in Houston, Texas
Craft breweries bill dies in Texas legislature -- again, and again, and again
Friday, May 27, 2011, 02:49PM CST
By Mark Lisheron
beer caps

In the end no one, least of all the brewers of craft beer in Texas, should have been surprised.

House Bill 602, allowing these small brewers to sell token amounts of their product to visitors after brewery tours, died when the deadline for its consideration in the Senate passed this week, according to a story by the Houston Chronicle.

Similar bills have suffered identical fates in at least three previous sessions, most recently in 2009. After the House tantalized the brewers by passing the bill unanimously on to the Senate in April, Texas Watchdog speculated that it was only a matter of time before someone stepped in to stop the insanity.

The conventional narrative has Anheuser-Busch InBev, the world’s biggest brewing conglomerate, killing the bill merely by having an Austin spokesman, Mark Bordas, voice objections before a senate committee. A howitzer employed to obliterate a mite.

The reality is much cleverer and more interesting.

Rep. Jessica Farrar, D-Houston, has twice carried this legislation. St. Arnold, the state’s leading small brewer, is in her district. St. Arnold owner Brock Wagner has long sought a change in the law similar to that made in 2003 when the Legislature allowed wineries to sell small amounts of their wine to tourists.

Different this session was early and vocal support from the Wholesale Beer Distributors of Texas. Because of laws dating back to the end of Prohibition, distributors in something called the three-tier system have absolute command of the flow of beer from producer to retailer in Texas and in much of the country.

Anheuser-Busch InBev, with its 101 million barrels, or 48 percent of all beer produced last year in America, has for decades been the distributors’ biggest and most important customer. Over the years, the St. Louis brewing giant has not been afraid to enforce that relationship.

In addition to protection within the three-tier system, consolidation within the distribution industry has caused critics, including the Texas Sunset Advisory Commission (in particular, page 77 of report), to question the power, even the role, of the distributors.

In the past, the Wholesale Beer Distributors have lobbied furiously against any law like HB 602 that would allow a producer to skirt them to deliver even the smallest volume of beer directly into the hands of customers.

It was no surprise, then, that before signing onto the little beer tourism bill, the distributors insisted that it include a provision locking out any company brewing 75,000 barrels or more a year.

It is one thing to open the legal door a tiny crack for St. Arnold and its  31,000 barrels of beer a year and quite another to leave the same legal crack open for Anheuser-Busch InBev and its 340 million barrels worldwide.

But why risk antagonizing your biggest customer with considerable lobbying clout in support of a rag-tag group of relatively tiny breweries with no organization or money for a single lobby representative?

Keith Strama, an attorney for the Wholesale Beer Distributors, has said all along and told the Chronicle’s Ronnie Crocker that the group was interested in helping the little guys build market share. And in today’s beer market, where craft breweries are experiencing double-digit percentage growth while the sales of industrial beer have for years been flat in Texas and nationwide, it might seem like good business.

Good, certainly, but still not big. With A-B InBev objecting, the distributors could dig in on behalf of themselves, refusing to lift the limit. All that was left was for the Senate to play its inert role.

Sen. John Whitmire, D-Houston, a member of the Business & Commerce Committee, voted with the majority to send the bill, unchanged, to the full Senate. Whitmire told the Chronicle he was prepared to offer a bill that would remove the big brewer exemption, if only the bill could come up for a vote.

Had that improbability happened, Lt. Gov. David Dewhurst was there waiting to stop any bill that did not create a “level playing field”  and that did not favor “a select few” brewers, Mike Walz, his spokesman, told the Chronicle. Time, unfortunately, ran out on HB 602, Walz said.

According to the story, distributors and their representatives have since 2000 contributed $275,000 to Dewhurst and $70,000 to Whitmire. Neither has gotten a contribution in the name of St. Arnold Brewing Co., according to reports kept by the Texas Ethics Commission.  

The only risk involved was assumed by the craft brewers. In an understatement as big as an Anheuser-Busch brew kettle, Wagner said, “We just got outgunned.”
 
***
Contact Mark Lisheron at 512-299-2318 or mark@texaswatchdog.org.

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Photo of bottle caps by flickr user deege@fermentarium.com, used via a Creative Commons license.
Comments
Adrian
Saturday, 05/28/2011 - 08:56PM

TABC pushed through waivers of the three tier system at lightening speed when Bush purchased Sea World which serves beer retail.

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