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Texas Beer Freedom

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!

 


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.


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!


Alcohol Work Groups a Model of Transparency and Good Government

A lot gets said, written and flat out complained about regarding the transparency of Government, be it on the local, state or federal levels. We all know I’ve been guilty of it myself. With that said, I thought I’d share my experience in working on beer issues at the Legislature in the interim both as an inside looking into the process of “making the sausage” and to point out how impressed I was with this method of governing. I’d go so far as to say that the Alcohol Working Groups hosted by Senators Carona and Van de Putte in the interim should be viewed as a model of Government working to serve the best interests of the state and its citizens.

In a bold step, Senator John Carona (R-Dallas) appointed Senator Leticia Van de Putte (D-San Antonio) to head working groups to look into any modernization that may need to be made to the Alcoholic Beverage Code in order to foster economic growth in Texas and to eliminate unconstitutional segments of the code which puts the state at risk of litigation.

I have to admit, I was a little skeptical at first, especially when the first invitations to the working group came out and it was scheduled during the Craft Brewers Conference and World Beer Cup when the majority of the state’s craft brewers would be in another state. So spun the conspiracy theory wheels that reside in the back of my mind at all times. Luckily my friend and colleague Brock Wagner of Saint Arnold Brewing Company was able to stay behind and represent craft brewers at the meeting, which turned out to mostly be administrative in nature.

With everyone back from the conference, things really kicked into gear. The Working Group at large split into industry segments (Wine, Distilled Spirits and Beer). I don’t know how things went with the other two industry segment groups, but our beer group quickly switched gears from administrative to very substantive. Stakeholders from throughout the beer industry (brewers large and small, distributors large and small, retailer groups, and consumer groups like Open The Taps) were all in attendance debating the merits or changing or preserving the system as it exists today.

Although a lot of the industry work and interact with each other on a daily basis, these working groups provided the first real opportunity for everyone to come together and discuss issues from a philosophical, big picture perspective. What emerged was a better understanding by all of the perspective and positions of other industry tiers. Speaking for myself only, I know I left the numerous discussions and negotiations with a better appreciation of the needs of the large brewers and distributors we can sometimes find ourselves at odds with. At the same time, I feel that with the help of some of my colleagues, we did a tremendous job of explaining to these same large brewers and distributors what our needs are. The result has been an extremely positive step towards drafting a regulatory system that is advantageous to all stakeholders and fosters economic growth for the state. At the same time, having Legislative staff in the room for all these meetings helped keep everyone honest, but more importantly it thrust them right into a position where they got an intensive boot camp on the subject and are now fluent on the issues facing the state. One of the biggest challenges in the past has been that our elected officials really didn’t understand our complex alcoholic beverage code (nor should they be expected to be experts on every part of Texas’s statutes). Today, we have Capitol staff who understand the issues and guide the state towards the best outcome.

This  transparent framework for governance that invited, encouraged and fostered stakeholder participation should be viewed as a positive development by Texas citizens. We had input from a wide arrange of positions and everyone was invited. No one can stand before the Legislature with any shred of integrity and say they never had a chance to have input on the direction our alcohol regulatory environment is headed, and that is a good thing.

I’m looking forward to this session, and I’m looking forward to seeing the work we have done in the interim develop into bills filed by the Senate and the House and then eventually become law. Years from now we will look back at the economic impact this legislation will have had and tip our hats to all the participants of this working group who made it happen.


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.


Is this thing on?

Okay okay, I’ve been slacking… big time. No posts since July? Pathetic. Not to make excuses, but I have been busy with getting a new website up and running (check it out if you haven’t already: www.freetailbrewing.com), starting the long-awaited Online Store, the new beer board, about to unveil an app, insane bottle releases, and then the every day workings of a Texas brewpub.

With that said, I haven’t been slacking on the legislative front, and neither have my colleagues. I’m very happy to report that we’ve been engaged in discussions with legislators, wholesalers, retailers, big brewers and other industry stakeholders to discuss changes to the state’s Alcoholic Beverage Code which would get Freetail beers (and other brewpub beers) into the hands of distributors (and eventually retailers, then eventually you) and get you the ability to buy beer at a brewery.

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.

I promise I’ll do better updating going forward, but if I’m not updating then it means I’m busy fighting hard for the changes we all want to see!

Cheers!


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

 


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.


Chairman of Senate Business and Commerce Committee reacts

One item lost in the shuffle following the Authentic Beverage v. TABC ruling is a telling statement from Senator John Carona, Chairman of the Senate Business and Commerce Committee, which hears alcohol-related bills.

“A Federal Court has ruled that Texas’ laws regarding the advertising and labeling of beer are flawed. In the case of Authentic Beverages Co. vs. TABC, the Judge awarded a summary judgment that certain laws directing the labeling and advertisement of beer are unconstitutional. While the three-tier system of manufacturer, distributor, and retailer has served Texas well since the end of Prohibition, it is an open question how well the Texas Alcoholic Beverage Code reflects today’s reality of Internet sales and the growth of the craft brewing industry. The Court’s ruling suggests this is a topic that may be taken up by the 83rd Legislature.”

Credit Lee Nichols’ I Love Beer Blog for the quote.

Senator Carona’s quote demonstrates that our legislators have becoming increasingly aware of the changing marketplace, and recognize that an 80 year old code may not be the best to regulate it. 2013 is looking better and better for Craft Beer to finally have a fair hearing for statutory reform.

Drink Beer, Save Texas!

 


Judge Sparks’ Greatest Hits!

And now for the lighter side. As I alluded to previously, Judge Sparks’ judgement is full of all kinds of funny lines. If this whole judging thing ever gets old to him, he’s got a career in comedy.

Judge Sparks wastes no time getting into the humor (and a little jab), and offers this in his background on the case:

The practice of law is often dry, and it is the rare case that presents an issue of genuine interest to the public. This is just such a case, however. Dealing as it does with constitutional challenges to the Texas Alcoholic Beverage Code, it is anything but “dry”and this Court wouldnever be so foolish as to question the sincerity of Texans’ interest in beer.

Given this obvious public interest, it is both surprising, and unfortunate for proponents of the Alcoholic Beverage Code, that the State of Texas does not appear to have taken as much of an interest in this case as it might have.

Judge Sparks did limit comedy to his commentary, and titled one section of his Judgement as:

2. Beers and Liquors and Wines, Oh My!

On the defense’s argument that The Texas Alcoholic Beverage Code is constitution because it is the Texas Alcohol Beverage Code:

In a remarkable (though logically dubious) demonstration of circular reasoninga tactic it repeats throughout its briefing, and which it echoed in open court TABC attempts to defend the constitutional legitimacy of the Code through an appeal to the statutory authority of the Code itself.

On the idea that the state should have the authority to define words however the legislature sees fit (and in what can only be seen as a tip of the hat to Freetail Brewing Co… right?):

Second, TABC’s argument, combined with artful legislative drafting, could be used to justify any restriction on commercial speech. For instance, Texas would likely face no (legal) obstacle if it wished to pass a law defining the word “milk” to mean “a nocturnal flying mammal that eatsinsects and employs echolocation.” Under TABC’s logic, Texas would then be authorized not only to prohibit use of the word “milk” by producers of a certain liquid dairy product, but also to require Austin promoters to advertise the famous annual “Milk Festival” on the Congress Avenue bridge. Regardless of one’s feelings about milk or bats, this result is inconsistent with the guarantees of the First Amendment.

This one isn’t so humorous as it is an insight into the larger issue that I have dealt with extensively: the restrictions of brewpubs to sell their beer to distributors or retailers for resale based on 3-tier arguments. Judge Sparks questions whether or not the concerns purported by the WBDT as reasons for not letting brewpubs sell their beer to distributors and retailers is a valid one.

Although unquestionablytrue whenthe Code was first written, andthe evils oforganized crime’s involvement in the alcoholic beverage industry were both immediate and substantial, it is less clear that vertical integration of the alcoholic beverage industry still poses a grave threat to Texas’s interests. In any case, in light of wineries’ exemption from these regulations, this purported interest is suspect.

In response to the defendant’s argument that the “Beer” and “Ale” distinctions are important for consumers to know how strong a product is in terms of alcohol, the Court reponds (my favorite part highlighted by me):

Although a typical member of the public may not be able, off the cuff, to state the average alcohol content of popular Texas malt beverages, the Court is confident that same person could, if presented with the alcohol content of a variety of malt beverages, come to a reasonably quick and accurate conclusion regarding their average range. Having determined the average range, this person could then make an intelligent choice whether to deviate from that range, in which direction, and by how much. The Court simply does not share TABC’s apparently low estimation of Texans, and remains steadfast in its belief that they are capable of basic math.

On why TABC’s lawyers presented what appears to be a less-than-full effort:

Regrettably, TABC has almost wholly failed to submit such evidence, and has often failed even to respond to Authentic’s arguments. Whether this failure reflects a tactical error, laziness, an implicit concession that the Code cannot withstand constitutional scrutiny, an erroneous assumption that TABC is entitled to special treatment, or a mere oversight, the Court cannot say. However, under the circumstances here, the Court is obligated to grant summary judgment in favor of Authentic on its First Amendment challenges.

On why just because TABC doesn’t know why it enforces stuff, it doesn’t make it unconstitutional:

However, as noted above, the state need not come forward with any record evidence whatsoever in defense of the Code. Further, just because particular individuals within the Texas governmenteven those of high rank within the administrative agency that enforces the law may not be able to articulate a reason for the Code’s disparate treatment, that does not mean no reason exists. Indeed, although it may well be desirable, there is no constitutional requirement that a personwho enforces of a law must also know the legislative purpose behind it.

Again, on defendant’s level of effort in defense:

The Court is shocked and dismayed at the Texas Attorney General’s halfhearted conduct in this case. The very purpose of having the Attorney General’s Office defend suits like this, is so the State of Texas can vigorously defend its duly enacted legislative mandates. Here, however, when TABC responded to Authentic’s challenges at all, it responded with little in the way of argument, and even less in the way of relevant evidence. The State of Texas is lucky the burden of proof was on Authentic for many of its claims, or else the Alcoholic Beverage Code might have fared even worse than it has.

Final note: I don’t feel the Attorney General let the TABC down as much as Judge Sparks thinks they did. Judge Sparks thinks the AG left arguments on the table, but I would contend THERE WERE NO ARGUMENTS TO PUT ON THE TABLE!

Been a fun day. Cheers everyone.


Aftershock of Judge Sparks’ Ruling

As seen in the post immediately preceding this one, Judge Sparks has sided with the plaintiffs, Authentic Beverage, on the 1st Ammendment claims of their lawsuit filed in Federal Court.

To summarize, the ruling has the following effects:

  1. TABC cannot prohibit you from telling customers or advertising where they can buy your products
  2. TABC cannot require you to label your products by their definition of “beer” and “ale”
  3. TABC cannot prohibit you from advertising the strength of your products by prohibiting words like “strong”, “prewar strength”, “full strength”, etc

If you read my blog post on thoughts from the motions hearing in this case, you might remember I raised some questions about point #1, specifically in respect to the potential for brewers or distributors to advertise on behalf of retailers in order to provide a benefit to the retailer. I maintain that it is not far fetched for a Big Distributor or Big Brewer rep to say “hey, carry our beers and we’ll include you in our ad” as an inducement to gain tap space.

In spite of Judge Sparks’ ruling, such behavior remains illegal – but its enforcement may prove difficult. I agree with the general sentiment that brewers should be able to tell you where you can find their products, but I maintain a real danger exists that this may open the door to less than scrupulous activity. If you’re a normal reader of this blog, you know my feelings on ethical behavior and its primacy in the marketplace. I hope this does not open a can of worms that results in the eradication of small, local brands from tap walls and bottle shops as larger brands “buy out” the space with inclusion in ads. I think it is a lot to ask of any enforcement agency to be able to effectively track down, prosecute, and prove guilty violators of this behavior – as we’ve seen it is already difficult for them to enforce the laws restricting other illegal inducements (see the No Label tap targeting case).

The biggest win on these points is for the Texas beer consumer, as it should open to the doors to more brands coming into Texas. This may, in fact, make Texas a more competitive market place and put more strain on start-ups fighting for space in bars, restaurants and other retailers. However, you will not find me arguing against the lifting of restrictions of competition. I don’t believe in laws that reduce competition for wholesale or retail tiers, and I certainly don’t believe in anti-competitive laws so far as they concern the production tier. Quite simply: let the best beer win.

It was not a total victory for the plaintiffs, brewers, and Texas beer consumers, however, as Judge Sparks sided with the state on the claim that the restrictions on permissible activities of breweries and brewpubs. Authentic’s lawyers argued the restriction of breweries from selling to consumers and brewpubs from selling to resellers (wholesalers or retailers) was a violation of the 14th Amendment Equal Protection Clause and the Commerce Clause.

In essence, Judge Sparks did not go so far as to say that the state’s restrictions on breweries and brewpubs were constitutional, just that the plaintiffs did not satisfy the burden of proving they are unconstitutional. As critical as Judge Sparks was of the defense in their arguments in the 1st Amendment issues, he was just as critical of the plaintiffs in their arguments on these claims. To quote Judge Sparks:

Because Authentic has failed to present sufficient evidence in support of its Equal Protection claims, it is clearly not entitled to judgment as a matter of law. It further appears TABC is entitled to such judgment, by reason of its cross-motion, and because of Authentic’s failure to meet its evidentiary burden. Accordingly, the Court grants summary judgment in favor of TABC on Authentic’s Equal Protection claims.

While the illogical restrictions on the activities of breweries and brewpubs in Texas may have withstood legal challenge this time, Judge Sparks has provided a lot of kindling for the fire when the next legislative session rolls around. My fellow Texas Beer Freedom members and I have already begun discussing strategy for the next Legislative Session, and we have the continued support of San Antonio Representative Mike Villarreal, who is steadfast in his commitment to fair, logical beer laws.  In 2013 I think you will find Texas Craft Brewers more united than ever before and our chances of reforming the law and finding an equitable solution are better than ever.

I’d like to give some thanks and credit. First, to Jim Houchins and Rachel Fisher of Authentic Beverage and Pete Kennedy of Graves Dougherty Hearon & Moody for taking on this case. They are deserving of all the endearing credit that I hope you all bestow upon them. They took this lawsuit up not because a brewer asked them to, but because they believed in the cause. Additional thanks to Jester King Craft Brewery and Zax for volunteering to be co-plaintiffs in the suit so that it could have standing.

And finally, in what I think is an overdue thank you, thank you to all the other brewers in Texas who were involved in this effort behind the scenes. There is more than meets the eye in this case, and a lot more Texas breweries were involved than you know about, providing feedback and assistance to Authentic and Mr. Kennedy when asked. They did so without the expectation or desire for credit or applause from the crowd, but rather they did so because of a belief in the cause. You won’t find their names on press releases or blog postings nor will you ever get their names from me even though I know them. The community of Texas Craft Brewers is a tight knit group – perhaps too tight at times and I know newcomers to the scene may at times find themselves “outsiders” to the club – and that tight knitting is what provides the support system for efforts like this one, or HB 660, HB 602, HB 2436, the Texas Craft Brewers Festival, and countless other to be possible. A tip of my hat to all my fellow brewers. I often jokingly brag to folks how I have the coolest job in the world, and a big part of that is because I have the coolest peers in the world.

Cheers!

PS: In a few hours I’ll post “Judge Sparks’ Greatest Hits”. His judgement is a demonstration of some extraordinary wit, and some comments are just too good not to share.


Judgment Day: Authentic Beverage v. TABC

I’m going to post a quick summary, and follow up later with interesting tidbits from Judge Sparks’ ruling. But in the interest of getting information out there quickly, the Judge has ruled Sec. 108.01(a)(4) of the Texas Alcoholic Beverage Code unconstitutional as a violation of the First Amendment. . Additionally, he has ruled Texas Administrative Code Title 16, Sec 45.77, 45.79(f), 45.90, & 45.110(c)(3) unconstitutional as a violation of the First Amendment.

What does this mean in layman’s terms? 3 things:

  1. TABC cannot prohibit you from telling customers or advertising where they can buy your products
  2. TABC cannot require you to label your products by their definition of “beer” and “ale”
  3. TABC cannot prohibit you from advertising the strength of your products by prohibiting words like “strong”, “prewar strength”, “full strength”, etc

Like I said, be back later with more details. You can play the home game and read the full judgment here.


Authentic Beverage v. TABC et. al.

It was a Who’s Who of the Texas Beer Industry at the Federal Courthouse in Austin today, enough so to give me flashbacks of our failed efforts to affect change in Texas beer laws in the last legislative session (a high-level recap: we brewers want 1) the ability to sell our products to consumers and to distributors 2) the ability to call our products what they really are and 3) the ability to tell people where to find our beers). In the crowd were representatives from The Beer Alliance, who sided with us in our efforts to gain the right to sell brewpub beer to distributors, many TABC staffers, representatives from a handful of distributors and importers, a staff of a key Texas Congressional Committee, and our old friend Keith Strama from The Wholesale Beer Distributors of Texas. From all appearances, I was the only member of the craft brewing industry present and perhaps from the brewing tier altogether (I didn’t recognize anyone from the big breweries, but there could have been someone there I don’t know).

For those unaware, Authentic Beverage, joined by co-plaintiffs Jester King Craft Brewery, LLC and Zax, LLC, filed suit against the TABC and its commissioners (in their official capacity) over a number of issues. You can read what Jester King had to say about the suit and the actual filings by the plaintiffs and the defendants.

For those unaware and who don’t want to go through the rigor of reading the entire suit, I’ll summarize the main points that were argued this morning.

  1. Brewers’ first amendment rights are violated by the state’s prohibition on breweries from “advertising” where their products can be found, whereas an “advertisement” has been defined as any communication be it traditional advertising, a list on the company’s website, or even word-of-mouth.
  2. Brewers’ first amendment rights are violated by the state’s prohibition on breweries from listing the alcohol content of their products in any “advertisement”, whereas an “advertisement” has been defined as any communication be it traditional advertising, a list on the company’s website, or even word-of-mouth. A brewer can, but is not required to, list alcohol content of products on a label, but cannot do so in advertising.
  3. Brewers’ first amendment rights are violated by the state’s definition of “beer” as a malt beverage containing 4% or less alcohol by weight and “ale” as a malt beverage containing over 4% alcohol by weight. In industry parlance, the terms “beer” and “ale” have nothing to do with alcohol content (and in fact an ale is a beer while a beer is not necessarily an ale, by industry terminology). The suit contends the state compels producers of beer to make false statements to consumers in order to adhere to its definitions of “beer” and “ale” (since if a producer makes a lager that is over 4% ABW, they are required to call it an ale even though it is not, and if they make an ale under 4% ABW they are not able to call it an ale although it really is).
  4. Brewers’ have their 14th amendment rights violated by virtue of the states make brewers chose between being a brewpub (which can only sell its products directly to the consumer on its premise) and a production brewery (which can only sell its products to distributors for resale) while not applying the same restrictions to wineries, which are allowed to do both.

There was another argument made as to the number of permits a foreign brewery is forced to obtain, but I won’t go into that as it constituted the least amount of time and has the least direct impact to Texas brewers.

On the 1st Amendment Issues, Judge Sparks was especially harsh on the TABC’s counsel (note, the state’s Attorney General Office acted as counsel, not TABC lawyers), which failed to provide a rational basis for the law. It is important to note that the courts have found the government can restrict free speech where they have a governmental interest to do so, but the defense failed to provide a rational basis. One exchange went like this:

Defense: I can’t site you to any specific evidence [of a rational basis]…

Judge Sparks: Because there isn’t any!

In the end, the State seemed to center their defense around the circular argument that (I”m paraphrasing) “The rational basis for the law is that they are the laws.” As you might imagine, this didn’t impress Judge Sparks very much, who at one point rhetorically asked the defense “you are aware that the legislature can pass unconstitutional laws, right?”

The defense did cite the 21st amendment, which ended prohibition and gave the states to regulate alcohol in their state, as a defense, but that led to the most comical moment of the morning for me, as Judge Sparks asked: “So can the state just define wine as beer? Can they define malt liquor as orange juice? [...] These are false statements.”

In the end, it appears that at least on the issue of item #3 above, the plaintiffs will prevail, ending the absurd labeling silliness that gets Texas ridiculed nationwide by people who know the actual beer nomenclature of beer, ale and everything else under the sun.

On the issue of advertising where to find one’s beers, the court did raise a valid concern. If we let breweries advertise where to find their beers, what would stop the big breweries (or any brewery) advertising on behalf of their preferred clients and putting undue influence on the market? Or what is to stop a big brewery from offering ads to retailers as incentives for carrying their beers over other brands? This is an area that (in my opinion) needs some mechanism to regulate what constitutes “providing information to consumers” and what constitutes anti-competitive behavior. I think that will be the biggest hurdle to overcome, because clearly there is a governmental interest in competitive markets.

On the 14th amendment claim, my sense (and this is just my opinion) is that the court may agree that our laws are nonsensical, but that doesn’t make them unconstitutional. Unfortunately, states do indeed retain the right to make stupid laws and we citizens sadly have no constitutional protection against stupidity – it has to be coupled with a real constitutional violation. The question: are breweries and wineries similar enough to where an equal protection claim can be made? To me, the answer is yes – but I have a certain (biased) viewpoint based on the similarity of the production processes. At the same time, I can admit that wine is in fact different than beer – and that is the issue of whether or not equal protection applies. It will be interesting to see what the court says.

Some notes on what I feel are take-aways from today’s hearing:

  1. The state was unable to provide an evidentiary defense or rational basis for the laws being challenged in the 14th amendment portion of the suit. That doesn’t, in an of itself, make the laws unconstitutional, but it does provide some interesting fodder in the next legislative session. It will certainly be interesting to stand in front of the congress and remind them that the state can’t think of any reason for these laws to exist. Judge Sparks had another interesting comment when TABC was pressed to explain the rationale behind the laws they enforce and couldn’t. “So you guys just blindly enforce the laws they send you?” asked the judge.
  2. The tides continue to change in our state. The “old guard” is on their heels and they are fighting change with their last tooth and nail. I’m not talking about the TABC here, I’m talking about the WBDT.
  3. A great job, and I mean this in all sincerity, by both sides in today’s hearing. I think the plaintiff’s counsel did a good job explaining their case (and I’m not talking about the rational case of whether the laws are dumb – but the case of whether they are constitutional), and I want to impress upon you that they 14th amendment claim is an uphill battle. Whereas the burden of proof in the 1st amendment claim lies on the defense to provide a rational basis or governmental interest, the burden in the equal protection case relies solely on the plaintiff. Attorney’s Pete Kennedy and Jim Houchins did a great job. On the flip side, Beau Eccles from the AG’s office did a good job of defending the state. The fact of the matter is that THERE IS NO RATIONAL BASIS for these laws, but the AG is required to defend them anyway. They can’t just “roll over” because they personally think they are stupid. Their job is to defend the laws the Legislature writes. I found Mr. Eccles to be a well-reasoned, open-minded and rational person who did his best to defend the state. Despite the fact that I disagree with the position he was defending today, I’m glad to have someone like him defending our state when other issues might arise.

Certainly this isn’t over. We’ll see what’s next!

 


The Case For Three-Tier

Wait… WHAT?

No, you read the title of this post correctly, The Case For Three-Tier. Disclaimer for those who are pregnant, may soon become pregnant, or suffer from a heart condition: you are about to read me make a case for the three-tier system and not in a “devil’s advocate” sort of way, but in a real “we actually need this” way.

There is a growing sentiment among consumers, and even a growing trend among statutory changes (like this one Tuesday in Washington state), against the 3-tier system. The behind-the-scenes warfare, as detailed here, between the members of the various tiers has only intensified as the clamoring for reform has grown. Most of you are probably aware that I led a charge for statutory reform in Texas earlier this year that would have allowed brewpubs like mine sell to distributors, which is currently prohibited.

So I come here today to once again remind us all of the importance of a truly independent distribution tier. The simple fact of the matter is that craft beer needs the middle tier for its continued existence. The distribution game is a difficult one, and in most cases requires scale in order to be profitable. Because of the scale required, it often takes big resources and big companies to be an effective distributor – something most craft breweries cannot be. If not for the requirement for an independent middle tier, there is little question the world’s mega brewers would vertically integrate distribution networks, and eventually crowd out craft brands. Niche distributorships may emerge, but their geographic reach would be limited (and many geographic areas would probably end up underserved or completely unserved).

Craft beer needs distributors. But our beer laws also need reform. These are not concepts in conflict with one another. As the fight for fairer beer laws in Texas continues, I’m proud to say that I’m in the process of meeting with distributors across the state to find common-ground solutions so that we can move forward. What I’ve found is that the distributors are not as unreasonable as we are led to believe, and they increasingly want craft beer in their portfolios. Now they want a way for us to work together without opening things up completely and allowing the world’s mega-brewers to re-establish the vertically integrated monopolies that flourished pre-prohibition.

The craft movement has a strong foothold and is here to stay. Let’ s not undermine the progress made thus far by calling for the complete abolition of 3-tier, let’s instead focus on making the right improvements to the system that doesn’t kill the craft movement in the process.


The Value of Business Integrity: A Call for Enhanced Ethics, Respectfulness and Law Abiding Behavior

So, it’s been awhile – and even before the last update, posts had been sporadic at best.  Don’t stop me if you’ve heard this one before - but I’m going to make a real effort to update at least once a week. Some updates will attempt to be poignant and tackle serious issues, other might be about the daily in-and-out of running a small brewery and teaching economics while finding time for soccer and mountain biking. In any event, content will be more frequent if not necessarily more meaningful.

Today I want to discuss something that’s been bugging me for a while, a certain lack of business integrity by not only by big business (the rumored targeting of start-up No Label Brewing taps by mega-distributor Silver Eagle for example), but by fellow craft brewers and non-beer industry small businesses in my community. (Note, I’ve always adhered by the long-standing prison code of “Snitches Get Stitches”, so I’m not here to rat anyone out. If you’re reading this and any of the things I’m describing sound like you, then they may very be you. It’s up to you to correct your behavior.)

Pay-to-play is a fairly common practice in the beer business, independent of how illegal and unethical it is. Stories like this one out of Chicago are just telling us what we already know: where the incentive exists, businesses will try their hardest to circumvent fair trade in order to gain the upper-hand. When products don’t have incremental intrinsic value to offer the consumers, they can hang onto, or gain, market share in a number of ways (this list not intended to be comprehensive):

  1. Increase the real value the product provides consumers (make your product better)
  2. Increase the perceived value it offers consumers even if it offers no more real value (in economics, we call this advertising)
  3. Become the more attractive option for consumers from a price perspective (make your product more affordable)
  4. Cheat

The first three options on this list are all okay, because they all require a two-way match of wants, preferences and needs for a consumer to choose one product over another. Like it or not, some people make purchasing decisions based on who has the best ads. Fair enough, but an ad in and of itself does not take a competing product off the shelf and limit consumer choice. The same with making a product better or less expensive. Sales of that product will still depend on how much consumers value that product relative to all other options.

It’s fairly self-evident why “cheating” in business is bad for consumers (not to mention our nation’s continuously bleak economic picture). We generally have little problem calling out big, faceless, corporations when they “cheat” – but it seems like we lose our ferocious intolerance for cheating when someone we have an emotional attachment to is doing it. We have no problem blasting AB and their brands – but there is nary a whisper when it’s a beloved craft brewer openly and proudly engaging and promoting blatantly illegal activity. We may not like the Texas Alcohol Beverage Code, but until it changes we are still bound to follow it. Those who ignore the law, even if out of a sense of rebelliousness, are no better than a big distributor illegally targeting a small brewers taps.

Beyond the obvious ethical hypocrisy, I wonder about the potential backlash from this kind of activity in a legislative session. We all remember The Wholesale Beer Distributors of Texas Keith Strama’s bumbling, incoherent diatribe in front of the Licensing and Administrative Procedures Committee (chronicled here) where he stammered on how allowing brewpubs to distribute would somehow lead to babies drinking barley wine on street corners in dry counties. It may not be too hard to picture him standing before the LAP Committee again rambling on about how we can’t even obey the existing laws and we want the state to give us more freedom? It would be like handing the car keys to a teenager who you just grounded for getting excessive speeding tickets. (This would be the argument used against us, not one I actually believe in). It is imperative, for the success of any future legislative efforts (which there will be for years to come, even after breweries and brewpubs are allowed the freedom we seek - there are many other issues to tackle) that we be model citizens.

So here I present you with a proposed Code of Small Business Ethics. Please comment to add to, disagree with, or give a tip o’ the hat.

  1. Be a Law Abiding Corporate Citizen. Regardless of your opinion of the law, you chose to open and operate a business under the jurisdiction of said laws and they must be obeyed.
  2. Commit to Product Excellence. Let the sales of your product be dictated by the real value of your product, not by increasing your relative value by putting down your competitors. Your competitors making a better product should drive you to make a better product, not drive you to find ways to tell consumers a competitors’ products are garbage.
  3. Make Honesty a Core Value. Be open, honest and transparent about your business, even your shortcomings. As a small business, your customers have an emotional connection with you. They knew you weren’t perfect long before you admitted it to yourself. Be truthful when you fail and never be ashamed to say sorry.
  4. Be Direct and Discreet With Those You Disagree With. The growth of social media has made for entertaining battles when two figures (either business or personal) clash, but when you have beef with a competitor or partner, take your beef directly to them – not to twitter.
  5. Give Credit Where It Is Due. Give props to the people who made things happen. If someone gives you credit that you don’t deserve, be the first to stand up and distribute it where it truly belongs – don’t let others do it for you.
  6. Always be Customer Focused. This is obvious and cliché, but seemingly oft forgotten. Never forget, that without your customers, your business has no reason to exist.
  7. Commit to Fairness Throughout the Supply Chain. Treat your suppliers, creditors, employees and downstream customers with the same respect and fairness you would expect from them. Your supplier has bills to pay too, and squeezing every drop of margin out of him threatens his viability and your ability to benefit from him in the future.
  8. Be Passion-driven, not Profit-driven. Let your business decisions be driven by what you believe, not by what would be most profitable in the short-run. Your passion will best support you in the long-run. The craft beer industry is a great example of small businesses driven by passion, not by capturing economies of scale and seeking the greatest profit. As a result, it’s the only segment of the beer industry that is growing.

What should we add to the Small Business Code of Ethics? Chime in!

Next Post: I’ll have La Muerta details on my next post, which I’ll aim to have out this weekend at the latest. Cheers.


Open The Taps: The 4th Tier Has a Voice

If you heard my testimony before the Licensing and Administrative Procedures Committee back on March 22, 2011 (or if you’ve been a regular reader of this blog), you might recall me talking about how the 3-Tier System is really the 5-Tier System. The beer industry in Texas isn’t just brewer, wholesaler, retailer and it is an affront to forget the 4th and 5th Tiers – consumers and the state itself, respectively – in a discussion on statutory reform.

I’m happy to see that the 4th Tier, the consumer, has organized to have a voice in the political arena. First of all, with due respect to members of the Wholesale Tier who seem to believe the world revolves around them, it needs to be acknowledged that the 4th Tier is the most important tier. Without beer drinkers, there is no beer for brewers to produce. There are no deliveries for wholesalers to make. There is nothing for retailers to sell. There is nothing for the state to regulate and tax.

The beer industry does not exist to be a piggy bank for bloated distribution companies who wish there was simply a commodity called “beer” in a non-descript white can – after all, that would make their jobs a whole lot easier. The beer industry exists because consumers want beer. And though it pains some industry members, it is becoming increasingly obvious that beer consumers want a diverse, well maintained selection of craft beer. Sorry lifelong Bud Light salesman, times have changed. Either board the train or get steamrolled by it.

Open The Taps is an organization founded by a group of Houston craft beer drinkers (that I’ve had the pleasure of meeting over the years: great folks, I can vouch) aimed at giving the 4th Tier an organized voice at the Capitol. I look forward to seeing how their fundraising efforts go and their impact on Texas lawmakers leading up to and during the next legislative session. Along with my organization, Texas Beer Freedom (which represents Texas Craft Breweries and Brewpubs), the increased awareness for the design for statutory reform will reach a point where it can no longer be ignored. You know I’ll be talking more on this topic here on my blog as the effort gets rolling again.

As one of the founding volunteers of Texas Beer Freedom, Andy Liddell, said before the Licensing and Administrative Procedures Committee:

“Alcohol regulation is supposed to protect the consumer. Well, unfortunately all our laws are doing is preventing me, the consumer, from getting the products I really want.”

Drink Beer, Save Texas.


Day 100: Support HB 2436 / SB 1575

Long time, no write. unfortunately, I have nothing to report on HB 660. I’ll let you figure out the rest there.

I do, however, have great news on HB 2436 and its companion bill, SB 1575. If you remember, this is a microbrewery direct sales bill that would allow you to buy pints at places like Real Ale, Live Oak, (512), St. Arnold, etc. Both bills will be heard in front of their respective committees tomorrow April 19, so get off your tails and get to the Capitol to show your support!

Viva Texas Beer Freedom!


Day 89: The Freedom to Choose

On this day in 1933, the first brews were legally sold following prohibition – a movement that, at its end, saw even its original proponents lobbying to repeal it. As it turned out, Prohibition did more damage than good – creating the niche for highly organized crime and spawning some of the most notorious criminal masterminds in American history.  We learned a valuable lesson from Prohibition: restricting people’s right to choose is a bad thing; and that typically the people pushing hardest for restrictions are those who stand to gain the most from it (in the case of Prohibition, the gangsters and racketeers).

Today, our state still struggles with the lingering effects of Prohibition – most notably in the form of laws that restrict our smallest and most innovative brewers from reaching the marketplace. Brewpubs are not allowed to sell to wholesalers. Production brewers are not allowed to sell you a six-pack at the brewery. Out-of-state brewers are treated preferentially by Texas alcoholic beverage code. And none of this in the name of consumer protection or the welfare of the state – but rather the protection and welfare of a handful of multi-million dollar businesses who seek to build the biggest and best walls in order to defend their castles.

A significant number of the wholesale-tier members, who have traditionally been against the reforms we seek, have had the same revelation as John D. Rockefeller Jr., Pauline Sabin and the Women’s Moderation Union had in the late 1920s: they would best be served having a part in the future of the alcohol industry, rather than protecting a system which serves to enrich the organized few. 

We were proud to stand beside members of The Beer Alliance and the Licensed Beverage Distributors of Texas in support of HB 660 before the House Licensing Administrative Procedures Committee.  Support from the wholesale-tier was echoed by endorsements from the Texas Restaurant Association (Retail-tier), in addition to countless consumers. Every tier of the beer industry is in favor of our bill (and recall, there are actually five tiers when you count consumers and the state itself) – even the state, which stands to gain much-needed tax revenue as its small breweries grow and the overwhelming majority of Texans agree it is good policy. Please, make another call to your State Representative and members of the LAP Committee and ask them to support HB 660 on this day, the celebration of American’s right to choose.

Around the Web

Not that they didn’t believe us, but the Austin American-Statesmen fact checked statements made by Rep. Villarreal (HB 660′s Author). The verdict: the Representative is rated as true!


Day 86: Rockin’ for a Cause

Thanks to everyone who came out to Uncle Billy’s Lake Travis yesterday for the HB 660 benefit concert. We had a great time with Slow Train, Mike and the Moonpies and Two Tons of Steel.  I didn’t catch who ended up winning, but someone ended up with a hoodie, shirt, cap and 2008, 2009 and 2010 Vertical of La Muerta that I donated to the silent auction. Congrats and enjoy! (Sadly, that only leaves me with two or three more bottles of 2008 La Muerta!)

Some great press today as the HB 660 effort makes the front page of the Austin-American Statesman with this story.

The Statesman also has a good photo gallery from yesterday’s event here.

And our good friends at BeerTownAustin have a recap our efforts to Drink Beer and Save Texas here.

The battle isn’t over, keep those calls going into the committee!


Day 79: Just Say There’s a Chance

Today the House Licensing and Administrative Procedures Committee is busy hearing a litany of gambling bills. interestingly, this article came out today with Senate State Affairs Committee Chair Robert Duncan quoted saying gambling bills have no chance. Lt. Governor Dewherst has said he’ll funnel all gambling bills through Duncan’s committee, which pretty much assures they are all DOA. (Which raises the question – what’s the point of going through the motions?)

Hopefully, “going through the motions” with no point isn’t what we’ve been doing with HB 660. It is up to Chairman Hamilton to decide whether or not to bring the bill (and the same is true with HB 602) back up for a vote. Keep those calls, letters and emails up encouraging his support of HB 660. A little advice I got from someone who works in politics: one handwritten letter is worth 20 emails. Something to keep in mind.

Come Party with us this Sunday to Support HB 660

This Sunday we’re going to party at the new Uncle Billy’s on Lake Travis with Two Tons of Steel, Mike and the Moonpies and Slowtrain in support of HB 660. Buy your tickets now and save $5 at the door!