably more inclined to view craft brewers as important small businesses that deserve the state’s support.

See here and here for some background. As noted by the Texas Craft Brewers Guild, the bills in question are Senate Bill 1386 and House Bill 3086. I understand the Beer Alliance’s hesitation – and it should be noted that they were among the good guys in 2013 – but it’s still crazy when you think about it that brewers can’t sell a six pack or two to the people that come to visit their facilities. It would be one thing if there were a blanket prohibition on all forms of booze, but that’s not the case – Texas’ wineries and distilleries can sell bottles on site. So can microbreweries in other states. What Texas does makes no sense, and it’s all about what the big brewers and distributors want. The difference between the faith in free markets that people constantly proclaim in this state and the actual freedom of some specific markets never fails to boggle my mind.

Anyway. As those links above point out, there were other issues that the 2013 legislation did not address that remain untouched by these bills. Licensing fees remain high, and microbrewers were forced by another bill from 2013 to give away their territorial distribution rights instead of being allowed to sell them. Again – crazy, right? A lawsuit was filed last December to overturn that law. I don’t know where that stands now, but there’s apparently no legislative fix for it. So, while this has been a lot more low-key this session, there’s still a lot to be done to make the beer market in Texas what it should be.

Tesla tries again

They’ve brought more firepower to the fight this time, by which I mean “more lobbyists”, but we’ll see if they can break through.

Let the car haggling resume at the Texas Capitol.

A group of state lawmakers on Thursday filed legislation that would allow Tesla Motors to sell its luxury electric cars at as many as 12 stores in Texas, renewing the California-based company’s challenge to a state law protecting auto dealers.

Tesla’s business model is to sell directly to consumers, bypassing the middleman dealers as it does in many states. But a longstanding law bars that practice in Texas.

New legislation — House Bill 1653 and its companion, Senate Bill 639 — would allow manufacturers that have never sold their cars through independent dealerships in Texas to operate the limited number of stores. It’s modeled on deals Tesla has forged in other states, including New York, Ohio and Pennsylvania.

“Free market principles are the foundation of our strong Texas economy,” said state Sen. Kelly Hancock, R-North Richland Hills, who filed the Senate bill. “SB 639 helps sustain a competitive marketplace and gives consumers more choices.”

State Rep. Eddie Rodriguez, D-Austin filed the House bill, along with with Reps. Charles “Doc” Anderson, R-Waco; Jodie Laubenberg, R-Parker; Tan Parker, R-Flower Mound; and Ron Simmons, R-Carrollton.

Tesla currently showcases vehicles at “galleries” in Austin, Dallas and Houston, but because the galleries are not franchised dealerships, state law prohibits employees from discussing the price or any logistical aspect of acquiring the car.

Tesla calls the traditional dealership model unworkable, because it doesn’t mass-produce its cars — at least not yet. The company allows customers to order customized cars that it later delivers, and it can’t depend on independent dealers to champion its new technology, it says.

“Fundamentally, this company was founded to produce a new technology,” Diarmuid O’Connell, vice president of business development, said in an interview. “No one is as unconflicted as we are in our desire to promote electric vehicles.”

Some Texas dealers have approached Tesla about selling its cars, O’Connell said, and the company has “respectfully declined.”

Tesla and others have also questioned whether a traditional dealer could succeed in selling its cars, because dealerships make much of their money on maintenance — something the company’s highly touted models require little of.

O’Connell said the legislation would let Tesla employees educate Texans about its cars in person, allowing the company to grow its footprint here. He envisions adding stores in Corpus Christi, San Antonio, El Paso, Fort Worth and San Antonio, if given permission.

See here for previous Tesla blogging. The Trib also had an interesting story about the auto dealers’ attempt to get Tesla to work with them; some of that is recapitulated in the story above, but it’s worth reading on its own. Tesla insists that their model doesn’t work with dealerships, though I get a whiff of “the lady doth protest too much” in their argument. I’ve compared Tesla’s efforts to the microbreweries more than once, and one of the things that characterized that saga was that in the end they didn’t get everything they wanted. They scaled their wish list back to the point where they were able to minimize opposition from the big brewers and the distributors, and from there the task became doable. It would not surprise me if in the end Tesla needs to find some form of accommodation with the auto dealers.

The Fair BEER Act

I’m in.

beer

The act would reform the federal beer tax imposed on brewers and beer importers and give a special boost to small brewers. The idea is to create a laddered rate that is based on how much a brewer produces, much the same way the income tax rate is higher the more money you make.

Currently, brewers are charged $7 a barrel on the first 60,000 barrels and $18 on every barrel thereafter. Two tiers do not address the wide variety of brewers in the market today.

The act, which was introduced by U.S. Reps. Steve Womack, R-Ark., and Ron Kind, D-Wis., would establish a more subtle schedule:

– No excise tax on the first 7,143 barrels;
– $3.50 a barrel on barrels 7,144-60,000;
– $16 a barrel on barrels 60,001-2 million; and
– $18 a barrel on every barrel above 2 million.

The 7,143 barrel cutoff is tied to the Treasury Department’s definition of a small brewer, which applies to 90 percent of American breweries. These are the small business people who provide variety to local bars and super-markets, but are not large enough to see economies of scale, to afford big marketing budgets or to sign national distribution deals.

[…]

The act has more than 20 co-sponsors, but none are from Texas. That’s a glaring omission since Texas has the second-largest congressional delegation and a rich history of beer brewing.

That’s for sure. It’s a bipartisan small business tax cut that would benefit a lot of Texas breweries. I have no idea what the hangup is. There’s not a whole lot of legislation worth supporting out of this Congress, so let’s grab the few good bills there are with both hands. The Fair BEER Act is HR 767, and you can see some more information about it here. This press release has more.

My craft beer options runneth over

2015 could be a very fine year.

My personal beer map

Several local brewery construction projects headed for completion in 2015 are designed to draw in visitors as well as ship beer out the door.

The neighborhood-centric Town In City Brewing Co. in the Heights could open in February, co-owner Justin Engle said earlier this week, as workers poured and leveled concrete for sidewalks and a driveway entrance into the startup brewery at 1125 W. Cavalcade.

In addition to selling beer to other retailers, Town In City will open each Wednesday through Sunday for customers to buy beer that they can drink in its 700-square-foot taproom or 1,400-square-foot outdoor beer garden. Food trucks will be invited on-site, and there will be a dedicated secure bicycle parking area.

Engle said the goal is to create a neighborhood gathering spot like many of the breweries he enjoyed visiting when he lived in Colorado. He’d prefer a steady daily business to a more crowded once-a-week tour.

Engle and partner Steven Macalello bought a vacant lot on Cavalcade, between Main and Airline, and built a brewhouse with initial capacity of 2,300 barrels of beer a year. Watching over the final concrete pour was a major step for a project that began more than 3½ years ago.

“I’m ecstatic,” Engle said.

Meanwhile, Brash Brewing, at 510 W. Crosstimbers in Independence Heights, also could begin producing beer in February. Owner Ben Fullelove said the brewery plans to install glycol lines for chilling next week and get a final city inspection soon after. It’s licensed as a brewpub, though Fullelove said it won’t be open to the public right away.

“We are almost done,” he said in an email.

Although its beers have been brewed under contract in Massachusetts since 2012, Brash has strong Houston roots. Fullelove founded craft beer hot spot Petrol Station, and he hired Vince Mandeville, formerly of Saint Arnold, as head brewer for the local operation.

[…]

Last spring, Karbach broke ground on a $15 million project that will do more than just boost capacity.

The project, facing Dacoma on a 1.2-acre tract adjacent to the current brewery at 2032 Karbach, includes not only a new 19,000-square-foot, two-story brewery but also a public tap room and kitchen that will be open daily, plus space upstairs that will be available for special events.

Spokesman David Graham said Karbach hopes to open the space around the end of the first quarter.

I’ve highlighted these three breweries, plus Buffalo Bayou Brewing, on the embedded map. All are within about ten minutes of my house, with Buffalo Bayou and Town In City both being within biking distance. City Acres up on 59 North isn’t too far away either. I’m thinking I need to plan a few weekend beer tastings once the weather gets warm and all these places are open. Sounds like a good reason to get out of the house and hang out with some friends. For all that could be better in the world today, we do live in prosperous times.

Tesla is back

I wish them better luck this time, but I wouldn’t expect anything to come of it.

Proposals to allow direct car sales in Texas stalled during the 2013 legislative session, but the Pala Alto, California-based automaker appears poised to rev up efforts to revive the issue as lawmakers head back to work next month.

“We’re not asking to blow up the franchise dealer system,” said Diarmuid O’Connell, Tesla’s vice president for business development. “We are looking for a narrow and reasonable window to be able to promote this new technology ourselves.”

No one has pre-filed a bill promoting direct sales yet, and few in the Legislature have publicly supported the idea. But outgoing Gov. Rick Perry in March called the state’s laws “antiquated” and said it was time for “Texas to have an open conversation about this.”

Of course, Perry said that when Texas was still one of four states in the running to get Tesla’s new battery factory, which eventually went to Nevada. Perry prides himself on being able to woo job creators, and at the height of his Tesla charm offense during a June visit to California, he even drove the company’s Model S around Sacramento.

[…]

Texas Automobile Dealers Association lobbyist Robert Brazie said he believes bills promoting direct car sales will likely be filed before the end of the 2015 legislative session, but that he expects them to garner little support. He said an offer of future Tesla investments would carry little weight in the state, because “when they had a chance to come to Texas, they didn’t.”

Brazie added that Tesla explained its choosing Nevada by pointing to “geography, cost and speed of development,” reasons that had “nothing to do” with either state’s car sales laws.

O’Connell admits that getting the law changed won’t be easy.

“Does the fact that we didn’t site the factory there complicate things? Absolutely,” O’Connell said. “But we’re going to be doing a number of big battery factories in the coming years and we’re going to need new vehicle factories as well, and there’s a certain logic to doing those in Texas.”

See here for past blogging on Tesla. I agree with TADA lobbyist Brazie that one or more bills to allow Tesla to operate will be filed, and I agree that they will go basically nowhere. That’s about the extent of my agreement with TADA on this, as I think they are completely in the wrong. Be that as it may, I’ve previously compared Tesla’s efforts to those of microbreweries, and one implication of that is that I expect them to need several sessions to really get traction on this. Some kind of grassroots outreach would be a good idea for them, too. I’ll keep an eye on this going forward.