By Frances Bello, Becca Wright, Skylar Isdale and Kari Counter
This June, Governor Perry signed into law a slew of bills that gave Texas craft breweries and brewpubs have a reason to celebrate. After years of effort, Texas breweries can now sell their products in-house, and brewpubs can finally self-distribute.
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The five bills, SB 515-518 and SB 639, have changed the game for craft breweries and brewpubs, like recently opened brewpub Austin Beer Garden Brewing Co. ABGB opened its doors to the public on August 30.
Video: ABGB talks craft beer legislation
“It was great timing for us,” says Mark Jensen, owner and head of marketing at ABGB. “We built our business on the idea that the laws were not going to change and that we were going to have to make a living based on how much beer we could sell out of here as a brewpub.”
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The Brewers Association, an organization of brewers and for brewers, defines a brewpub as a “restaurant-brewery” that sells 25 percent or more of its beer on premise. In comparison, breweries produce beer purely for distribution.
“There are breweries and there are brewpubs, and the lines are getting more blurry between them now,” says Jensen.
With the ability to now self-distribute, the option of opening a brewpub could look more appealing to craft beer home brewers.
Brian Peters, an owner and brewer at ABGB, believes many small-batch breweries would be better off switching to a brewpub business model. Peters was also one of two brewers who started Live Oak Brewing Company in 1995 before he left to join the brewpub world.
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“Now we [brewpubs] are treated almost like a production brewery. We have more than production breweries actually, but we have a limit of how much we can sell,” Peters says. Brewpubs have the ability to sell on premise, sell to go and now also self-distribute up to 1,000 barrels. They can now also manufacture 10,000 barrels instead of 5,000 to sell to a distributor for resale.
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Peters believes the options with brewpubs are boundless. ABGB is able to provide a relaxing, fun environment and offer food and music, along with brewing, selling and distributing beer. For the short amount of time ABGB has been open, Jensen says he has been pleased with the constant flow of customers.
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Before this legislation passed, breweries could only give free test samples of beer out during tours and hope visitors would then buy their products at off-premise retailers.
SB 518 will now allow breweries to sell beer directly to customers on premise, instead of only being able to offer free samples during tours. SB 516 and 517 adjusted the self-distribution laws, allowing breweries to sell up to 40,000 barrels of brew themselves, as long as the total yearly production amount does not exceed 125,000 barrels.
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On the other hand, SB 639 protects the three-tier system of producers, distributors and retailers by prohibiting “reach-back pricing.” This happens when producers change the price they charge to distributors after finding out the price the retailers are charging for the product.
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However, these laws do not give the breweries the right to sell products on premise to go. One would not be able to walk in a buy a bottled or canned six-pack, an option that brewpubs do have. This was an issue that was brought into the House but ultimately did not pass.
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The Texas Craft Breweries Guild praised the current efforts in a press release, saying the new laws will help the “overall competitiveness of the Texas craft beer market.”
Craft brewing is a growing marketplace, especially in Texas, and these laws will only help to propel the movement.
According to the Texas Craft Breweries Guild’s website, from 2010 to 2011 the number of barrels produced by Texas craft breweries increased 56 percent, and the number of licensed breweries rose from 52 to 78.
Peters believes these new laws will put Texas on “equal playing field with some other states.”
“Texas sells a lot of beer, but in terms of the craft beer movement, I think we are five or six years behind a lot of the states,” says Peters. “I would love to see Austin with 20 brewpubs, I know that is crazy, but I would love it.”
Peters predicts these laws will impact the Texas craft beer culture in a positive way. He expects more Texas craft beers to hit the market and out-of-state breweries to find it more difficult to locate shelf space.
“People view that the competition might hurt, but it is not that. It creates this synergy that is crazy, like Portland,” Peters says. “Portland is like the Napa Valley of beer. I want Austin to kind of turn into that. And I think it has the chance to be that.”
Jensen, ABGB owner, also strongly believes that Austin’s commitment to stay local and eat local is transcending into the beer culture.
“There is a difference when something is made fresh and locally. It improves the way the product is experienced by the end user,” says Jensen. “Austin has always had a local spirit, and I think Austin is becoming a hot bed for a lot of local craft beer.”