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Beer Industry

FT2 Update, Sustainable Business Relationships & Taking the Long View

So I admit it, I say a lot of stuff and then not follow through. I tell my wife I’m going to wash the dishes, or put together our daughter’s “big girl bed” or I claim I’m going to have a frequently updated blog detailing the progress of the new brewery. I don’t think I’m a liar, I just commit to more than I can execute sometimes.

On the last example, I know I’ve slacked a bit on the blog. As I rambled on a bit on Twitter the other day, I really did hope to do a better job of documenting the construction of Freetail2. My goal was to create almost a “how-to” of sorts, but not in the “hey you need x and y and z” sense but more of a “this is the journey of going from a 4700 SF brewpub where the brewery takes up about 800 SF to a 30,000 production brewery that can (theoretically) produces half of our pub’s annual volume in 6 days”. The hope was that this journey would at least give some insight to someone on whatever project they were working on (be it a brewery themselves, or anything else).

The good news is that not a whole lot has happened that you’ve missed out on. We are awaiting demolition permits to do some minor (I use that term lightly, since it’s almost $40,000 worth) of demolition work inside the building. The biggest part being tearing down an old ceiling that was put up and exposing the roof deck and the cool beams up there:

In the meantime, we are also working on finishing our construction drawings, which I’ll share some images of when they are ready. Hopefully (and it is a big hope) we can stay on track to start construction in December. Some of the fun “unexpected” things that have come up – we need to sprinkler the building and the closest water line to tie into is across the street, which means we’ll have to come across the street and bring water in. This is probably at least a $100,000 extra project and one that will definitely cut back on some of the things we had hoped to do. But that’s usually the way brewery projects work.

I also wanted to talk a little more on the business philosophies that drive us at Freetail. We are very big on Sustainable Business Relationships, and we aren’t talking about environmental practices but rather the way we conduct business with outside suppliers, vendors, etc.

There is an obvious motivation for a business to extract the most value out of every single transaction they take part in to maximize the net benefits from such a transaction. When you view isolated transactions, this is a common sense way of doing business. Stepping back and taking a longer view of things, however, this isn’t always the best approach. We always take the approach that we want transactions to be mutually beneficial to both sides (because we want to conduct these transactions again in the future!).

One example: I got a call from our growler supplier yesterday saying they had accidentally overprinted our order by 4 cases. It would be easy for me to say “I will only pay for what I ordered” and I probably could have gotten those four extra cases for free (because they have no use for 4 cases of Freetail growlers other than to ship them to me). However, because we enjoy a long-term relationship with this supplier, I have little interest in pissing them off. Sure, we’ll take the 4 extra cases, just add it to the invoice.

This is an oversimplified example, but it is one that should extend to all business relationships. It is important to take the long view and approach your relationships in wanting to make it mutually beneficial for both sides. If I enjoy the product & service provided by one of my suppliers, I want them to make a profit so they are successful and can continue providing me with this product & service. Negotiating them down to the very last penny doesn’t achieve this.

The same philosophy can be applied to pricing of the products we make. Can we charge you double for the bottles of beer we sell you? Yes. But I want you to pay a price for our beer that you feel good about, and that leaves you money to go try some other beers and come back around to buy more of our beer in the future. On the wholesale level, I’ve seen a  lot of brand new breweries charge prices for their kegs that exceeds the price for a keg of world class beer from established breweries.

I understand that these new guys are hungry to recoup some of their investment, but in my opinion this is a mistake born of taking a short-term view. If I charge you too much for a keg (and try to extract the profit away from the retailer) then all I’m doing is one of a few things: 1) discouraging the retailer from buying my beer again or 2) forcing the retailer to charge even more for my beer to the customer, which may discourage the customer from buying my beer again which trickles down to discouraging the retailer from buying my beer again.

In economics, we always stress the concept that “price matters” and this couldn’t be any truer than in relationships between suppliers. Take the long view, and support your suppliers’  AND customers’ long-run viability.

Until next time,

Scott


Honoring Our Friends & Unveiling Freetail2

I’m extremely please to announce and invite you all to an event this Saturday, September 7, as we formally unveil the site of our new facility and honor Representative Mike Villarreal and Senator Leticia Van de Putte, who were both instrumental leaders in finally changing those Texas beer laws.

Here are the details of the event:

Date: Saturday, September 7, 2013
Time: 11am – 12:30pm
Where: 2000 S Presa, San Antonio, TX 78210
What: A short program detailing a brief history of Texas beer laws; awards for Representative Villarreal and Senator Van de Putte; formal unveiling of the new space;  and an open house to check out the new digs, mingle and yes… enjoy some beer.

We hope you will come out and check out the next step in our evolution. Here is a copy of the official press release we sent out today:

 

REPRESENTATIVE MIKE VILLARREAL AND SENATOR LETICIA VAN DE PUTTE TO BE HONORED AT UNVEILING OF NEW FREETAIL SITE AT 2000 SOUTH PRESA

Legislative changes paying immediate dividends throughout state; San Antonio’s most decorated brewery begins multi-million dollar expansion

 

(September 4, 2013) San Antonio, TX – Freetail Brewing Co. will announce the unveiling of its much anticipated new facility, located at 2000 S Presa, at 11:15am on Saturday, September 7.

Along with the unveiling, the Texas Craft Brewers Guild will be honoring Representative Mike Villarreal (District 123) and Senator Leticia Van de Putte (District 26) with special awards commemorating their work in the Texas Legislature. Villarreal and Van de Putte were leading figures in the fight for statutory reform to aid the state’s burgeoning craft beer industry. The Guild estimates the new laws – which for the first time allow Texas breweries to sell directly to consumers and Texas brewpubs to sell into the wholesale market – could create up to $5 billion of new economic activity and 50,000 new jobs over the next decade. The news laws were signed by Governor Perry and went into effect on June 14, 2013.

According to Villarreal, the new laws are working as he envisioned. “Freetail’s expansion is exactly what we had in mind when we wrote this legislation. By replacing outdated laws with smart regulations we’re allowing small business owners to create new jobs. I’ll raise a glass to that.”

To benefit from the new laws, San Antonio’s Freetail Brewing Co. has announced they would be building a new facility with the capacity to allow for wholesale production. “At our original location, we simply don’t have the space,” said Freetail Founder & CEO Scott Metzger, adding “We can hardly keep up with the demand for our beer for customers of our pub. Expanding into another facility was a no-brainer in terms of being able to take advantage of these new laws.”

Van de Putte echoed these statements, stating, “This type of business expansion and job creation is exactly what I had in mind when I called together beer and spirits industry stakeholders back in 2012 to reform our Texas Alcoholic Beverage Code. The craft beer sector was skyrocketing around the nation, yet Texas’ craft brewing industry was restrained by outdated laws. I applaud the Freetail success story and anticipate many more as Texas’  brewpubs finally catch up with pent-up demand for a great product.”

As previously rumored, the new Freetail facility, codenamed “Freetail2” will be located at 2000 S Presa, occupying 30,000 SF on 1.8 acres, costing an estimated $3 million and creating 15 new jobs. Freetail2 will be designed in order to produce up to 10,000 barrels a year, the new statutory limit for brewpubs. The company’s goal, according to Metzger, is rooted in the company’s heritage. “San Antonio is my home town and Freetail is a San Antonio company. We want to be San Antonio’s beer.”

Saturday’s unveiling will begin at 11:15am and include a brief program introducing the space and presenting awards, followed by an open house and samples of Freetail product until 1:00pm. Representative Villarreal and Senator Van de Putte will be available for questions and to meet with constituents during the open house.

 

Freetail Brewing Co. is founded on the pursuit of creating exciting, innovative and unique world class beer and beer-centric cuisine. We embrace the laid back and fun-loving Texas culture and set out to create products that mirror the lifestyle of our diverse and rapidly growing community. We believe in promoting an increased appreciation of craft products and their responsible enjoyment.

 

For more information visit www.freetailbrewing.com.

 

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We Did It! Beer bills on their way to the Governor

This will be fairly brief since there isn’t a lot to say that hasn’t been said already.

OUR BEER BILLS ARE ON THEIR WAY TO THE GOVERNOR!

We aren’t expecting any issues with the Governor, as we have been in close contact with his office throughout the process.

Just a few thank yous. First, to Senators Eltife & Van de Putte and Representatives Smith & Villarreal. Also thank you to all those legislators who signed on as authors and sponsors of our legislation and supported us to the end. A special thank you to a few staffers who worked tirelessly on this to make it happen. Amber, Chuck, Gabe and Margo – the state of Texas is forever in your debt!

A huge thank you and congratulations to my colleagues Brock Wagner, Davis Tucker, Rick Engel, Joey Villarreal, Chip McElroy, The entire ABW Crew, Brad Farbstein, Tim Schwartz, Vickie Jones, Charles Vallhonrat, Ron Extract, Jeff Stuffings, Brian Peters… this list can go on forever. A lot of Texas brewers put their hearts and souls into this, thank you all so much.

Last but certainly not at all least, thanks to Texas Beer Consumers and Open The Taps. Your voices have carried the battle cry for years, and we couldn’t have done this without you.

Cheers!


Hey, what about those TX Craft Beer Bills?!?!

Figured it was time for an update here, since emails and tweets are starting to trickle in asking about the Texas Craft Beer Bills. After all, seemingly nothing has happened since they were voted out of Licensing & Administrative Procedures and sent to the House Calendars Committee on April 23.

Well, I’m here to reassure everyone that there is nothing to worry about, for now.

Right now, the House is understandably tied up wrapping up their own business before they move on to considering Senate Bills (of which ours are). 11:59 pm on May 9 is the deadline for bills originating from the House to be sent to the Senate, so Representatives are squarely focused on that at the moment.

Assuming everything goes to plan, we should see our bills (SB515, 516, 517 & 518 along with SB 639) be placed on the House Calendar sometime next week.

Stay tuned!

 


It’s Unanimous in the Senate: Beer Bills a Go

What an honor today as Senator Van de Putte was fulfilling her roll as President Pro-Temp and acting as Lt. Governor for the passage of our beer bills in the Senate.

SB 515, 518 and 639 got voted on today. SB 516 and 517 will be later this week, probably tomorrow. At this point in the session, Senators are limited on the number of bills per day they can have on the calendar, so that is why 515-18 couldn’t go together.

SB 515 and 518 passed unanimously, 31-0, and 639 passed 30-1.

What a day. Hard to imagine that it was just 4 years ago that I thought this would be a helpless task.

On to the House!


Silence is Golden

We had our House Licensing & Administrative Procedures Committee hearing yesterday, and it was unlike any craft beer bill hearing before in that it was quick, easy and without much fanfare.

Chairman Wayne Smith laid out the bills, myself, Brock Wagner, and Leslie Sprague of Open the Taps all offered ourselves to questions, but received none. The committee will leave the bills as pending until they come over as passed from the senate (perhaps this week or next) and then they will move them on.

Of course, this seemingly easy path wasn’t easy to get to nor was it without controversy. After a day’s worth of meetings with our colleagues from around the state, I think Texas Craft Brewers have a good understanding of where we are and how the process works, and as such the rumblings have died down.

Things are looking good from here on out, but let’s not get too cocky yet… there is still a long path ahead.

Cheers!


On Deals and Disagreements: Beer Bills Move Forward

As has been widely reported, a deal was struck late Monday afternoon between The Texas Craft Brewers Guild, distributor groups, large brewers, and Open The Taps.

The final deal includes the following bills, and here is the final version of what they do (items in earlier versions of the bills but not listed below are not part of the final 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

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

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

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

I am fully aware of the dissatisfaction of some members of our Guild at the provisions contained in the new 639, specifically “outlaws a manufacturer from accepting payment specifically in exchange for an agreement setting forth territorial rights.”

This provision of 639 came into being because wholesalers felt the practice of paying for territorial rights violated the tied-house provisions of the Alcoholic Beverage Code. TABC was asked to clarify such payments did, in fact, represent a violation of the TABC code. TABC’s response was not to say the practice was legal or illegal, but rather to say that they didn’t know and would benefit from legislative clarification. Thus, the original SB 639 contained this provision.

Recently, such payments have occurred in the marketplace and the practice is becoming more common, though certainly not the standard. At the same time, some of my closest colleagues in the industry have confided in me that they never received any payment for their distribution rights, because when they asked TABC, they were told it was illegal. It is important to stress that at no point has TABC or the Legislature specifically said this transaction was legal.

Throughout the course of the debate on this specific provision of 639, I fought tirelessly to earn the right of brewers to be able to sell the distribution rights. No one put up a bigger fight and no one took as much of a beating on this than me. Make no mistake, my position and the position of the Texas Craft Brewers Guild is that a brewer who builds a valuable distribution network through his or her right to self-distribute should be compensated for that value when he or she turns operations over to a distributor.

There was a point when it became very clear to me that this provision of 639 was going to move forward as the Legislature felt this activity should be illegal rather than specifically making it legal. This is up for every person to debate on their own, but I had come to understand with absolutely certainty that this practice was going to be outlawed one way or another. The debate was had, and the debate was lost by my side.

When that moment occurred, we immediately shifted gears to try to make this provision in 639 as palatable as possible (if it could even be done). This is where the language that sets forth other ways in which manufacturers and wholesalers comes from. While the specific payment in exchange for territorial rights was outlawed, for the first time in Texas history, we codified a series of other agreements that often occurred in the marketplace but had questionable legality.

I’m not just saying this to defend myself, but because I believe this is absolutely a true statement: without the work of the Guild, the provisions of 639 would have been a lot worse for Texas craft brewers. Not only did we curb some of the provisions in that bill, we gained rights that myself and some of my colleagues have been working on for almost a decade.

To be very clear: we did not “trade” the provisions of SB 639 in exchange for SB 515-18. Rather, we were able to greatly scale back 639 (including defeating the proposed severability language and mandated uniform pricing) while also gaining the rights enumerated in 515-18. For this, I will contend until the day I die that this was a victory for Texas craft brewers – and that first such victory since Brewpubs were legalized in 1993.

I welcome and encourage your feedback and discussion on this issue.


Media Round-up on Beer Bills in Texas Legislature

Just a quick media round-up. I’ll likely be back with a first-person perspective of the Senate Hearing (set for Tuesday) on Wednesday, along with a round-up of media coverage.

Until then…

The Rivard Report has a story on all things shaking at the Capitol in regards to Craft Beer.

A Beaumont Enterprise story on the growth of Texas beer and spirits touches on Senator Eltife and Representative’s Smith legislation.

San Antonio’s KSAT-12 has a story on the growth of San Antonio’s craft beer scene and the proposed changes. 

The San Antonio Express-News has a story on the Texas Public Radio beer law forum I participated in along with Representative Villarreal, GLI’s Tim Campion and beer writer Travis Poling.

Speaking of the Texas Public Radio forum, you can stream the audio here or download the podcast version of it here.

 


Current Support for Craft Beer Bills

Just  a quick roll call on who has officially supported our Craft Beer Bills, SB515-18 and HB1763-66, as of noon today. If only the folks in Washington, DC could be this bi-partisan!

After the list of supporters of the bills we like, I’ve also included a list of members who have officially supported the bills we oppose. Feel free to express your opinions on these bills, but remember to always do so in a respectful manner.

(Lists are in the order in which they are listed on Texas Legislature Website)

BILLS WE SUPPORT (SB 515-18, HB 1763-66)

Senate

Primary Author: Kevin Eltife (R-District 1)

Joint Authors: Brian Birdwell (R-District 22) [Note: Senator Birdwell is signed as a Joint-Author only on SB515 and 518]; Eddie Lucio Jr. (D-District 27); Leticia Van de Putte (D-District 26); Kirk Watson (D-District 14); John Whitmire (D-District 15)

Co-Authors: Wendy Davis (D-District 10); Bob Deuell (R-District 2); Rodney Ellis (D-District 13); Craig Estes (R-District 30); Kelly Hancock (R-District 9); Jane Nelson (R-District 12); Jose Rodriguez (D-District 29); Tommy Williams (R-District 4)

House

Primary Author: Wayne Smith (R-District 128)

Joint-Authors: Patricia Harless (R-District 126); Mike Villarreal (D-District 123); Jason Isaac (R-District 45); Eddie Rodriguez (D-District 51)

BILLS WE OPPOSE (SB 639 & HB 1538)

Senate

Primary Author: John Carona (R-District 16)

Co-Author: Eddie Lucio Jr. (D-District 27)

House

Primary Author: Charlie Geren (R-District 99)

Joint-Authors: Naomi Gonzalez (D-District 76); Bobby Guerra (D-District 41); Lance Gooden (R-District 4); Abel Herrero (D-District 34)

Co-Authors: Yvonne Davis (D-District 111); Joe Deshotel (D-District 22); Craig Eiland (D-District 23); Joe Farias (D-District 118); Ryan Guillen (D-District 31); Roland Gutierrez (D-District 119); Kyle Kacal (R-District 12); Sergio Munoz Jr (D-District 36); Kenneth Sheets (R-District 107); Chris Turner (D-District 101)


Number of Breweries Tied to Quality of Brewery Laws.

Out of curiosity, I decided to see how closely correlated brewery laws are to the number of breweries in a state. To the shock of no one, turns out good laws that support the development of craft breweries results in more craft breweries.

To perform this analysis, I did a few thing:

  1. Obtained a list of breweries per capita from the Brewers Association
  2. Develop a proprietary Beer Regulatory Openness Index (BROI) to act as a proxy for craft beer-friendly regulations (more on this later)
  3. Plot the two against each other and see if there is a relationship.

The results will not surprise you even slightly:

*Note, my craft breweries per capita figure represents Craft Brewers per Million Residents.

That one outlier? Montana, who has the second most breweries per capita despite having fairly restrictive laws. Keep in mind, however, that Montana is also one of the most sparsely populated states in the nation, skewing its relevance to the overall correlation.

So, about that BROI… I’m not going to reveal the algorithm I used to build it… yet. I’ve got big plans for the BROI for some future academic studies (probably after the legislative session).

For now, what we all suspected has been verified by good old science… friendly craft beer laws leads to more craft breweries.


Craft Beer Bills Filed in House

Licensing and Administrative Proceedures Chairman Wayne Smith has filled companion bills to Senator Eltife’s SB515-18. The House Bill numbers are HB1763-66.

Also, Senators Deuell and Hancock have joined the Senate Bill as Co-Authors.

Stay tuned for more.


Senator Carona Issues Statement on Beer Bills

Senator John Carona, chairman of the Senate Business & Commerce Committee (where Senator Eltife’s craft beer bills have been referred) issued the following statement yesterday:

“The outlook is bright for legislation to create new opportunities for craft brewers and brewpubs in Texas.  For months we have worked to get to this point — several important pieces of legislation have been filed and placed before the public for discussion and debate.  I applaud Senator Eltife, Senator Van de Putte, and the others who have brought these ideas forward.

“My support of craft beer is well known.  Pro-craft beer legislation has passed out of my committee before and will again.  I have insisted on bringing stakeholders to the table, created the framework for it, and was one of the first few legislators to respond to the Open the Taps survey.  The bill I filed is a step along the path to passage of comprehensive legislation.  We are remiss if we do not take the long and wide view on these important provisions.  Provisions such as reach back pricing, the alteration of a price by a manufacturer based on the price a distributor charges a retailer.  This practice borders on price-fixing and must be addressed.  But comprehensive legislation also includes a “tap room” provision, which will allow brewers to serve customers beer at their brewery, as well as legislation that will allow brewpubs to use a distributor to get their product into stores and in front of more customers.

“As with any issue, there are many stakeholders with varying interests — this is the very reason I created working groups during the interim to begin to address these important issues.  We will continue to work together, and in the end I am confident that this Session we can pass legislation beneficial to craft brewers and brewpubs.”

I’d like to say that we (speaking on behalf of the Texas Craft Brewers Guild) don’t think Chairman Carona is the enemy here and we have the utmost respect for him. He has always been a fair and impartial Chairman, and has historically always given Pro-Craft Beer legislation a fair shot in his committee. It was him who called for a working group to study alcohol issues, including craft beer, in the interim and that working group is where SB 515-18 emerged from. We are appreciative of the Chairman for having SB 639 filed as a standalone issue to be evaluated on its own merits, rather than lumped in to the Pro-Craft Beer legislation where the Guild would have been forced to cut off our noses in spite of our faces.

I would advise anyone with an opinion to feel free to share those opinions with their elected officials in a civil, respective manner. The accusations (that I’ve seen around the web) of impropriety on the Chairman’s behalf are counterproductive and completely off-base. We Craft Brewers are thankful to have Senator Carona as Chair of Business & Commerce because of his reputation for being fair and even-handed. While there may be a tendency to vilify him based on the appearances of what has happened recently, I can assure everyone that we are in constant contact with his office and have a fantastic relationship with the Chairman and his staff.


Senator Van de Putte files Bulk Transfer Bill, Supports Free Markets

Lost in the shuffle of everything else beer related happening at the Capitol, Senator Leticia Van de Putte (D-San Antonio) has filed SB 652, which would allow breweries and wineries to sell their products, in bulk, to distillers to further process into spirits. [Edit: wineries would still be forbidden from selling their wine to distillers because Federal Law precludes it. But if Federal Law changed, Texas wineries would be allowed this activity.]

You may recall, Senator Van de Putte led the Alcohol Working Group in the interim to look at the Alcoholic Beverage Code and recommend changes to the legislature. This bill was one of the items requested by the state’s small craft distillers. Kudos to the working group and Senator Van de Putte for taking this step in making Texas a viable place for craft producers to make unique products within our states borders without unnecessary government restriction. I can imagine a Whiskey distilled from Saint Arnold Amber, for example, being popular.

You’ll notice most of the results of the working group – be it this bill, Senator Eltife’s SB 515-18 (of which Senator Van de Putte is a Joint Author), or any of the others that may follow – are all in the vein of free-market principles and fostering economic development. It’s legislation like these bills (and legislators like Senators Van de Putte and Eltife) that make Texas one of the best places to do business. A huge thank you to them for extending the free-market philosophies that our state is built on to our states manufacturers of beer, wine and spirits.

Contrast this to the anti-competitive SB 639 (which now has a House Companion in HB 1538, filed by Rep. Geren) which was never discussed in Senator Van de Putte’s working group, and it’s clear to see why the competition and free-market encouraging bills are picking up momentum (up to 12 Authors on SB 515-18) and why the self-serving, protectionist, profiteering WBDT bills are drawing ire in the court of public opinion.

This is Texas after all, and Free Markets are one of our core beliefs.


WBDT-Supported Bill Immediately Slammed by Fellow Distributors

As Senate Bills 515, 516, 517 and 518 progress forward (we’ve added a handful of Senate Co-Authors, bringing the total up to 12 as of the writing of this blog), The Wholesale Beer Distributors of Texas have introduced their own legislation, which has been met by immediate backlash by other industry stakeholders, including some fellow distributors. Ronnie Crocker with The Houston Chronicle first reported these bills on his blog and followed up with a story in the business section today.

SB 639, filed Monday by Senator John Carona, has three primary components:

  1. Adds severability language to the code which could take self-distribution rights away from small brewers. Currently, there exists a potential commerce clause issue with the allowance of self-distribution for the state’s brewers, because it specifically excludes out-of-state brewers. Our bills (specifically SB 516 and 517), corrects this issue. The WBDT opposes fixing the issue by eliminating the discrimination, rather they prefer to leave the discrimination in place and then add language to the code that would take self-distribution away from in-state brewers should a court find that the discrimination was unconstitutional.
  2. Mandates Uniform FOB Pricing from the Manufacturer to the Distributor. If this bill passed, it would make illegal any kind of price differentials between different markets, including any price differential reflecting actual transportation costs. Note that this bill does not mandate a uniform price for which the beer must be sold from the distributor to the retailer.
  3. Makes illegal for a Brewer/Manufacturer to receive compensation a distribution agreement. Basically, the law would mandate that your distribution rights are worth nothing when signing up with a distributor. The proposed law doesn’t restrict a distributor from selling a brewer’s distribution rights to another distributor, but only from the brewer from receiving any value.

It has not gone without notice that the proponents of this bill don’t have an interest in restricting themselves from raising prices in different markets, or from selling brands rights, but that they are only concerned about what they have to pay. In essence, this bill is one step short of the Texas Alcoholic Beverage Code having Mandated Profits for the middle tier. This is self-serving protectionism at its most blatant.

Ronnie Crock reported the response from The Beer Alliance (The larger of the state’s two wholesaler groups, who have been in favor of positive statutory reform for the state’s craft brewers):

“It’s probably the most anti-competitive piece of legislation I’ve ever seen,” Donley said. Change the topic from beer to hydrocarbons or other consumer goods, he said, and the proponents would “be laughed out of the Capitol.”

Pretty strong words, but I agree with him 100%.

The Texas Craft Brewers Guild support legislation that embody free-market principles. As Senator Eltife said, “Government shouldn’t be involved in picking winners and losers in private industry.”

This Legislation amounts to nothing more than a blatant money-grab by the Wholesale Beer Distributors. It distorts the free market by protecting wholesalers from paying the cost of doing business. Ironically, no one has ever forced any distributor to pay for the distribution rights of a brewer. These are voluntary private-party transactions that occur because craft beer distribution rights are actually valuable and distributors are eager to out-bid their rivals for those rights. If you don’t want to pay, then don’t.

Luckily, this proposal is likely to go nowhere at the Capitol. My contacts up there have told me the Legislature is highly unlikely to move on Legislation that most of the industry hates, benefits only certain players, and goes against free-market principles.

Lastly, I’m thankful to Chairman Carona for filing this legislation. The WBDT was trying to amend Senator Eltife’s craft beer bills with this anti-competetive, self-serving language, and were promptly told no. But I suppose everyone deserves a chance, and I’m looking forward to hearing the WBDT try to explain any shred of public interest that might exist for this money grab.

Now to focus on one of the initial charge of Senator Van de Putte’s Alcohol Working Group from last summer: stimulating economic growth in the Texas Craft Brewing Industry.

 


Press Round-Up for Feb 11-15

Just a quick round up of Press Reports on Craft Beer Legislation for the week.

Ronnie Crocker broke the news of the beer bills on his Beer, TX Blog with this post. A more extensive story on the legislation ran the next day in the Houston Chronicle and San Antonio Express-News. (They are the same story, the Chronicle story handsomely features my colleague Brock Wagner of Saint Arnold, while the Express-News print story has a photo of me, guaranteed to scare away any unwanted strangers).

KXAN in Austin reported the filing of the bills as well.

Charles Kuffner at Off the Kuff had a blog post on the bills.

Ivy Le at the Austin Chronicle had a breaking news story about the bill.

Lauren Daniels at The Dallas Observer has a story.

For the first time that I’ve had an opportunity to link to these guys… the Texarkana Gazette had a blurb on the bills.

The Bitch Beer Blog (which proclaims “Because Real Bitches Know Beer”) had a write up.

EDIT: Brewbound published this story late Friday afternoon.

That’s all I saw this time around.

In the meantime, follow me on Twitter if you don’t already @beermonkey – and I urge you to show your support for this legislation by using the hashtag #TXBeer4TX

Thanks!


2013 TX Craft Beer Bills Introduced

Today, Senator Kevin Eltife (R-District 1) introduced bi-partisan legislation along with Co-Authors, Senators Brian Birdwell (R-District 22), John Carona (R-District 16), Eddie Lucio (D-District 27), Leticia Van de Putte (D-District 26), Kirk Watson (D-District 14), and John Whitmire (D-District 15) to modernize the state’s alcohol regulatory system to make more competitive Texas’s small, craft brewers.

Senate Bills 515, 516, 517 and 518 expand the rights of the state’s craft breweries and brewpubs to provide parity versus what brewers in other states are allowed to do.

From a Press Release put out by Senator Eltife’s office:

“Government shouldn’t be involved in picking winners and losers in private industry.  Texans believe consumers make the best choices about products in the free market,” said Senator Eltife.  “These four bills will level the playing field for the small business segment of Texas brewing industry.”

“Legislators should encourage entrepreneurial spirit by creating a climate for small business development opportunities that leads to capital investment and job creation in our state,” added Senator Eltife.  “This legislation will provide the proper regulatory framework for these businesses to operate and grow.”

What the Bills Do

SB 515

  • Increases the production limit for a brewpub from 5,000 to 12,500 barrels annually
  • Authorizes a brewpub to sell their products to the wholesale tier for re-sale
  • Authorizes a brewpub to self-distribute up to 1,000 barrels annual to the retail tier for re-sale

SB 518

  • Authorizes a production brewery under 225,000 barrels of annual production to sell up to 5,000 barrels annually of beer produced by the brewery to ultimate consumers for consumption on the premise of the brewery

SB 516 & 517

  • Authorizes a production brewery under 125,000 barrels of annual production to self-distribute up to 40,000 barrels annual of beer, ale and malt-liquor to retailers. (Note: this right currently exists but is being adjusted. Currently, a brewery under 75,000 barrels of annual production may self-distribute up to 75,000 barrels. These bills increase the size of a brewery that may self-distribute while reducing the amount they may self-distribute. There are two bills because it affects both the “Manufacturer” license - Ch. 62 of the code – and the “Brewer” permit – Ch. 12 of the code.)
  • Eliminates discrimination against out-of-state suppliers.

What Happens Next

Next, the bills will be referred to the appropriate Senate committee, where they will be heard and voted on whether they should go before the full senate.

This is very exciting, and as I’ve said before I’m very thankful for the hardwork of our Legislators but also the open-mindedness and willingness to find common ground by distributors and large brewers. Without them, we wouldn’t be in the position we are in now to make positive reform for the craft beer industry in Texas.

Cheers,

Scott


Buckle Up.

 

Great news everyone! Craft beer laws have passed! You can now purchase Freetail Brewing Co. beer at your favorite bar or restaurant! Let’s talk about this Saturday at Saint Arnold over some pints!

Just kidding (unfortunately). No Craft Beer bills have been filed yet, but you may recall what I posted here exactly one-month ago today:

In the coming weeks, Craft Beer Legislation will be introduced that will represent the most meaningful and comprehensive updating to the 3-tier system in decades. Through numerous discussions with and careful consideration of other industry stakeholders (including large brewers and wholesalers), the legislation will provide a pathway for growth for small breweries to eventually become big breweries. Wholesalers will have a renewed commitment to the 3-tier system. Distributors and retailers will benefit from an increased number of local product offerings. And most importantly, consumers will benefit from finally having access to the Texas breweries they love. I’m very proud of the work we have done while the Legislature has been in off-session, to come to consensus with distributors, large brewers and retailers, in order to make sure Texas is a good place for small breweries to do business. When it is all said and done, I believe the passage of legislation this session will be looked at by other states as a model for alcoholic beverage code modernization that fosters economic development while keeping intact the viability of independent wholesalers.

Every word (and every typo) of that paragraph was true when I wrote it, and it’s still true today. In the last month, we’ve continued our open and transparent discussions with industry stakeholders to ensure that the proposed legislation is equitable and in the state’s best interest. Some new points have been raised, considered, and incorporated where necessary. We are extremely lucky to have a fair, open-minded group of Legislator taking this on, and we tip our hats and offer thanks to the state’s beer wholesalers and large brewers for being an active party in the crafting of this legislation. Our goal at the Texas Craft Brewers Guild has always been to work with the industry’s other stakeholders, not against, and the cooperation of those stakeholders has been invaluable.

Stay tuned and, in the meantime, enjoy a Texas made beer!


Beer & The 83rd Texas Lege

Tomorrow begins the 83rd Session of the Texas Legislature, and you can be assured that craft beer will once again be on the agenda.

For practical reasons, my updates won’t be as frequent or detailed as they were in 2011, but I will do my best to keep you abreast of what’s happening with beer inside of The Pink Dome.

I can update you now that there have been a number of very productive discussions between us craft brewers, the legislature, and industry stakeholders. Many thanks are due to Senators John Carona and Leticia Van de Putte for organizing and hosting working group meetings of the entire alcoholic beverage industry to discuss the issues facing our state.

For craft beer and all involved with it, the main issue is ensuring a competitive environment for our state’s brewers while maintaining a viable and healthy 3-tier system that protects the independent of wholesalers. While brewers like myself often find myself at odds with the wholesale tier, there is no debate that the independence of wholesalers has been and will continue to be vital to the growth of small, independent craft brewers.

In the coming weeks, Craft Beer Legislation will be introduced that will represent the most meaningful and comprehensive updating to the 3-tier system in decades. Through numerous discussions with and careful consideration of other industry stakeholders (including large brewers and wholesalers), the legislation will provide a pathway for growth for small breweries to eventually become big breweries. Wholesalers will have a renewed commitment to the 3-tier system. Distributors and retailers will benefit from an increased number of local product offerings. And most importantly, consumers will benefit from finally having access to the Texas breweries they love. I’m very proud of the work we have done while the Legislature has been in off-session, to come to consensus with distributors, large brewers and retailers, in order to make sure Texas is a good place for small breweries to do business. When it is all said and done, I believe the passage of legislation this session will be looked at by other states as a model for alcoholic beverage code modernization that fosters economic development while keeping intact the viability of independent wholesalers.

Stay tuned this session, it should be exciting.

Scott


New Jersey passes brewery bill, can Texas afford to sit on the sidelines?

Last week, New Jersey passed a law to help the state’s microbreweries and brewpubs. To quote the South Jersey Times’ Jessica Beym:

 

The law:

  • Permits brew pubs, to increase their annual production to 10,000 barrels a year, up from 3,000.
  • Allows brew pubs to distribute their product to liquor stores and restaurants through the wholesale distribution system. Previously, brewpubs could only sell their product in the restaurant immediately adjoining the brewery.
  • Increases the current cap on the number of brewpubs a company may open in New Jersey, by raising the limit on plenary retail consumption licenses for brewpubs from two to 10.
  • Permits brewpubs to offer samples of their product on site as well as off site with a permit from the Alcohol Beverage Control director, at places such as fairs or charity events.
  • Permits microbreweries to sell beer brewed at the licensed location for consumption on premises as part of a brewery tour. Also allows microbreweries to sell a limited amount of beer for off-site consumption.
  • Allows microbreweries to offer samples of their product both on and off the premises, as currently permitted by the state’s wineries.

Sound like a familiar premise? Well, it’s basically exactly what we are trying to accomplish here in Texas.

Today, we raise a pint to you, New Jersey! Well done.

Texas, we can’t afford to fall further behind on this.


Economic Impact of Texas Craft Brewing Industry: Drink Beer, Save Texas.

Today the results of the most recent update of the Texas Craft Brewing Industry Economic Impact Study has gone live. Below is a copy of the story, and a link to additional materials.

I’d like to thank all my colleagues in the Texas Craft Brewers Guild for helping me with this study, and a special thank you to Joanne Marino of Skematik and Steve Brand of Wasabi Creative for all their help in helping with the release and publication of the study.

Texas cannot afford to keep it’s small businesses operating at a disadvantage to out-of-state concerns. 52,000 jobs and  $5 billion of additional annual economic activity are at stake. I encourage you to contact your representatives, tell them the story of Texas Craft Beer, and point them towards this study.

Cheers,

Scott

TX Craft Beer Impact $608 Million, Could Be Billions

 

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.


Gearing up for 2013.

I get occasional questions via email and comments here in regards to if Craft Brewers will once again be active in the 2013 Texas Legislative Session. The answer is absolutely, and I believe we are more focused, driven and organized than ever.

If you hadn’t heard, Senate Business and Commerce Committee chairman, Senator John Carona, (Rep-D16-Dallas County) asked fellow committee member, Senator Leticia Van de Putte (Dem-D26-Bexar County), to form a working group of industry stakeholders to evaluate the Texas Alcoholic Beverage Code. Production, wholesale and retail tier members from distilled spirits, malt beverage and wine have been actively engaged with one another since.

On the malt beverage side, I am encouraged by an unprecedented level of openness and communication between the different tiers. For the first time since I’ve been involved, stakeholders have willingly come together and been open about their goals and concerns and, more importantly, we all acknowledge that it’s okay for us to disagree on certain points. In fact, recognize where we disagree is the first step in coming to a middle ground we can all agree on.

Some of the best news is the sense of all around agreement is that craft beer is here to stay and that it is an important part of wholesaler’s growth plans. Not only is craft beer driving all of the growth in the craft beer segment, but the success of craft beer is what drives the big breweries to continually develop new products – and those new products are the only growing portion of big beer’s portfolio. Craft beer is a win, win for everyone.

I know there hasn’t been a ton of activity on this blog, but look for things to be picking up as we advance closer to the session and then my goal is to have daily posts once the session starts.

Cheers,

Scott

 


Please do not buy Freetail beers on eBay

It has been brought to my attention that someone is selling, or trying to sell, our beers on eBay. I heard about it with Ananke (which we still have bottles of sitting on our shelves) and I found a listing for a 2011 La Muerta with a starting bid of $49.99.

Please do not buy these. First of all, La Muerta isn’t worth $49.99. It’s worth exactly $11+tax, the price we sell it for. I highly advise that no one ever pay a cent more (and there are no competitive issues with me saying that, since we are the only ones legally able to sell it).

Second of all, this is flat out f’ed up and I’m fully in support of TABC going after this person for the unlicensed sale of alcohol. If I find out who you are, I will make sure you are banned from ever buying our bottles again.

We take great pride in what we do and hate to see our hard work tarnished by someone trying to make a quick buck. I have no problem with the trading community (so long as traders don’t begin to crowd out our local customers) and in fact am very flattered to see our beers end up all over the country. But when someone buys our beers to try to flip them for financial gain, you’ve completely gone against what we are about.


Texas Beer & The 2015 Challenge

We are Texas, and our Star shines bright.

As of December 31, 2011, Texas was home to 71 licensed small craft breweries (which, for the purposes of my analysis, include breweries less than 75,000 barrels of annual production, up from 47 just a year earlier. That number includes 34 brewpubs (up from 28 at year end 2010) and 37 production breweries (almost double from the 19 licensed production breweries at the end of 2010). in 2011, Texas small craft brewers produced 130 thousand barrels of beer, compared to 93 thousand just the previous year.

The growth of our industry has been amazing and has not gone unnoticed, yet I submit to you the following proclamation: we are underachieving.

31 Texas counties are home to a small craft brewery, but that’s out of 254. Not good enough.

That 130 thousand barrels produced by Texas small craft brewers? That represents a paltry 1.2% of the craft beer industry and a pathetic 0.06% market share in the overall US beer market. Not good enough.

Those 71 small breweries? We still rank 46th in breweries per capita in the US. Not. Good. Enough.

Since I only speak on behalf of myself and my brewery, I won’t call the following list a set of goals. Instead, let’s call them a challenge.

By 2015, I challenge Texas to the following:

  • Be home to 160 actively licensed small craft breweries.
  • Produce 250,000 barrels of beer from small craft breweries.
  • Have a small craft brewery in 40 Texas counties (this one is admittedly harder, since breweries tend to open in more populated areas, for obvious reasons).

These three challenges are achievable, but it will take the effort of numerous parties. To be successful, I’m challenging the following groups to do their part.

  • Texas Small Craft Brewers: your challenge is obvious.
  • Texas beer distributors: you are our ally in the growth of the industry, and our growth cannot happen without you. Commit to carrying and featuring Texas brands.
  • Texas beer retailers: you are the front line. Abandon the old school way of retailing beers and the intimidating walls of industrial light lager. Give brewers a fair and equitable display with no unfair preference to brands who kick you illegal incentives. Provide consumers easy, clear access to the brands they want.
  • Texas Legislators: you are challenged with the task of establishing fair, competitive industry reforms that allow Texas small craft brewers to grow their brands. That means allowing production breweries to establish tasting rooms and sell directly to consumers on premise and allowing brewpubs to sell into the wholesale tier. There is almost $1 billion in economic impact at stake for helping Texas meet the 2015 Challenge (based on my annual Economic Impact Study – latest version to be published in March/April).
  • Texas beer consumers: you have the best job in achieving the challenge. Continue drinking and supporting Texas small craft brewers.

Together, we can do this. Share the message of the 2015 Challenge with friends, colleagues, industry members, and anyone you know who cares about Texas Craft Beer.

Drink Beer, Save Texas.


AleHeads Podcast

Wanna hear me talk about stuff? I didn’t think so. In any event, if you feel like hearing my opinion on Freetail, beer trading, Texas laws, the craft beer industry and dinosaurs, you can listen here:

http://aleheads.com/2012/02/03/the-aleheads-podcast-scott-metzger-freetail-brewing-co/

Cheers.