Craft Brewers Celebrate New Beer Laws

^{*Correction appended}

Marking the passage of sweeping Texas beer industry reform, Uncle Billy’s Brew & Que in Austin on Friday will load a keg onto a distributor’s truck, which, for the first time since Prohibition, will transport the beer to a bar six minutes up the street.

It will be the first transaction in what some predict could become a multibillion-dollar industry over the next decade.

Until June 2013, brewpubs like Uncle Billy’s could only sell their product on site: If you wanted an Uncle Billy’s beer, you had to go to Uncle Billy’s. That changed with the passage of Senate Bills 515, 516, 517, 518 and 639 last year, the largest overhaul of the beer industry since the Legislature legalized brewpubs in 1993.

Under the new rules, the cap on brewpub production doubled, growing from 5,000 barrels a year to 10,000. Now, brewpubs can distribute their beer using third-party distributors, and they can sell limited amounts of their own beer directly to retailers.

Rick Engel, the co-founder of Uncle Billy’s, opened Texas’ first brewpub in Houston in 1993, the first year brewpubs were made legal since Prohibition. Since then he has been working with members of the Texas Craft Brewers Guild to pass major reforms to beer laws.

“If you can’t sell your product to anyone other than your own customers, that makes it very difficult to survive,” Engel said. “I’ve seen a lot of brewpubs come and go over the last 20 years, and even today there are really only a handful in Texas.” 

The Texas Craft Brewers Guild predicts the new laws will have an enormous economic impact in Texas. The industry could generate $5.6 billion statewide and create 52,000 new jobs by 2020, according to a study conducted by Scott Metzger, a professor of economics at the University of Texas at San Antonio and the founder and CEO of Freetail Brewing Company.

Charles Vallhonrat, the executive director of the Texas Craft Brewers Guild, explained that the artisanship and detailed care that craft brewing require will generate thousands of jobs.

“Macro breweries are highly automated. They employ a lot of people, but the employee-per-barrel rate is much lower than that of a craft brewery,” Vallhonrat said.

State Rep. Eddie Rodriguez, D-Austin, and Austin Mayor Lee Leffingwell will be on hand Friday to tap Uncle Billy’s historic keg. Rodriguez, a co-sponsor of the legislation, said it took years to pass because the craft brewing industry was still maturing in Texas.

“Craft brewing is still a fairly young industry, but it has just grown tremendously. The distributors and the retailers realized there’s a definite market for it, and the time was just right,” he said.

While the legislation received bipartisan support, some of its detractors came from members of the Wholesale Beer Distributors of Texas, a trade association that represents Texas beer distributors. They argued, according to analysis by the House Research Organization, that the new rules would erode the state’s existing system that divides producers, distributors and sellers and that it could weaken distributors’ abilities to negotiate with producers and sellers. 

But with the new laws, Rodriguez predicts an upswing in local brewing, and with it economic growth in Austin and statewide.

^{Editor's note: An earlier version of this story incorrectly stated that the new brewing laws took effect on Jan. 1, 2014. They took effect in June 2013.}