The passage of House Bill 602 will allow breweries like Live Oak to distribute directly to consumers during brewery tours. Photo Credit Diego Flores

Beer Bills on Tap in Texas House

By Cameron Miculka

If craft beer fans have their way, passage of two pieces of legislation recently filed in the Texas Legislature could overturn decades of existing beer legislation.

The two bills, filed by Rep. Mike Villarreal of San Antonio and Rep. Jessica Farrar of Houston, would change the ways brewpubs and breweries are regulated.

Chip McElroy, owner of Live Oak Brewery, is currently looking for a sponsor for his proposed bill. Photo Credit Diego Flores

Although both bills target the regulation of beer distribution in Texas, they each focus on different parts of the industry: brewpubs and breweries. Brewpubs are pubs or restaurants that brew beer on premises and sell the beer to smaller niche market. Breweries exclusively produce beer to be distributed and sold to retailers.

Brewpubs, which currently may only sell beer directly to consumers on premises, are prohibited from selling their beer to wholesalers or distributors.  However, House Bill 660, filed by Villarreal would amend existing laws to allow these brewpubs to sell to wholesalers. The bill would still limit the maximum production of these breweries to 5,000 barrels per year, but would allow pubs to broaden their markets and make their beers more widely available.

Peter Clark, legislative director for Villarreal said that the bill was written in response to a San Antonio brewpub, Freetail’s, asking Villarreal to address the issue.

“Rep. Villarreal liked the idea of giving brewpubs an opportunity to grow their businesses by providing their product to a distributor and giving distributors an opportunity to grow their businesses,” he said.

Much of the opposition comes from wholesalers who “don’t want to rock the boat” when it comes to how beer is distributed in Texas, Clark said. Currently breweries are only allowed to sell beer through Texas’ “three-tier system” where breweries must sell to distributors, who then sell to grocers and then sell to consumers.

Another bill, House Bill 602, filed by Jessica Farrar, would allow breweries to distribute their beer directly to consumers, bypassing the three-tier system.

Representative Farrar said that the issue was most recently brought to her attention by the St. Arnold Brewing Company in Houston, Texas.

“This bill is meant to loosen some of those restrictive laws surrounding breweries,” Farrar said.  “Brewers want to be allowed to send visitors home with beer following a tour.”

Differences between propsed bill. Photo Credit: Antonio Morales

Despite two similar bills failing in the previous sessions, Farrar believes the third time may be the charm. She said that bills usually take several sessions of rewriting to pass due to the structure of the legislature, which, Farrar said, “is set up to ‘kill’ bills.” This draft of the bill, Farrar said, was written with interests of all concerned parties in mind, including wholesalers who have been previously opposed to the bill.

“The intention was never to [disturb the three-tier system],” she said. “If anything, it will create more business for distributors.”

A source from the Wholesale Beer Distributors of Texas was not available for comment.

She also said that the efforts of brewers across the state to raise awareness have been tremendously effective in garnering support for the legislation.

“Brewers are the ones with the most vested interest in passing this legislation, said Farrar. “Beer enthusiasts around Texas have also been a driving force behind this bill. They have been great at getting the word out to others in the community through blogs and public events. ”

Steven Anderson washes kegs at the Live Oak Brewery. Photo credit Diego Flores

However, some brewers would like to see the new system overhauled completely.

Chip McElroy, the president of Live Oak Brewery in Austin, Texas, compared the current three-tier process to standards regulating wineries, which allow wine to be sold directly to consumers.

“Wineries are allowed to sell wine at their place of production whereas breweries are prohibited from that,” McElroy said. “That’s a discrimination issue.”

Although the bill would still prohibit breweries from selling beer directly to its consumers, Farrar’s bill would allow breweries to give each customer up to 48 12-ounce bottles of beer. The bill also allows breweries to charge a ticket price for tours to make up for the cost of the beer.

McElroy said that he doesn’t believe Farrar’s bill goes far enough to help small craft breweries.

“[The bill] doesn’t do anything to help the smallest of the small breweries,” he said.

McElroy is instead currently looking for a representative in the House to file a bill that would allow small craft breweries to sell their beer on premises. However, he has not yet found a sponsor.

Villarreal and Farrar’s bills have been referred to the Licensing and Administration Committee. Dates for upcoming hearings have not yet been determined.