in Houston, Texas

Beer drinkers could purchase direct from local breweries under compromise plan

Tuesday, Mar 24, 2009, 06:10PM CST
By Matt Pulle



On a chilly Saturday in South Fort Worth, a large, boisterous crowd gathers to drink cold beer inside an old warehouse.

They're at a Rahr Brewery tasting, which includes a tour of their operations, a live set from a blues and country band, and, best of all, three pints of the brewer's finest and a glass for $5. The attendees here, who gushingly speak of the microbrewery like fans of an iconic rock star, sit on picnic benches or spill out onto the concrete floor, drowning barbecued sandwiches with a good Texas beer.

But as the event winds down and the motley crowd slowly trickles out the brewery's front door into a gusty afternoon, something doesn't seem right. Nobody is taking home a case of the craft beer.

State law prevents Rahr Brewery -- or any of Texas' microbreweries -- from selling their beer from their own facility. But that could soon change, if a compromise plan between large-scale distributors and small breweries like Rahr is passed into law.

Currently, small, independent businesses have to pay distributors to sell the beer for them at a bar or supermarket, an odd and calculated quirk in the law that benefits the middlemen. Meanwhile, the craft brewers struggle to make a profit.

Now, some distributors are willing to work out a plan. In Austin, a trio of lawmakers, all Democrats, have proposed to allow microbreweries to sell their beer where they make it. Distributors had been whispering to proponents of these bills that they were "dead on arrival" -- and few people doubted they could make good on their threats. But one of the two lobbying arms that represent the distributors, the Beer Alliance of Texas, is willing to work out a deal. Meanwhile, the Wholesale Beer Distributors of Texas, who employ 18 registered lobbyists in Austin, have lined up against the bill.

Under the proposed compromise, which was presented on Wednesday by state Rep. Jessica Farrar, Texas microbreweries like Rahr could sell different types of tickets to their tastings that would allow patrons to bring home a case or two. Essentially, patrons wouldn't be paying for their drinks, but for the tour and tasting. The case of beer would just be part of the experience, like receiving a ribbon at the end of a road race.

As the brewers see it, Farrar's measure is the best chance they have to allow them to market their product.

"If the distributors decide to support it -- or not oppose it -- we’ll have a shot,"  says Tony Formby, the managing partner of Rahr Brewery. "They could probably make one phone call and get it passed.”


Critic: 'A corrupt regulatory scheme'

If all this talk of beer sales seems convoluted, that's because it is.

It's not like the state forbids bakeries from selling bread--or, for that matter, wineries from selling wine. But in Texas, the beer distributors give money to hundreds of state officeholders and candidates from both parties, allowing them to gut any revision to the state's alcoholic beverage code that would reduce their business. That's why you can't buy a case of beer at Rahr or even the famous Spoetzl Brewery in Shiner, Texas. If you do that, you've just cut the distributors out of the process.

Shiner beer photo by flickr user swanksalot, used via a Creative Commons license.

"Why shouldn’t a brewery be able to sell beer on its premises?" says Howard Wolf, a former member of the Sunset Advisory Commission, which evaluates operations of state government. "There certainly isn’t a public policy reason for why that would happen. It is just a part of a corrupt regulatory scheme.”

As it stands now, that "scheme" helps both the distributors and the giants in the industry, who can pay middlemen to stock Budweisers and Millers in supermarkets from El Paso to Texarkana. A smaller brewery can't afford that. But if it can sell beer after a tasting, the business can make a little extra money and -- more importantly -- build its brand name so customers will seek out and ask for the product at their local market or restaurant.

“If you look at every state where craft breweries have been successful, they have the ability to sell beer to the public," says Brock Wagner, the owner and founder of St. Arnold Brewing Company in Houston. "It’s a valuable marketing tool to the local breweries, and it’s quite profitable. The small amount of beer that you sell helps you market yourself to bars and grocery stores.”

St. Arnold and other independent brewers lack that marketing tool, which is one reason why a beer-drinking state like Texas is home to only eight of the more than 400 microbreweries in the country. The Wholesale Beer Distributors, which represents the industry heavyweights, doesn't want those numbers to change, especially if it weakens the position of the state's well-heeled distributors.

State Rep. Lon Burnam, a Fort Worth Democrat, filed one of the bills that would allow microbreweries to sell their own beer. His district includes the Rahr Brewery. Talking to Texas Watchdog before distributors hinted at a compromise, Burnam didn't seem optimistic that he could pass his legislation.

“I hate to assign my own bill to the death bed, but it’s going to be a difficult," he said. “The big guys consistently squeeze out the little guys, and what I’m trying to do is give the little guy a competing chance.”

CONTINUES ON PAGE 2 WITH THE MONEY BEHIND THE BEER DISTRIBUTORS' LOBBY


Photo of vats, pictured above, submitted by the Rahr Brewery in Fort Worth.

Shiner beer photo by flickr user swanksalot, used via a Creative Commons license.

Comments
Dan Keeney
Wednesday, 03/25/2009 - 12:37PM

This is an excellent examination of the effort to change the economics of running a small brewery in Texas. As it stands, entrepreneurs who want to pursue their passion for brewing need to have years and years of financial reserves just to survive because the deck is stacked against them. Rahr is a great example -- they have been around for years and are just beginning to relieve their volunteer crew with paid staff. Craft breweries are just not economically viable in Texas under current laws that prohibit them from letting visitors take their beer home. A tiny tweak on the law would have an enormous impact. We would see the emergence of a viable craft brewing culture in Texas, which would enable the creation of more breweries, create jobs, support brewery-related tourism and benefit distributors. Just look at Colorado, Oregon and California as examples of where this works. Each has approximately 50 craft breweries (or more) that sell to visitors AND a vibrant beer aisle in the grocery and liquor stores.

Jennifer Peebles
Wednesday, 03/25/2009 - 01:13PM

Dan,

Welcome to our site! Thanks for reading us and writing in.

--Jennifer P.

jennifer@texaswatchdog.org

Dan Keeney
Wednesday, 03/25/2009 - 02:18PM

My pleasure, Jennifer. I have been trying to spread the word about this terrific article. It is a great example of why laws that make no sense, inhibit innovation and are unfreindly to consumers, businesses and their communities stay on the books generation after generation. Outrageous!

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