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!

Original 12oz Ananke Bottles, Released in 2010

Ananke Day 2013 is just a few days away, so I wanted to take the chance to answer some Frequently Asked Questions and wax poetic on a little Freetail philosophy. I was extremely flattered to see Ananke make it on writer Thomas Berg’s list of 20 Most Coveted Craft Beer Releases in America. To even be listed with those other breweries is amazing. It will be interesting to see what impact, if any, that list plays on the crowd Saturday.

Let’s jump right into it.

Q: HOW MANY BOTTLES WILL BE AVAILABLE?

A: We won’t be bottling Ananke until Friday, so we won’t have a final count until then. We are planning around 700 bottles.

Q: WILL THERE BE A BOTTLE LIMIT?

A: Yes. although you may still be able to buy as much as you want. The limit will be determined by the following mathematical formula:

Limit = b/n

Where:
b = Final # of bottles available
n = number of people waiting to buy bottles at 10:45 before we start selling them

Not everyone buys their limit, keep in mind. Last year we didn’t sell out on day 1. So, you may be able to get as much as you need. Just depends on the crowd.

Q: WHY THE BOTTLE LIMIT?

A: In the hierarchy of folks who will be purchasing bottles of Ananke we put the people who will be drinking it first and foremost. Anytime that someone makes the effort to come visit our brewery, we want to do our absolute best in order to get them what they came for. On a day like this, that thing is bottles of Ananke. While we understand this may create a less-than-ideal situation for traders, we would rather sell fewer bottles to someone who will enjoy them personally than more bottles to someone who is going to trade them away.

This isn’t a knock on the trading community. As a beer lover, I too enjoy trying different beers I don’t have easy access to. As a beer maker, I love the opportunity to get my beer in front of new people. As an economist, I love the market that has emerged between folks wanting to try new beers.  But with that said, the people who came to the brewery to get a bottle come first to me, and when we’ve had sell-outs in the past (especially with lower quantity releases) I have been bummed to see someone miss out on a bottle, then see bottles get shipped off to another part of the country.

I’ll also take the opportunity to say that I recognize the responsibility we share in this situation too, and that’s why we strive to increase bottle numbers when possible. On barrel aged beers, it’s tough because of the physical requirements of barrel aged beers, and that is something we will address with Freetail2 (a new brewery we are working on – more details on that another time). Along those lines, we don’t want to limit bottles to the point where it is not worth the effort of even trying to get any (the 2 bottle limit on Fortuna Roja was right on that fine line last year, and if not for the other 4 beers being released on the same day I’d have not liked to put on a bottle release with such a limited quantity). So, to summarize, we will continue to reasonably limit bottles while doing everything in our power to increase supply to meet demand.

Q: HOW MUCH WILL BOTTLES COST AND WHAT SIZE WILL THEY BE?

A: Ananke will be in our new standard (since we put the bottling line into operation) – 22oz bombers. They will be $11/each plus sales tax.

Q: COULDN’T YOU RAISE THE PRICE?

A: Absolutely. But along the same lines of the bottle limits, we want to make the enjoyment of our beer more of a democratic process, rather than one that creates people who are “in” and people who are “out”. $11 represents what we feel is a fair price given the price structure of our business. I can glance out into the market and quickly get a feel that we could easily charge more for these bottles considering what I see other bottles being sold for, but that isn’t my style. We will continue to price bottles based on what we feel is good for our business and a good value for all of you who support us. You can expect this philosophy from Freetail until I get hit by a bus or lose my mind.

Q: HOW WILL THE SALE GO? HOPEFULLY NOT LIKE THAT DIA DE LA MUERTA 2012 DEBACLE! 

A: If you joined us for Dia de La Muerta 2012, you’ll recall we tried something new – having everyone sit down and order from their waitress. Based on your feedback, I’ve decided this was a terrible idea. We’ll be going back to the old way of doing things. Show up, get a number, and then we’ll line everyone up to pay for bottles then take their receipt to pick them up. Though it takes some time to work through the line, I find this the most effective way at doing it, and it gives me an opportunity to say hey to everyone.

Q: BLAH BLAH BLAH… WHAT ABOUT THE BOTTLESHARE?!?!?!

A: Whoever said there is no such thing as a stupid question never anticipated this one. BOTTLE SHARE IS ON!!! Come, have a good time with new friends and old, and have responsible fun.

See you Saturday!

I guess I’ll have to rely on funding our business the “old fashioned” way of using our own money.

-Scott

Here’s the project, click on images to view full size.

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!

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!

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.

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.

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)

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.

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

Stay tuned for more.