New Texas Beer Legislation: What It Could Mean for You

Categories: Brew Blog

Photos by Joshua Justice
In case you didn't know, we here in Texas are so far behind the curve when it comes to alcohol laws, we might as well be your grandmother trying to work The America Online. Other states literally look to Texas as the textbook example of how not to do things. It's an embarrassment, really.

See also:
- An Open Letter to the Texas Craft Beer Industry

States like California, Colorado and Michigan enjoy the benefits of ever expanding multi-billion dollar brewing industries, while Texas's beer production and revenue is near the bottom in every ranked category -- despite being second nationwide in beer consumption. For that, you can thank outdated laws and a crushing stranglehold by powerful beer distribution lobbies set on controlling the revenues and flow of beer in Texas.

The Texas beer community has been abuzz this week with news that several pieces of legislation regarding craft beer, brewpubs and distribution of beer were approved in committee at the Texas state legislature. Bills 515,516,517,518 and 639 have all left committee. Additionally, all five pieces of legislation are now tied together -- making it as it stands an all-or-nothing package deal.

Brewpubs would be able to offer something Texas lacks, beer-centric food pairings.
The laws are at their base form something a large number of people have been pushing for for many years in Texas.

Here are the basics of the five bills:

SB 515:

  • Increases annual production limit of brewpubs from 5,000 barrels to 10,000 barrels
  • Allows all brewpubs to sell to wholesalers
  • Allows brewpubs who only sell alcoholic beverages made on-site to self-distribute up to 1,000 barrels per year from a single brewpub, and up to 2,500 barrels per year from all brewpubs owned by the same licensee

This would essentially allow brewpubs in Texas to begin to become the legitimate businesses and production facilities that they are in every other important beer state. This piece of legislation may be the most important of all, more on that later.

SB 516 & 517:

  • Creates a new Brewer Distributor permit, with a fee set at $250, which a production brewer under 125,000 barrels of annual production can obtain to self-distribute up to 40,000 barrels per year

This is a slight increase up from the current 75,000-barrel limit but caps distribution at 40,000 barrels. This would allow breweries using distribution houses to supplement that with self distribution and continue to allow draft only outfits like 512 Brewing in Austin to continue self distribution.

SB 518:

  • Allows production breweries who are under 225,000 barrels of annual production to sell up to 5,000 barrels per year to ultimate consumers for on-site consumption

This one is bigger than it sounds. This is the piece of paper that will turn tasting rooms into cafes and may one day lead to Texas' having it's very own version of Dark Lord Day. If this passes, you won't be hunting Divine Reserve in the wild anymore, you'll be lining up at the front door to Saint Arnold for a chance to drink the beer at the brewery.

SB 639:

  • Codifies the 2010 TABC Marketing Practices Bulletin against the practice of "Reach-Back Pricing", which is the practice where a manufacturer will adjust his price to a wholesaler based specifically on the price a wholesaler sells to a retailer. The new language goes on to specifically state that a manufacturer is still free to adjust prices as necessary, however it cannot be based on the wholesaler's price to the retailer
  • Outlaws a manufacturer from accepting payment specifically in exchange for an agreement setting forth territorial rights
  • Sets forth language that specifically permits a manufacturer and a wholesaler to enter in contractual agreements that govern ordinary business, including but not limited to, allowances, rebates, refunds, services, capacity, advertising funds, promotional funds, or sports marketing funds
  • States the code does not prohibit a wholesaler from selling territorial rights of a manufacturer to another wholesaler

This is the little bill that has some Texas breweries in an uproar.

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