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Saint Arnold

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.

Have we reached peak beer in Texas?

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

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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.

Keg dispute

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

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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.

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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.

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.

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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.

Good times for the craft brewers

There’s a lot more growth to come for the craft brewing industry.

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Texas’ smaller craft breweries increased production last year by nearly half and made deeper gains in the overall beer market, suggesting the industry’s growth spurt will continue.

“Yes, this is a long-term trend,” said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild. “Do I think we’re approaching a saturation point? No.”

The guild on Tuesday is releasing figures showing Texas craft breweries made 833,191 barrels of beer in 2013, an increase of 17.6 percent. When the Spoetzel Brewery in Shiner, maker of Shiner Bock and other widely distributed beers, is excluded from the list, the remaining crafts saw their production mushroom by 44.3 percent, to a combined 265,958 barrels.

Biggest among this group of 98 breweries is Houston’s Saint Arnold Brewing Co., which expects to brew at least 65,000 barrels as it commemorates its 20th anniversary this year.

A barrel of beer would fill 55 six-packs of 12-ounce cans or bottles.

“That’s what people think of beer now,” Saint Arnold founder Brock Wagner said of the public’s evolving attitude. “It’s not just mass-produced light lager.”

[…]

As a percentage of the total beer market, the craft numbers seem tiny. Last year, the 98 smaller crafts that reported to the Brewers Association trade group produced 1.36 percent of the beer sold in Texas.

But that is up from 0.93 percent a year earlier. Vallhonrat said the rapid increase proves demand is growing, while the small market share indicates there is plenty of room for growth. Even including the much larger Spoetzel brewery, Texas craft beer accounted for less than 5 percent of the beer consumed in Texas.

“Texas is just a really big, big beer market,” he said. “There’s tremendous opportunity for growth in Texas.”

The Brewers Association reports that U.S. craft production rose 18 percent last year, to 15.6 million barrels. The Texas guild notes that means Texas produced 5.3 percent of the total.

The guild hopes to mirror the Brewers Association’s goal of doubling U.S. market share by 2020. On a national level, bolstered by record numbers of new breweries and the emergence of several very large players in the craft segment, that would mean increasing market share to 20 percent by that year.

“As the BA doubles, we’d expect this number (in Texas) to double as well,” Vallhonrat said.

The fact that the craft brewers’ overall share of the market is still in the one percent range shows the potential for more growth. There are still tons of beer drinkers out there that haven’t really given the non-major alternatives a try. I don’t know what the saturation point is, but I feel confident as well that it’s a fair bit higher than this.

The big dog of craft brewers in Houston, Saint Arnold, is celebrating its 20th anniversary this month, and they get a feature story on their history and outlook to help celebrate it.

As Wagner likes to joke, in 1994 he had a great idea for a business in 2006. Except for a hard-core group of enthusiasts, many of them homebrewers, most of them male, college-educated and in their 30s or 40s, consumers were initially reluctant to part with their light, familiar beers in large numbers.

“It took 20 years to teach everybody who had forgotten what beer was like,” Wagner said.

In 1996, Wagner and original business partner Kevin Bartol, both former investment bankers, predicted in the Houston Chronicle that they would be making 100,000 barrels within a decade. In reality, sales flattened at just over the 5,000-barrel mark for the next few years.

Twelve years later, production exceeded 20,000 barrels for the first time.

Wagner stuck it out, buying out Bartol, repurchasing shares from initial investors and building Saint Arnold into an iconic local brand through its Saturday tours, pub crawls and an array of community fundraising projects. His and Bartol’s goal from the beginning, he says, was to make the best beer possible and to build a company that Houston and the state of Texas would be proud of.

By late 2009, business was booming and Saint Arnold was constrained only by physical space. That’s when Wagner moved his brewery into a renovated warehouse overlooking downtown, even though it would’ve been cheaper to buy a custom-built building outside the city center. But again, he said he wanted to create a community gathering point. Again, his decision paid off.

Wagner took on investors to raise enough capital to convert the century-old warehouse into a modern brewing facility with a huge beer hall that serves lunch daily, packs in crowds during tours and special events and is rented out for private parties. The brewery attracts an estimated 100,000 visitors annually.

The new digs also significantly increased capacity. Production is expected in the range of 65,000 to 70,000 barrels this year, boosted not only by consumer demand but also by changes in state law last year that Wagner had pushed for over several legislative sessions. Those production numbers are expected to continue to grow.

Read the whole thing, it’s a nice story about a great local business. I don’t remember exactly when I first discovered Saint Arnold beers, but it was back when their Saturday tours were free and a lot smaller than they are now. I never liked the taste of the big mass-produced beers, and after coming to Houston and becoming acquainted with Shiner while I was at Rice, I never looked back. I’ve been delighted by the success of the small brewers, and as you know I was extremely pleased by the long-awaited passage last year of legislation to help free up their operations. There’s still work to be done in that regard – one item on their wish list is being able to sell bottled beer to customers on their premises – but we’re making progress. This KUHF story on Saint Arnold’s 20th anniversary sums it up in a pithy little way:

A 2012 study prepared by the Texas Craft Brewers Guild puts the industry’s economic impact on the state at more than $600 million per year. The trade group says that’s likely to increase nearly tenfold by 2020. That’s thanks in part to reforms passed by the Texas legislature last year, loosening the state’s restrictions on marketing and distribution for small brewers.

Scott Metzger, founder of San Antonio-based Freetail Brewing, recently addressed the House Economic & Small Business Development Committee on behalf of the Brewers Guild. He says more reforms are needed to help Texas brewers to compete with those in other states.

“Just to make it clear, if the breweries of Texas were regulated by the laws of California, we would be worth more,” Metzger testified.

Take that, Rick Perry.

Big Brew

I like the sound of this.

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For three days in October, the [George R. Brown] convention center will host Big Brew, a major new festival that aims to tap into the region’s burgeoning craft-beer scene by putting 1,000 beers out for public sampling, along with seminars on what you’re drinking and where it comes from.

To satisfy Houstonians’ growing passion for pairing food with beer, some of the biggest chefs in town are lining up 40 local restaurants for an evening of culinary improvisation.

“We really do think we can make this a beer-tourist destination,” said Big Brew organizer Clifton McDerby of Food & Vine Time Productions.

[…]

McDerby said the sampling hall during Big Brew will feature 1,000 craft beers. A selection that large would rank among the larger ones in beer festivals nationally, said Julia Herz, craft beer program director for the Brewers Association industry group.

“It’s a goal, but it’s a goal that we will reach,” McDerby said.

The main tastings will be preceded by two smaller events, a food-and-beer pairing and an exclusively Texas tasting, on the evenings of Oct. 23 and 24, respectively. All will be inside the Brown Convention Center.

McDerby said there also will be a downtown pub crawl, and additional events in the vicinity are likely to be added.

The pairing event will feature food selections from 40 Houston restaurants, 29 of which have signed up.

McDerby said a culinary committee led by noted restaurateurs Robert Del Grande of RDG & Bar Annie, Michael Cordúa (Américas , Artista) and Randy Evans (Haven) is developing the list.

The Texas tasting will feature 40 in-state breweries exclusively.

I’m thinking this was Mayor Parker’s favorite press conference of all time.

Houston Mayor Annise Parker on Tuesday turned a public announcement about a new beer festival into a toast to the city’s industriousness and traditions of hospitality.

“Houston has always been a place for entrepreneurs,” she said, adding craft brewers to a legacy of dynamic business owners who stimulate the local economy.

“Today we celebrate an industry and a city on the rise,” she said, raising a glass of Houston-brewed beer from Saint Arnold Brewing Co. “Here’s to our city, and here’s to beer.”

I’ll drink to that. The festival will run from October 23-25, and tickets go on sale on February 17. They’re limiting sales to 11,000 tix for the main event, so I’d advise buying yours quickly, not to mention perhaps planning for a vacation day on the Friday. The event webpage is here, the Facebook page is here, and a photo gallery from the press conference is here. CultureMap has more.

A preview of the next beer battle

Texas microbreweries are now officially selling their wares on premise. Woo hoo!

In business for nearly 19 years, Saint Arnold Brewing Co. sold its first cold one directly to a customer [in June], thanks to a new law liberalizing the way beer is bought and sold in Texas.

The buyer, 22-year-old Dale Edwards, made his $8 purchase to the click and whir of cameras and a round of cheers from the afternoon tour group, then sipped a heavy stout that marked a turning point for Saint Arnold and the state’s fast-growing craft-brewing industry.

[…]

Customers must drink the beer there, however, as some of the competing interests successfully resisted efforts to allow people to take home packaged beer.

Just hours after the ink dried on Perry’s signature, Houston’s Buffalo Bayou Brewing sold its first beers during its Saturday tour. Owner Rassul Zarinfar said he sold $18 worth of beer in addition to the samples that are included in the admission price.

Saint Arnold also plans to continue including samples in its tour prices but in addition will offer select special-release beers for sale.

CultureMap rounds up what the other craft brewers in town plan to do with their new freedom. It’s been such a long time coming that it’s almost hard to believe. Saint Arnold is at the forefront here, and I really look forward to how they and their colleagues innovate now that they have this capability. But while we celebrate this achievement and all the good it will bring, it’s important to remember that there’s a lot more that could have, and still should, be done. The Jester King brewery lays it out.

While the new laws represent major progress for Texas beer, there are some realities that we are not pleased with. There still exist exorbitant licensing fees in Texas that keep beer from small, artisan brewers out of our state. We still will not be seeing beer from Cantillon or Fantome on Texas store shelves anytime soon. We feel strongly that in order for Texas to become a truly world-class beer state, it must eliminate the massive licensing fees that keep out beer from small, artisan producers. We have written extensively on this topic before, which you can read here.

We are also not pleased with the passage of SB 639, which makes it expressly illegal for breweries to sell the right to distribute their products to wholesalers, while making it expressly legal for wholesalers to sell those same rights to one another. This law is tantamount to legalized theft, and we will join future efforts to see it overturned. For our complete commentary on SB 639, please follow this link.

Again, we are thrilled for Texas law to have changed. We were skeptical whether it would ever happen after repeated defeats in the legislature. First and foremost, we want to thank beer drinkers across the state who voiced support for the bills and gave their time and/or money to our cause. We would also like to thank Open the TapsThe Texas Craft Brewers Guild, Brock Wagner of Saint Arnold Brewing Co., Scott Meztger of Freetail Brewing Co., The Beer Alliance of Texas, and journalists who helped shed light on the injustices inherent in Texas beer law. There is still much work to be done in making Texas a better place for beer and beer drinkers, but these changes represent a dramatic, positive step forward.

See here and here for my blogging on SB639, which helped to land Sen. John Carona on the Ten Worst Legislators list for this session. You should also follow the Jester King link to learn more about what still needs to be done. Here’s an excerpt:

Imagine a local event, right here in Austin, where you could sample hand-crafted beers from both the world’s most highly regarded artisan brewers, and talented newcomers whose names you probably never even heard before. OK, now stop imagining and instead start planning your trip to wherever next year’s festival is going to be held, because without some serious changes to Texas law, there is absolutely no chance that it will ever come here.

In order for an event like this to take place in Texas, every individual, participating brewer, including foreign brewers, would need to pay up to $6,128 in licensing fees, fill out extensive paperwork (available only in English) and submit each of their beers that they planned to pour for label approval, along with either samples or a certified laboratory analysis, even if they had no intention of doing any future business in the State. Of the 70+ artisan producers in attendance, you could easily count on one hand the number whose products are currently available in Texas, and unless the law changes, we aren’t likely to see that number increase all that significantly anytime soon.

There’s been a good deal of focus placed on the need to change the laws prohibiting Texas production brewers from selling their products to the general public on site and preventing Texas brewpubs from distributing theirs off site, and we absolutely, wholeheartedly support the collective efforts that are being made to eliminate these restrictions. At the same time, however, we also feel that in order for Texas to develop a truly world-class artisan beer scene, in addition to supporting its local brewers and easing the path to market for small in-state start-ups, it also needs to remove the economic and regulatory barriers that seem virtually designed to deny its citizens access to world-class artisan products that happen to be made outside its borders.

They have a chart of per-unit costs for breweries of various size to illustrate their point. It’s clear that everyone who was involved in getting the good bills passed recognizes the need for more work, and I expect they’ll be back in 2015 to push for more. That fight will be more difficult – as far as the public is concerned, the problem has been solved, and as SB639 represented a last stand by the Wholesale Beer Distributors of Texas you can be sure they’ll lobby like crazy to protect it – but it needs to be fought. Again, this is about making the beer market in Texas more closely resemble an actual free market. You’d think the way so many politicians in this state croon about the virtues of the free market that this would be a no-brainer, but then we’re really much more about being pro-business than pro-market. The two are very much not the same, as the long slog to get any freedom for craft brewers attests. The fight picks up where it left off in another 18 months.

Craft beer bills now officially the law

Whatever you think of the vetoes or the special session action, this is unequivocally good news.

Happy hour started Friday afternoon for Texas brewers.

Gov. Rick Perry signed five bills representing the most comprehensive overhaul in two decades of how beer is packaged and sold across the state.

Thus, effective immediately, shipping breweries such as Houston’s Saint Arnold can sell a set amount of beer directly to customers, although they must consume it on-site.

And brewpubs like San Antonio’s Freetail can package and sell some of their products for distribution in other retail outlets. The latter change gives Texas restaurants that make their own beer the same ability to sell off-site as many out-of-state brewpubs.

“This is a great moment for craft brewers in Texas,” Saint Arnold founder Brock Wagner said. “It’s the first real reform we’ve seen in beer law, for craft brewers, since the brewpub bill.” He referred to the 1993 legislation that authorized licensed restaurants to make and sell beer for sale on-site.

The Texas Craft Brewers Guild hailed the signings as a “progressive step forward in making Texas the epicenter of craft beer development and growth” and predicted the law changes will mean not just more beer on store shelves but also “more jobs for Texans, increased tourism and greater tax revenue for the state.”

In Houston, the law allowing on-site consumption at shipping breweries would have the biggest immediate potential impact. Saint Arnold, for example, plans to begin offering “special and limited edition brews” for sale during its weekday and Saturday tours.

The basic tour at Saint Arnold’s won’t change – they’re not going to fool around with something that’s been such a success for them. Saint Arnold may start adding other events at which beer will be sold. I suspect there will be a lot of experimenting, and that’s just fine. The brewers and the brewpubs have been given a lot of new latitude, and it will take them awhile to figure out how best to take advantage of it for themselves.

Saint Arnold is the biggest player in the microbrewery space around here, but there are plenty of others now. One of them is Karbach, which hasn’t decided yet what it will do now that it can sell beer on premise. Karbach has been growing like gangbusters lately, so the new freedom they’ve been given comes at a great time for them.

Karbach Brewing Co., one of the nation’s fastest-growing craft breweries, has signed a distribution deal that will significantly expand its availability in stores, bars and restaurants from Beaumont to Galveston to Victoria.

In a separate deal, the Houston brewery also will begin selling beer in San Antonio next month, co-founder Ken Goodman said Wednesday.

To meet the anticipated demand, Karbach is completing a major expansion of its northwest Houston plant that will give it capacity to produce and sell up to 40,000 barrels annually, up from 15,000 barrels.

Karbach, which began sales in August 2011, produced more than 8,000 barrels in 2012, well ahead of internal forecasts. Goodman said he expects to sell 18,000 to 20,000 barrels this year.

That will include new sales in 17 counties across Southeast Texas through a distribution arrangement announced Wednesday with Del Papa Distributing Co.

Karbach had been delivering some beers on its own in a limited area, but the Del Papa deal will put year-round and special-release beers in a wider variety of stores and bars.

According to some research done by The New Yorker, based on newly released 2012 data gathered by the Brewers Association, Karbach was the second-fastest growing brewery in the country from 2011 to 2012, with sales increasing by a phenomenal 1112% over that year. You have to start at a pretty low level to grow tenfold, but still, that’s impressive. Overall, craft brewery production increased by 14% in the state, though the total volume of over 770,000 barrels is still peanuts compared to what an Anheuser Busch produces in a year. One reason why there’s been such growth is because there’s plenty of room for it. Texas is only 41st in the country in craft breweries per capita. A whole lot more of these places could open before the market even approaches saturation.

One more thing:

The brewers guild released new figures Friday showing that craft beer production in Texas was up 42 percent last year compared with 2011. It estimated the industry’s economic impact in the state was $737 million in 2012.

“Texas craft beer now accounts for an estimated 0.98 percent of all beer consumed in Texas, but it employs 59.7 percent of the people who work in breweries in the state,” it said.

The new figures don’t appear on the Texas Craft Brewers Guild website just yet, though you can still see last year’s study, which put the impact at $608 million. You can be sure that number will be even bigger next year.

Craft beer bills pass the House

Hallelujah!

A raft of bills that would dramatically alter the way beer is sold and consumed in Texas sailed through tentative approval from the House on Friday after a lengthy and disputatious process between brewers and beer distributors. If finally approved next week, the legislation will go straight to the governor’s desk without another stop.

The bills represent the largest overhaul of the industry in Texas since the Legislature legalized brewpubs in 1993. Under the new regulatory scheme, brewpubs and craft brewers would be allowed more flexibility to sell their products — privileges beermakers have sought for more than a decade.

The package includes Senate Bills 515, 516, 517, and 518, by state Sen. Kevin Eltife, R-Tyler, which decrease restrictions on craft brewers and brewpubs.

Under the new rules, the cap on brewpub production would be doubled, from 5,000 barrels a year to 10,000. Brewpubs would also be allowed to sell their beer to distributors, in addition to selling limited amounts of their own beer directly to retailers.

The bills adjust breweries’ right to circumvent beer distributors and sell beer directly to retailers. Larger breweries than before would now be allowed to self distribute, but the limit on how much they are allowed to self distribute has been lowered.

Also, breweries would now be able to sell beer for on-site consumption — a major victory for Frank Mancuso, the Central Texas sales representative for the Saint Arnold Brewing Company of Houston, the oldest craft brewer in the state. Mancuso came to the House Gallery with a large number of other Texas brewers, who broke into applause when the last of the bills finally passed.

“We’ve been working on this for eight sessions now,” he said. “Selling beer at our location is something we’ve wanted to do for a long while.”

I only remember this going on in the last four sessions, but regardless, it’s been a long and arduous road to this point. I’m going to crack open a Saint Arnold’s to celebrate. Major kudos to everyone involved – I’m especially proud to say that my State Rep through 2012, Jessica Farrar, was an early and ardent leader in this fight. Here’s a little beer music to commemorate the moment. Please note that it contains some naughty language, so exercise care while watching:

We do love beer. Thanks to these bills, it’s easier to love.

Craft beer bills pass out of the Senate

A good day indeed.

The Texas Senate voted Monday to give craft brewers and brewpubs new opportunities to sell their beer.

“To see that happen was amazing,” said Scott Metzger, a San Antonio brewpub owner who worked with other brewers, legislators and wholesalers in negotiating a compromise.

Brock Wagner, owner of Houston’s Saint Arnold Brewing, called it a critical step toward passage of the state’s most significant beer-related legislation in 20 years.

“We still have a path to follow,” he said.

Metzger watched via his office computer at Freetail Brewing as the Senate voted 31-0 to approve two bills promoted by the Texas Craft Brewers Guild. An economic impact study Metzger prepared for the guild predicts the measures will spark even stronger growth for the state’s burgeoning craft beer industry.

[…]

Rick Donley, president of the Beer Alliance of Texas distributors group, which supported SB 515 and 518 from the beginning, called it “a good day for the craft-brewing industry,” including manufacturers and wholesalers.

As Metzger noted, SBs 516 and 517 were not taken up because the Senate can only vote on so many bills on a single day at this point in the session. They were subsequently passed unanimously on Wednesday. SB639, the Carona bill, was also approved after some modifications were made that settled most of the objections to it. All bills now await hearings in the House, and signs look good for passage. Put some beer in the fridge in anticipation of it finally happening.

Craft beer legislation advances

Moving forward.

Legislation authorizing the most significant changes in 20 years to the way beer is bought and sold in Texas passed a key Senate committee Tuesday with broad support.

Under terms of the bills, Houston’s Saint Arnold and other Texas craft breweries could sell a limited amount of beer on site and brewpubs like San Antonio’s Freetail Brewing could package some of their product for sale in stores, bars and restaurants.

The breweries, meanwhile, would be prohibited from accepting cash payments for the rights to distribute their beer in specific geographic regions, but they would be allowed to continue to share marketing and some other costs with their distributors.

“It’s an exciting day,” said Scott Metzger, the owner of Freetail Brewing, who has been negotiating on behalf of the Texas Craft Brewers Guild. “ … We have a path ahead of us.”

Final terms of the bills – four of which were developed after yearlong negotiations between brewers, lawmakers and distributor and consumer groups – were hammered out under a tight deadline set last week by the chairman of the Senate Committee on Business & Commerce, who introduced a competing bill and ordered the two sides to reach a compromise.

The committee approved all five amended bills unanimously Tuesday and sent them to the local calendar committee for expedited scheduling before the full Senate. Metzger said a signed agreement among stakeholders with an interest in the bills should expedite companion bills in the House.

Metzger and Brock Wagner of the Saint Arnold brewery both expressed positive thoughts on this, while spokespeople for the Beer Alliance of Texas and the Wholesale Beer Distributors of Texas, who had played the role of villain prior to this, both basically said everyone got some of what they wanted and no one got everything. In its summary of the legislation, Open The Taps says that “at least a few craft brewers are not pleased with the limitation on selling their brand territorial distribution rights”, which is an aspect of the Carona bill that had been criticized by everyone except the Wholesale Beer Distributors. My feelings on this are in line with Open the Taps, which writes in its analysis of the bills:

This is by no means a perfect package of regulatory changes, but again it is a good step. Things happen incrementally in legislative bodies, and we will be back next session if necessary to continue the fight to OPEN THE TAPS in Texas.

We still have a few points on our wish list to accomplish, and we are looking for ways to implement those points, but this may be the most we can get at this time and we will consider it more progress than has been made since 1993 when brew pubs were first allowed in Texas, post-prohibition.

See also Scott Metzger’s analysis of the bills and the process that led to the package that emerged from committee. This is tangible progress and a big deal in its own right, but hardly the end of the line. Now let’s get this across the finish line, and we can see where to go next from there. Good job, y’all.

Craft versus crafty

Just because that beer you’re drinking has a quirky name and a whimsical label on the bottle doesn’t mean it came from a microbrewery.

In a biting opening salvo, a trade group for the nation’s craft brewers on Thursday accused Anheuser-Busch InBev and other major manufacturers of “deliberately attempting to blur the lines between their crafty, craft-like beers and true craft beers from today’s small and independent brewers.”

“We call for transparency in brand ownership and for information to be clearly presented in a way that allows beer drinkers to make an informed choice about who brewed the beer they are drinking,” the Colorado-based Brewers Association said.

The group singled out Blue Moon and the Shock Top line. Those popular beers are owned and produced by, respectively, SABMiller, the same company that makes Miller Lite, and AB-InBev, the Belgium-based purveyor of the ubiquitous Budweiser and Bud Lite.

“You would not know that from looking at the labels,” said Julia Herz, craft beer director for the Brewers Association, which represents such locally owned breweries as Saint Arnold, Southern Star, No Label and Karbach.

There’s more information from the Brewers Association here and here. I don’t think it’s asking a lot to clearly state on the label that thus-and-such beer is a product of whichever brewery. A lot of people are choosy about which businesses they support and which they don’t. More generally, I favor customers getting full information about the products they buy. How can you make an informed choice if you don’t have all the relevant information? Beer, TX has more.

Beer is still a job creator

We really owe a debt of gratitude to beer, in particular to microbrewers.

Saint Arnold Brewing Co., the city’s oldest craft, has 43 employees and is in the midst of hiring at least three more, founder Brock Wagner said. That is about double the staff before production shifted to a new brewery with more capacity 2½ years ago.

“We’ve been able to turn it into a place where you can have a career,” Wagner said, noting such benefits as fully paid health care, a generous 401(k)-match program and paid vacations.

The employment growth is actually greater considering that several volunteers who used to help set up Saturday tours at the original brewery were given paid part-time positions to handle the weekday and Saturday tours at the new place.

Karbach Brewing, which marked its one-year anniversary Sept. 1, already has tripled its staff, from the original seven.

“Obviously, our growth was higher than anticipated,” marketing chief David Graham said.

An ongoing boom in craft-beer sales is boosting hiring nationwide.

In a speech during last month’s Great American Beer Festival in Denver, Colorado Gov. John Hickenlooper noted this statistic from the Colorado Brewers Guild: While craft beer accounts for less than 5 percent of beer produced in that state, the 150 craft breweries there provide 64 percent of the brewing jobs.

That’s because major breweries, like Houston’s Anheuser-Busch plant, produce millions of barrels annually, compared with the Saint Arnolds and Karbachs in the tens of thousands of barrels. The difference in scale enables the big players to utilize a lot of cost-saving efficiencies.

In contrast, said Dave Fougeron, founder of Conroe-based Southern Star Brewing, “We do things backward and slow.”

Fougeron and other supporters say this laborious process results in better-tasting beers and more diversity for consumers.

In other words, the big breweries rely on automation, while the microbreweries rely on people. That’s a formula for more jobs, many of which are for skilled people. This story refers to a study of the economic impact of microbreweries, which could be a lot if the Legislature would finally do something about those archaic restrictions on selling beer. The microbrewers have a strategy, and they’ve done a good job getting their story told in the media. It’s got to happen one of these days, doesn’t it?

What the microbreweries want from the next legislative session

Scott Metzger of Freetail Brewing has an update on what he and his craft-brewing colleagues have been working on.

Brock Wagner (of Saint Arnold of course) and I have been Co-Chairing the Texas Craft Brewers Guild Legislative Committee and have come a long way. There is still a ton of work to do, and nothing is certain, but I feel better about our chances than ever before. For the first time this issue is being tackled from the perspective of economic development and helping Texas-born businesses flourish. From that angle, there is really no denying that changes must be made to grant Texas craft brewers greater access to market.

The Texas Craft Brewers Guild has released this position paper laying out our legislative agenda. Specifically, we have four goals (all equal in importance):

  • Gain the ability for packaging breweries to sell their products to consumers on the premise of their breweries
  • Gain the ability for brewpubs to sell to the wholesale tier
  • Protect small brewer’s existing rights to self-distribute
  • Achieve these goals while protecting the integrity and viability of the 3-tier system

As I wrote here last November, protecting a viable, independent 3-tier system is vital for the health of the craft brewing industry. Without independent wholesalers, craft beer would never see the light of the shelves or taps we’d be stuck in a world without the wide variety of choices we enjoy today.

See here for more about their economic impact study. I’m less sanguine about the three-tier system than they are, but if they’ve found a way to overcome the resistance to any change while living within that system and not making it any harder for further newcomers to the industry, then who am I to complain? I wish them all the best of luck next year.

Beer is a job creator

Microbreweries are, anyway.

Craft brewing in Texas could add 52,000 jobs and mushroom into a $5.6 billion industry by 2020 if state lawmakers next year ease restrictions on breweries and restaurants that make beer on-site, a study prepared by the brewers claims.

That compares with the estimated $608 million economic impact that smaller, independently owned craft breweries made in 2011, according to the analysis made public Monday by the Texas Craft Brewers Guild.

“If you get a really vibrant industry going, with all the multiplier effects, to me it’s not unrealistic,” Brock Wagner, who founded Houston’s Saint Arnold Brewing Co. in 1994, said of the projected growth.

Wagner and other Brewers Guild members have already begun meeting with legislators and wholesaler groups ahead of the 2013 legislative session.

They are pushing for changes to the state alcohol code that would allow shipping breweries like Saint Arnold – which sell their product to wholesalers, who distribute it in turn to stores, bars and restaurants – to offer a limited amount of beer directly to consumers and allow brewpubs to package some of their beer for off-site retail sales they way they do in states with strong brewing industries.

Wagner said the changes would encourage more Texans to open breweries and help startups and established breweries alike by providing additional revenue that can be used to expand marketing efforts and reach new beer drinkers.

“Changing the laws will make many of these businesses much more viable,” he added. “If the law changes, we will change our staffing overnight – literally, add another 50 percent.”

We are well familiar with the microbrewers’ efforts to get the Lege to update its archaic and obsolete laws regarding beer distribution. I of course hope that the fourth time is the charm. I don’t recall them making an explicit economic argument for their case in years past; certainly, they appealed to basic free market principles, which the beer distribution duopoly most certainly is not, but I don’t recall jobs being part of the pitch. Of course, they didn’t have these numbers before now. Here’s more on that.

The Texas craft beer industry is having measurable positive economic impact on local and regional economies throughout the state to the tune of $608 million, according to the Economic Impact of the Texas Craft Brewing Industry study released today by the Texas Craft Brewers Guild. Texas craft brewers are also creating jobs, accounting for 51.2 percent of all the state’s brewery jobs, a remarkable figure given only 0.7% of the beer consumed in the state comes from Texas craft brewers.

The study, authored by University of Texas-San Antonio Economics Professor Scott Metzger, founder and CEO of San Antonio-based Freetail Brewing Co., also models how the economic impact of the Texas craft beer industry could reach $5.6 billion annually in just eight years.

“$5.6 billion sounds astounding, but given what’s happening across the country with craft beer, it’s not. It’s actually conservative,” Metzger says, calling the 2011 figure “the tip of the iceberg.”


“Given consumer demand and planned increases in capacity, a tremendous opportunity exists for ongoing and future growth — provided legislation may be passed allowing Texas’ craft brewers the same access to market enjoyed by brewers in other states and by the Texas wine industry,” Metzger says.

 

“In other states, brewers can sell their packaged goods directly to consumers through tasting rooms. In other states, brewpubs can sell their beer off premises, at festivals, for instance, and as packaged goods in retail stores, not just at their brewpub location,” explains Metzger.

 

“These sales opportunities other brewers benefit and grow from are lost for Texas craft brewers — and they add up.”

Download the entire report, official press release and supplemental materials here.

I have not had the chance to pore through these reports in detail yet. I suspect there may be a bit of puffery in there, as is often the case with studies like these, but the thing about a small population is that it doesn’t take much for it to have rapid and sizable growth. Further, the vast majority of microbreweries are startups, and as the CBPP points out, that’s where the job creation action is.

There is an emerging consensus among economists that young small firms — not small firms in general — are particularly important “job creators.” A 2010 study finds no systematic relationship between firm size and job growth, after controlling for firms’ age.[22] It thus is important to distinguish between startup businesses, which the study finds “contribute substantially to both gross and net job creation” (as well as to gross job destruction when they fail, as many startups do), and other small businesses, which on average generate no more net job growth than do larger businesses.[23]

Similarly, as CRS notes, recent research “suggests that small businesses contribute only slightly more jobs than other firms relative to their employment share. Moreover, this differential is not due to hiring by existing small firms, but rather to startups, which tend to be small.”[24]

So there you have it. Do your part for job creation in Texas and pick up a sixpack or two of your favorite microbrew. It’s the right thing to do.

713 ™

WTF?

Anheuser-Busch is counting on civic pride to make its next product a smash seller: beer named after America’s various beer-drinking cities, based on their area codes.

To that end, AB has already applied for a federal trademark for “713” for Houston, reports Craft Business Daily, as well as 314 for St. Louis, 303 for Denver and 214 for Dallas.

And while it’s a proven fact that Houstonians are easy targets for anything that bears our area code — much like Texans are easy prey for advertisers who hawk their product as the “best in Texas” or decorate it with a Lone Star flag — there’s uneasy concern in the craft beer world that the beer giant is simply exploiting this tendency to sell a low-quality product and undermine craft brewing in the process.

Yeah, I’m not too worried about that. No amount of marketing will ever make bad beer taste better. And if it turns out that Bud 713 or whatever they call it doesn’t suck, then it’s a win for raising quality standards. Now if you’ll excuse me, I’m going to go trademark the number 3. I don’t know for what purpose, I just figure I’d better get in on the action before all the good numbers are taken.

Another microbrewer comes to town

The beer scene in Houston keeps getting better.

Eric Warner was at the well-regarded Flying Dog Brewery in Colorado for a decade, as brewmaster and then as chief executive. While there, the brewery came out with such beers as Snake Dog IPA, Double Dog double pale ale, Gonzo Imperial Porter and Dogtoberfest Märzen.

By the time Flying Dog moved production to Maryland and Warner left the company in 2008, Flying Dog was a national brand with annual production of 50,000 barrels, up from 10,000 when he started.

Now the 47-year-old is bringing his talent, a quarter-century’s brewing experience and his interest in startups to Houston.

Karbach Brewing Co. has brewing equipment on site, in a warehouse under renovation in the same U.S. 290/Loop 610 West part of town where Saint Arnold started.

Warner said the company will have more than $1 million invested in the brewery by the time it begins operations in late July or August.

The Karbach beers will be on draft around town two months after that.

Packaging — in 12-ounce cans, meant to fit the lifestyle of active Texans – should follow shortly.

“Hopefully, people can take a couple of six-packs of Karbach beer to the Thanksgiving table,” Warner said one recent morning, while making a test batch of “Weisse Versa” wheat beer that will be among three year-round offerings.

That’s now three new microbreweries in the Houston area in the last year, plus the forthcoming Freetail brewpub. Not too shabby. I wish them all well. Beer, TX has more.

RIP, HB602

Dammit.

Texans won’t be buying liquor on Sunday and the state’s 29 brewpubs won’t be competing with their out-of-state rivals on local grocery shelves.

And Texas breweries or liquor distillers still can’t sell a 12-pack of beer or a souvenir bottle of bourbon to tourists, as the Legislature has killed all bills related to changes in state laws on beer and liquor retailing.

“We got railroaded,” said Dan Garrison with Garrison Brothers Distillery, a Hill Country distiller who wanted the ability to sell a souvenir bottle of his bourbon to tour groups.

Garrison’s comment could sum up the frustration of the smallest players in the state’s beer and liquor industry that is controlled by giants.

Rep. Mike Hamilton, R-Mauriceville, chairs the House Committee on Licensing and Administrative Procedures, where most of the alcohol-related bills died this session.

He said it’s difficult to change decades-old laws without affecting someone’s financial interest.

Translation: It’s difficult to give small brewers and distillers an even break because doing so might put a tiny dent in the massive, oligarchic profits of the big distributors.

Most attempts to change beer or liquor laws eventually bump up against the state’s post-Prohibition rules that maintain distinct boundaries between manufacturers, distributors and retailers, in what is commonly called the three-tiered system.

House Bill 660 would have allowed brewpub owners to sell their beer through distributors at retail outlets. The brewpubs said they would expand and create jobs.

The Beer Alliance of Texas and the Licensed Beverage Distributors supported the bill, while the rival Wholesale Beer Distributors of Texas opposed it. That was enough to kill it in Hamilton’s committee.

Likewise, Rep. Jessica Farrar’s House Bill 602, which would have allowed microbreweries to sell 12-packs of beer to tour groups, fell victim to competition between two distributor groups.

And once again, the deciding factor in this debate is what’s good for the distributors, and not for the customers. The customers always lose. On the one hand, legislation to allow microbreweries to sell their product onsite made it farther than it had before, and given the way the Lege works you have to hope that this represents progress. On the other hand, to come this far and see it fall just short is that much more wrenching because you could see the finish line. I’m sure I’ll feel hopeful again in time for the next session, but for now I’m just pissed off. Lee Nichols has more.

UPDATE: Here’s the Chron story.

Saint Arnold Brewing Co. founder Brock Wagner, one of the driving forces behind this and two previous legislative efforts, said he was “annoyed” at the continued failure to pass a bill that had no other organized opposition.

“We just got outgunned,” he said.

“The laws in Texas need to be changed,” he said. “Right now, the laws in Texas are biased against in-state craft breweries. It makes no sense.”

I couldn’t agree more.

A night with the Skeeters

I learned a couple of interesting things from this Richard Justice column about the forthcoming Sugar Land Skeeters minor league baseball team. Among them: You may think you know what a Skeeter is, but you don’t.

If you’re wondering what a Skeeter is, don’t.

“It’s not a mosquito,” [team president Matt] O’Brien said.

He will unveil a mascot later this year, and then we’ll all know.

Why wait that long? Leave your guesses as to what a Sugar Land Skeeter is if it’s not a mosquito in the comments. Bonus points for links to a representative image.

Houston hasn’t had a minor league baseball team in 50 years, and the gamble for the Skeeters is trying to survive in the shadow of a major league franchise.

And then O’Brien starts rattling off reasons people will enjoy the ballpark experience.

“At times, we’ll feel like dinner theater,” he said. “It’s a place to eat, have fun and socialize with your neighbors.”

If the Skeeters are a success, there likely will be more teams added within two or three years. Baytown has been mentioned for a franchise. So have The Woodlands, Conroe and Waco.

These would be Atlantic League teams – the league is looking at expanding into Texas, if only to make future Skeeter scheduling easier. There’s also supposed to be a Montgomery County team coming online in 2012, but I have not heard anything more about that recently. I don’t know if they’ve officially landed a team, and if so what league it’s in. I’m not sure there’s room for two minor league teams out that way.

The description of the minor league experience as being a bit like dinner theater is apt. I’ve been to minor league games all over the country, and they do work hard to keep you entertained. A common factor now seems to be having a play area for kids. Speaking from recent personal experience, you can spend the better part of the game there with the kiddos if they’re not as into watching the action on the field as you might be. Minor league games are very different than their major league counterparts, but they’re a lot of fun. I plan to make the trek out there once or twice a summer.

One more thing:

There will be all the bells and whistles of minor league baseball. One section of the outfield will be a playground, another an old-fashioned Texas icehouse.

Tickets will go for $8, and $1.75 will get you a hot dog. Depending on your taste in beer, a cold one will cost between $4 and $6.

Again, speaking from personal experience, let me implore President O’Brien and the entire Skeeters staff to ensure there are microbrews available at the games. If you don’t have Saint Arnold, No Label, and Southern Star on tap, you’re doing it wrong. Trust me on this.

A win for the microbrewers

Woo hoo!

Craft beer brewers came to the Capitol this session with a number of bills giving them greater latitude in getting their beers to customers. [Thursday], the House gave an early OK to one of those bills, allowing breweries to charge admission for tours, and include up to two six-packs of beers to give to tourists at the end.

“Tours of our brewery are the single most important marketing item,” Brock Wagner, founder of Saint Arnold brewery in Houston, told the House committee that took up the bill last month. Other states have that ability, he said, and those breweries and their beers are out-competing Texas beers.

This is HB602 by Rep. Jessica Farrar we’re talking about. It passed the House unanimously and now needs to pass the Senate. Beer, TX has some information on that:

[Rep. Farrar’s] bill now awaits committee assignment in the Senate, where it is being sponsored by State Sen. Wendy Davis, D-Fort Worth.

[…]

Brock Wagner, the Saint Arnold Brewing Co. founder who has pushed for the change as a way to help small brewers market their products more effectively, said his focus now turns to the upper chamber. While pleased with Thursday’s vote, he was not ready to pop the top on a celebratory ale.

“I continue my state of cautious optimism,” he said. “We’re not there yet. It’s certainly a big step in the right direction.”

Sen. Davis’ bill is SB1863; it remains in the Business and Commerce Committee as of today. I should note that Saint Arnold’s already charges for a tour, and in return you get the lovely glass pictured on that page. That’s nice, but perhaps not so useful after a certain number of return trips. If this gets signed by the Governor, I presume Saint Arnold will institute a tiered pricing structure for its tours, thus allowing those who wish to take home a six pack or two to do so. After three sessions of trying to make something like this happen, this is substantial progress.

I wish I could report equally good news for the brewpub bill HB660, but it remains in committee and I daresay it is unlikely to see the light of day this session. Tellingly, the only update on the Brewed And Never Battered blog talks about a couple of other bills that had recent committee hearings, HB2436 by Rep. Eddie Rodriguez, and companion bill SB1575 by Sen. Kirk Watson, which would allow for some direct sales by microbrewers, but neither has received a committee vote yet. Frankly, no matter what happens with any of these bills, I think Scott Metzger did a great job getting the word out and building support for letting brewpubs expand their markets. If HB602 can pass, something like HB660 will eventually pass, too. It may take a few more sessions, but it will happen, and we’ll all be the better off for it.

Compromise microbrew bill voted out of committee

From Brewed and Never Battered:

Congrats to Brock Wagner, the folks at St. Arnold, and all the other Texas brewers, distributors and retailers supporting HB 602 which today passed the House Licensing and Administrative Procedures Committee by a vote of 6-0. Next up is the Local & Consent Calendar Committee, which will place the bill on the Calendar for a vote before the entire house.

As far as HB 660 goes, we are still trying to arrange for it to be brought up for a vote before the committee. No further news at this time.

HB602 is Rep. Jessica Farrar’s bill, the compromise bill that even the beer distributors support. Farrar’s 2009 bill did make it out of committee, but not until May, and it died even before the Great Chubfest of 2009. Maybe this year it finally makes it, and if so it will be a big step forward. As always, now would be an excellent time to call your State Rep and State Senator and let him or her know that you favor a Yes vote on HB602. And HB660 too, if it ever makes it out of committee.

Brewery bills get referred to committee

It’s a first step.

State Rep. Jessica Farrar, D-Houston, has introduced House Bill 602, which would allow breweries to distribute up to 48 12-ounce beers at the conclusion of tours of the respective facilities. Brewers would cover the cost of the beer by charging varying tour admission fees. The net effect would be that tourists could take some of the product home with them, just as visitors to Texas wineries can do under existing law.

HB 602 is very similar to a bill Farrar carried during the 2009 session that made it out of committee but was buried in Calendars. Traditionally, the Texas beer wholesalers have opposed anything seen as challenging the three-tier system that gives distributors exclusive rights to sell beer to retail outlets.

This is the third time a version of the bill has been introduced. But since the defeat of the 2009 measure, Texas has seen a significant spike in the number of small breweries that have either opened, have licenses to open or are in more preliminary stages.

[…]

Also sent to the Licensing & Administrative Procedures Committee is House Bill 660, sponsored by state Rep. Mike Villarreal, D-San Antonio. It would allow brewpubs – that is, restaurants that make and sell beer on premises only – to increase the amount of beer they produce and to sell some of that beer off-site through distributors.

It’s a journey of a thousand miles, and there’s a million ways to go off the trail and into the weeds, but you have to start somewhere. As always, if you support these bills, now would be a good time to let your Rep and your Senator know that. The AusChron has more.

Legislative beer news

There’s a new player on the beer legislation scene this session.

The owner of one of San Antonio’s largest brewpubs, Freetail Brewing Co., is spearheading an effort to change state law to allow it and other brewpubs to distribute their beer anywhere in Texas.

If successful, beer aficionados no longer would need to travel to San Antonio to sip on Blue Star beverages, or to Austin for Uncle Billy’s or Dallas for Gordon Biersch. The brewpubs would be able to self-distribute up to 10,000 barrels of their brew per year or sell it to licensed distributors.

And under the proposed legislation, brewpubs could increase their total production from the existing limit of 5,000 barrels per year to 75,000 barrels.

Freetail owner Scott Metzger helped draft House Bill 660, which would change the state’s beer distribution laws. State Rep. Mike Villarreal, D-San Antonio, filed the bill last week.

The San Antonio Current, the Chron’s Beer, TX blog, and the Austin Chronicle have all written about HB 660. Far as I know, this is the first time that brewpubs have gotten involved in this.

If you’ve read this blog for any length of time, you know that I’m a fan of Saint Arnold beer and of microbreweries in general, and I’ve been a supporter of legislation to give them more freedom to sell their product. Past legislative efforts to allow microbreweries to sell their wares at their base of operations, which is something that Texas wineries have been able to do for some years now, have fallen short. The microbreweries are trying again, but theirs is a separate effort, as noted in that Beer, TX post:

Our own Jessica Farrar, D-Houston, has indeed introduced a bill that would let brewers distribute a limited amount of beer directly to consumers. HB 602 would allow Texas breweries to charge for tours and then give tour participants up to 48 12-ounce beers at the conclusion.

By charging varying amounts, depending on how much beer a tourist wanted to receive, consumers could get the beer they want while maintaining the status quo for the state’s powerful distributors. According to the wording of Farrar’s bill:

This section does not authorize the holder of a brewer’s permit to sell ale to an ultimate consumer.

So instead of allowing people to buy a case of beer after touring the brewery, you can offer differently-priced tours that may or may not include a free case or two of the product to take home with you afterward. If you’re thinking that’s a subtle change from the previous bills, you’re correct. If you’re wondering why such a subtle change would make this bill more likely to pass, all I can say is welcome to the world of sausage-making.

Anyway. Freetail owner Scott Metzger has started a blog to document his journey through this process, and he describes the differences between HBs 660 and 602 in this post, summing up as follows:

Obviously, I support HB 660. I also believe that the activities that would be permitted by HB 602 should be legal. If a brewery wants to give you a couple of cases of beer, I believe they should be allowed to. It should be noted, however, that HB 602 has a very narrow focus that affects only a handful of breweries: A-B in Houston, MillerCoors in Ft. Worth, Spoetzel in Shiner, St. Arnold in Houston, Real Ale in Blanco, Rahr in Ft. Worth, and Independence in Austin (in other words, only the breweries that package beer in 12-ounce bottles).

I support this bill and the efforts of the breweries who would be helped by its passage. I would however, point to HB 660 as a more comprehensive piece of reform legislation that has a greater reach. And with the exception of A-B, MillerCoors and Shiner who all exceed HB 660′s size restriction, the Brewpub bill allows the activities that HB 602 seeks to allow, should a brewery decide to change to a brewpub license. A brewpub is legally allowed to sell you packaged product for off-premise consumption, so long as they have packaged product to sell (most don’t).

You will never find me campaigning against HB 602, as I think it’s a bill that should pass. However, I believe our state is in need of greater reform that benefits our craft beer industry.

I was curious about what the microbrewery perspective was on HB 660, so I placed a call to Saint Arnold’s and had a chat with Brock Wagner. He told me they’re focused on their own efforts and that he wishes Metzger and his supporters the best of luck. As do I, to all of them. There’s a Facebook page for HB 660 to like if you’re into that sort of thing. You know I’ll be keeping an eye on this.

Good beer, good times

Nice to know that quality still matters.

Saint Arnold Brewing Co. increased production by 22  percent last year, continuing a streak of double-digit annual growth even as the U.S. beer industry stagnated.

The Houston brewery, founded in 1994, expanded capacity by about 80 percent in 2010 with a move into a larger plant and the purchase of seven new fermentation tanks. Despite startup hitches that led to the dumping of several batches and retail shortages, Saint Arnold produced a company-record 31,445 barrels of beer.

Once the hiccups were solved, shipments soared 38  percent during the second half of the year, said founder Brock Wagner.

In the fall, Saint Arnold began distributing in Louisiana, the company’s first foray outside of Texas. That expansion, remaining capacity for an additional 16,000 barrels and sustained interest in locally made craft beer have the brewery poised for continued growth.

“I don’t see anything slowing it down,” Wagner said.

That includes the recent openings, and planned openings, of several craft breweries in Texas. Rather, Wagner said, established breweries should benefit from any increased market interest.

This makes me happy. The Saint Arnold brewery is one of the best things about Houston. Keep up the great work, y’all.

Saint Arnold school supply drive

The following is from the latest Saint Arnold Army newsletter:

School Supply Drive for Needy Families on Wednesday, July 28

In conjunction with State Representative Jessica Farrar, we will be hosting a school supply drive at the brewery on Wednesday, July 28.  For many families, the basics like a backpack and pencils are difficult to afford.  What better way to help kids in these families get a great start to the school year than for us to come together and donate these items to them.  And we will bribe, er, entice you to do so with a fun evening at the brewery.

Here are the details:
Date: Wednesday, July 28
Taps open from 6:00 PM to 8:00 PM (remember you can bring snacks, dinner, heck, a white table cloth and 5 course meal if you like)
Admission: Bring one new or gently used children’s backpack
AND
at least one of the following items:
8 pack of markers
24 pack of crayons
Large pack of pencils
Large package of spiral notebooks

You can go to Academy or Amazon.com and get a backpack for around $20 to $25.  There are some available for as little as $15.

That would be at the Saint Arnold brewery, of course. You can find directions and a map here.

And then there were three microbreweries

Meet Mike Brian Royo, the owner of what will soon be the third microbrewery in the Houston area, No Label Brewing Co.

Royo, 32, and his wife, Jennifer, and his parents, Gilberto and Melanie, have leased space in an old warehouse in Katy and are expecting their federal license to arrive within a couple of months. In the meantime, he said, he’s shopping for a 15-barrel brewhouse and some fermenting tanks to replace the “glorified homebrew system” he’s relying on as he fine-tunes No Label’s initial lineup.

No Label plans to start with a hefeweizen, El Hefe!, and either Pale Horse pale ale or Ridgeback Ale, an American amber with a distinct chocolate finish.

“I lean toward the maltier beers,” Royo said.

He said he’ll also put out a lighter blonde ale, Silo, before moving into the higher-alcohol stuff, IPAs and stouts, for example.

Royo’s dad is a native of Panama, where he met his wife, whose family was stationed there. He’s also a geologist who’s always had a taste for good beer, Brian said. The family eventually settled in Katy, where Brian went to junior high and high school before heading to Texas A&M to study construction science.

After transferring to the University of Houston, he discovered the Flying Saucer, visited the Saint Arnold brewery and started making beer as a hobby.

“Next thing you know, I’m spending all my extra money on homebrewing supplies,” he said.

Brock Wagner, the owner of Saint Arnold’s, always used to joke when he gave the brewery tours that “this is what happens when your home-brewing hobby gets out of hand”. Now you know what he means. No Label joins them and Conroe’s Southern Star in the craft beer-making business. I wish them the best, and look forward to sampling their wares some day.

UPDATE: Correction made per comments.

They’re brewing up in Conroe

I’m glad to hear that there’s another microbrewery in the area, and I’ll be keeping my eyes open for Southern Star beer the next time I’m someplace that might have a broad enough selection to include it. One item to note:

[Co-founder Dave] Fougeron also would like to see small breweries become local gathering spots. He and [Brian] Hutchins open their business to the public on Saturdays, offering free tours and handing out samples while Jeff Smith and Steve Sumner of the Outlaw Kookers keep the barbecue pits stoked outside. Fougeron said the tours create “a genuine feeling of community.”

“There should be thousands of breweries in America,” he said. “We’re Americans. We drink beer.”

Brock Wagner, the head of Saint Arnold, agreed that his former employee is both passionate and knowledgeable about his favorite subject. Also, he might be in business at just the right time.

Southern Star is only the second craft brewery in the Houston area, and it’s one of just a handful statewide. Yet there is something of a building boom going on, particularly in the Austin area, where four already are open and several others are at least in the planning stages.

Wagner, who runs the oldest and largest craft brewery in the state, sees plenty of room for growth. In Houston, he said, craft beer makes up less than 3 percent of sales.

“Long term,” he said, “I think we should all be working toward making craft beer about 10 percent of the market down here. That will take us all working together.”

Hopefully, one thing they’ll all be working together on is to improve the state of beer in Texas by trying once again to pass a bill that would allow microbreweries to sell their beer on premises. They made some progress in a second attempt at it in 2009 but ran into the usual resistance from the beer distributors’ lobby. Having one more microbrewer in Texas won’t make that much difference, but every little bit helps.

The new Saint Arnold brewery

Opening today just north of downtown.

[T]he 15-year-old craft brewery will debut to the public a new plant in a converted warehouse with fabulous views of downtown and easy freeway access. It’s the result of a $7.5 million renovation and the determination of Saint Arnold founder Brock Wagner to move his company into something other than a generic concrete box somewhere off Beltway 8.

“Having a building downtown is part of our passion for being part of the community,” said Wagner, a Rice University grad who started homebrewing in his dorm room more than 20 years ago.

Wagner started scouting locations for a new brewery in late 2006, and he liked what he saw in the Houston ISD food-distribution warehouse for sale at 2000 Lyons Ave. He closed on the deal in June 2008 and began adding on a brewhouse — with room for three, 240-barrel fermenting tanks to supplement the collection of 60- and 120-barrel tanks that will make the move — and adapting the interior of the four-story, 95-year-old warehouse to the needs of a modern brewery.

“You get all this extra character,” said Wagner, “you find a use for it.”

They had a ribbon-cutting ceremony, follow by much beer drinking of course, on Wednesday. You can see pictures of it and of the construction here, and Houstonist has more. Somehow, it’s fitting that the official grand opening is on Halloween. Slainte, y’all.

UPDATE: Oops. No tour today.

Saturday’s scheduled inaugural public tour of the new Saint Arnold Brewing Co. plant has been canceled due to confusion over city permits. No tour will be at the original location, either, as things had already been moved to the new site.

Brewery owner Brock Wagner said he was informed Friday that the new plant at 2000 Lyons Ave. — the scene of a grand opening Wednesday night — did not have the temporary certificate of occupancy that he thought had already been secured.

They hope to have things ready to go for next Saturday.

Shine on

Let us pause for a moment in appreciation of the Spoetzl Brewery, makers of Shiner beer, which celebrates its 100th birthday this year.

By all accounts, Shiner beer shouldn’t have made it this long. The Spoetzl Brewery ferments its brew in a one-stoplight town that’s not on the way to anywhere, and much larger regional brewers long ago succumbed to consolidation and the muscle of national brewers.

For years, Spoetzl limped along with cast-off parts from other breweries and lingered on the brink of shutting down. But today, at 100 years old, Shiner beers are more popular than ever, the oldest and largest craft beers in a state where people cling fiercely to their beer and to all things Texan.

“It’s the classic little guy story,” said Mike Renfro, author of “Shine On,” a book about the brewery’s history. “They managed to overcome some pretty incredible odds.”

Before Prohibition and easy interstate travel, the nation was dotted with small regional brewers, but only a handful have survived and remained independent for a century or more. Yuengling Beer Co. and Matt Brewing Co., maker of Saranac beers, sell mostly on the East Coast, while August Schell Brewing Co. and Stevens Point Brewery, maker of Point beers, sell primarily in the Midwest.

In Texas, there’s just Shiner now, and it’s growing. The brewery now produces 400,000 barrels a year, 10 times what it did 20 years ago, and distributes to 39 states, selling particularly well with ex-Texans and Texas-themed restaurants, company officials say.

The German and Czech immigrants who settled and farmed around this town, an outpost roughly halfway between San Antonio and Houston, formed the Shiner Brewing Association in 1909. In June that year, they bore a well and at just 55 feet, water bubbled to the surface, providing a water source that the brewery still uses.

My introduction to Shiner came when I arrived at Rice University as a graduate student in 1988. You could buy a serving of Shiner, in a plastic cup, at the grad student pub Valhalla for the bargain price of 35 cents. It’s a bit more expensive nowadays, I’m told, but still very student-friendly. I’m a big fan of Saint Arnold beers these days, but when they’re not on the menu, my default choice is Shiner Bock.

Microbrewery bill dead

sigh Not unexpected, but still a disappointment.

HB 2094, state Rep. Jessica Farrar’s longshot bid to help small brewers by letting them provide a small amount of beer on premises, directly to consumers, is dead for this legislative session.

“We gained a lot of yardage this time,” Farrar told me a few minutes ago, “but we didn’t get to the goal line.”

She was referring to the fact that during the 2007 session a similar bill of hers died without ever getting a hearing. This year, the bill cleared the Licensing & Administrative Procedures Committee on a 5-to-2 vote.

However, almost assuredly because of behind-the-scenes lobbying, by the time the bill was released it was probably too late to get it added to the calendar and set up for a vote in the full House. The session ends June 1, and lawmakers are sifting through tons of other legislation.

There is no time left for the Calendars Committee to get the bill set up for a vote tomorrow, and Farrar said she does not see any pertinent legislation out there that the measure could be attached to.

“It’s very clear that … it got buried,” she said.

[…]

Farrar said she plans to refile a version of the bill when the Legislature meets again in 2011 and hone her strategy, in part by lining up a senator to sponsor a companion bill.

Despite the setback, Farrar sounded optimistic about her chances, particularly if the Democrats continue to gain seats. “If my party’s in power,” she said, “I might be on Calendars.”

Brock Wagner, the Saint Arnold founder, was disappointed to see the “state legislating against its own in-state businesses.”

He, too, was encouraged that the measure got further along this go-round. He said Farrar did “a superb job” and added that he and the other small brewers will work harder to “lay the groundwork” to get even more support in 2011. Some distributors, he noted, were on board for the amended version of the bill this year.

It did get farther this year, and it’s important to keep that in mind, because a lot of legislation takes multiple attempts before passing. Feel dejected if you must, but don’t be discouraged. And do get out there next year, at campaign events and whatnot, and talk to the officeholders and candidates for state office, and tell them that you support this and that you want them to support it as well. It really does matter, and it really does help.

Microbrewery bill passes out of committee

Woo hoo! HB2094, the bill that would allow microbreweries to sell some beer on premises that I thought might be dead before getting a glimmer of hope last week, passed out of the Licensing and Administrative Procedures committee on a 5-2 vote. That’s progress, baby. Time to call someone on the Calendars committee so this can get a floor vote. What a nice brewery-warming present that would make.

The Statesman on the state of beer in Texas

The Statesman visits an issue with which we are familiar.

Ever wondered why you can’t go to the store and buy a six-pack of the North by Northwest Restaurant and Brewery’s beer? How about one more: Ever wondered why, in a state of 24 million that ranks second-thirstiest in terms of beer consumption, Texas has about, like what, eight craft breweries? Partly thanks to, say many in the business, the Texas Alcoholic Beverage Commission code, which keeps these small brewers from selling you a six-pack to go at the brewery.

Blame the code or blame beer distributors and their lobbyists, who wield a considerable amount of political power when it comes to TABC code changes, some small brewers say.

It’s very similar to the Houston Press story about the state of beer in Texas from October, with an update about current legislation such as HB2094. The brewpubs and microbreweries have done a pretty good job getting their story out about this, so even if they fail again to change the law this session, as is probably the case given the nature of the Lege and the way this session has gone, they’re putting themselves in a position where they can succeed. These things just take time.

One item from the story:

A compromise measure that would allow breweries to sell admission to tours, and for admission to include a beer sale, had a hearing before the House Committee on Licensing and Administrative Procedures last week, and Rick Donley, president of the Beer Alliance of Texas, testified in its favor.

“We had worked real hard with Rep. Farrar to craft some kind of legislation that would allow (brewers) to do some of the things they want to do without disrupting the three-tier system,” Donely said. “You’re not going to walk up and buy beer without taking the tour.”

As for some brewers’ gripe that distributors have disproportionate pull at the statehouse, Donley said: “I wish we had a tenth of the influence they think we have. The fact is the three-tier system has served the state well for many decades.”

I’d say the system has served the system well for many decades. Certainly, the distributors have no problems with it, which is kind of the point. If it served the state as well as it served the existing interests, we’d have a heck of a lot more microbrewers, brewpubs, and beer festivals than we currently do. Thanks to Guardian of the Non Sequitor for the link.