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House Gives Final Approval to Craft Brewing Overhaul

UPDATED: A dramatic overhaul of Texas' craft brewing industry easily won final approval in the House on Monday.

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Updated, May 20:

Sweeping changes to the Texas craft brewing industry easily won final approval in the House on Monday afternoon. The legislation now moves to the governor's desk.

Senate Bill 639, by state Sen. John Carona, R-Dallas, and Senate Bills 515, 516, 517 and 518, by state Sen. Kevin Eltife, R-Tyler, give craft brewers more flexibility in selling the beer they produce in exchange for certain concessions to beer distributors.

“It’s great legislation, great for the craft brewing industry and great for economic development,” Eltife said. “We’re hopeful the governor will sign it.”

After a rocky session, the bills’ final form won praise from both brewers and distributors. The Wholesale Beer Distributors of Texas, a group that represents some state distributors, originally opposed Eltife’s bills but lauded the measures’ passage.

"The legislation will further the success of the thriving craft brew industry in Texas and strengthen the laws maintaining the independence of wholesale beer distributors," Tom Spilman, the organization’s executive vice president, said in a statement.

The craft brewing industry has sought these measures since the industry was legalized in Texas in 1993.

In a statement, Eltife said he envisions that “breweries around the state will become tourist destinations similar to the wine industry, providing a strong tax base for local communities and the state.”

Rick Donley, the president of the Beer Alliance of Texas, another distributor group that has vocally supported the craft brewing industry through the process, told the Houston Chronicle last week that the governor’s staff had been involved in the process and was aware of the bills’ content.

Because all of the bills received a two-thirds majority in both chambers, the package will become law immediately upon the governor’s signature.

Original story, May 17:

A raft of bills that would dramatically alter the way beer is sold and consumed in Texas sailed through tentative approval from the House on Friday after a lengthy and disputatious process between brewers and beer distributors. If finally approved next week, the legislation will go straight to the governor's desk without another stop.

The bills represent the largest overhaul of the industry in Texas since the Legislature legalized brewpubs in 1993. Under the new regulatory scheme, brewpubs and craft brewers would be allowed more flexibility to sell their products — privileges beermakers have sought for more than a decade.

The package includes Senate Bills 515, 516, 517 and 518, by state Sen. Kevin Eltife, R-Tyler, which decrease restrictions on craft brewers and brewpubs.

Under the new rules, the cap on brewpub production would be doubled, from 5,000 barrels a year to 10,000. Brewpubs would also be allowed to sell their beer to distributors, in addition to selling limited amounts of their own beer directly to retailers.

The bills adjust breweries’ right to circumvent beer distributors and sell beer directly to retailers. Larger breweries than before would now be allowed to self distribute, but the limit on how much they are allowed to self distribute has been lowered.

Also, breweries would now be able to sell beer for on-site consumption — a major victory for Frank Mancuso, the Central Texas sales representative for the Saint Arnold Brewing Company of Houston, the oldest craft brewer in the state. Mancuso came to the House gallery with a large number of other Texas brewers, who broke into applause when the last of the bills finally passed.

“We’ve been working on this for eight sessions now,” he said. “Selling beer at our location is something we’ve wanted to do for a long while.”

There’s also Senate Bill 639, by state Sen. John Carona, R-Dallas. That measure makes several changes to the code governing relations between brewers and distributors, including banning “reach back” pricing, which involvers brewers selling beer to distributors based on the prices the distributors charge retailers.

SB 639 serves as a concession to the influential Wholesale Beer Distributors of Texas, which represents some of the state’s beer distributors. Distributors have resisted any changes to existing law that would allow brewers to sell directly to customers. The WBDT originally strongly opposed Eltife’s bills.

Carona's bill revealed a split between brewers who see it as a necessary price to pay to win desired reforms, and those who see it as a poison pill, like Rick Donley, the president of the Beer Alliance of Texas, the other major group that represents distributors in Texas, who said at the bill’s Senate hearing that it amounted to price fixing.

Ultimately, the bill’s language was scaled back after negotiations — and both the brewers and the Wholesale Beer Distributors of Texas relented. When the bills were finally brought up on the House floor, there was no debate. All five passed with unanimous consent. 

Taken together, the impact of the changes on the brewing industry in Texas would be momentous — and good for the state’s beer drinkers, Mancuso said.

“This whole business is about compromise,” he said. “This isn’t a perfect set of bills, but it’s given us more than we’ve ever been able to get up until now.”

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