Press Release:

(Austin, TX) – Austin Beerworks would like to publicly voice our support for SB 515-518.  The bills are the product of nearly 2 years of research and negotiations between the Texas Craft Brewer’s Guild, distributors, consumer groups, and state legislators. We feel these bills will enact the most positive change for the Texas craft beer community that is currently possible through legislative efforts.

These bills will:

SB 515

• Increase the annual production limit of brewpubs from 5,000 barrels to 10,000 barrels.

• Allow all brewpubs to sell to wholesalers.

• Allow brewpubs who only sell alcoholic beverages made onsite to self-distribute up to 1,000 barrels per year from a single location, and up to 2,500 barrels per year from all locations owned by the same licensee.

SB 516 & 517

• Create a new Brewer Distributor permit, which grants production breweries   who produce less than 125,000 barrels per year to distribute up to 40,000 barrels per year.

SB 518

• Allow production breweries who produce under 225,000 barrels per year to sell up to 5,000 barrels per year to ultimate consumers for on-site consumption.

Attached to these bills is SB 639, which was filed on behalf of the Wholesale Beer Distributors of Texas and has received a great deal of criticism.

The bill will:

• Prohibit “reach-back pricing”, which means a manufacturer cannot retroactively adjust their wholesale price to a distributor based on what that distributor charges a retailer.

• Prohibit a manufacturer from accepting payment from a wholesaler in exchange for territorial distribution rights.

• Set forth language that allows a manufacturer and wholesaler to enter into a contractual agreement allowing for marketing and advertising budgets and financing relating to the brewery.

• State the TAB code does not prohibit a wholesaler from selling territorial rights of a manufacturer to another wholesaler.

Although we do not endorse this bill, we feel it is less detrimental than others have made it out to be.

The most common complaint we have encountered is against the clause which prevents payment from a distributor to a manufacturer in exchange for territorial distribution rights. It has been estimated that some Texas breweries’ distribution rights are currently worth millions of dollars. To have that value legislatively reduced to zero would indeed be cause for alarm. But that is not the case.

The bill specifically allows contractual partnerships between distributors and manufacturers wherein the former can assist with the advertising, marketing, and expansion expenses of the latter.  It simply prevents a direct lump sum payment in exchange for distribution rights, which the Texas Alcoholic Beverage Commission has long considered a legal gray area.

We would prefer SB 515-518 pass on their own, but that will not happen. The bills are inseparable. So we have to weigh the pros of SB 515-518 vs the cons of SB 639.

On one hand, SB 515-518 will grant freedoms that breweries, brewpubs, and craft beer consumers in Texas have been trying to gain for over a decade. They will create new revenue streams for small brewers and increase the options of how and where consumers can enjoy their favorite local beers.

On the other, SB 639 will prevent self-distributing breweries from getting very large checks for their distribution rights. It is worth noting that Austin Beerworks is one of the largest self-distributing breweries in the state.  It could be argued that our distribution rights are among the most valuable in Texas.  And it’s still an easy decision for us to make.

We have dedicated our lives to making beer because we are passionate about our craft and the community surrounding it. We firmly believe these bills will strengthen that community and that, ultimately, we have much more to gain from a healthy and vibrant craft beer industry than we do from the one time windfall we might receive by selling our distribution rights. We are in this for the long haul, and that is why we support SB 515-518.