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General Category => Going Pro => Topic started by: euge on March 08, 2013, 12:39:54 AM

Title: New Texas law?
Post by: euge on March 08, 2013, 12:39:54 AM
Today a person I met in New Braunfels claimed that a law allowing self distribution by breweries was passed recently. A google search reveals nothing.

Might affect my choice of retirement career options. :D
Title: Re: New Texas law?
Post by: tygo on March 08, 2013, 01:45:22 AM
Even if it's true I don't think it'll let you distribute out of your kitchen  ;)
Title: Re: New Texas law?
Post by: Jeff M on March 08, 2013, 02:20:46 AM
His garage or basement then for sure!
Title: New Texas law?
Post by: duboman on March 08, 2013, 03:18:17 PM
I believe I heard or read the same thing. It appears many states are now allowing small breweries the ability to self distribute so they can avoid the cost of the middleman and be more competitive in the market. I know Chicago/Illinois allows this and the small breweries are really enjoying it!
Title: Re: New Texas law?
Post by: Jimmy K on March 08, 2013, 03:40:43 PM
I believe I heard or read the same thing. It appears many states are now allowing small breweries the ability to self distribute so they can avoid the cost of the middleman and be more competitive in the market. I know Chicago/Illinois allows this and the small breweries are really enjoying it!
Dogfish always talks about self-distribution helping them when they were small. I imagine once you get to a certain size it becomes a headache, so I doubt the distributors loose much business either.
Title: Re: New Texas law?
Post by: micsager on March 08, 2013, 03:56:48 PM
My state allows self-distribution. 

On Wednesday as I was delivering two kegs to one of my accounts, The AB distributer was there as well.  It was funny because the customers of this place know me as "the Amber guy" (Our flagship brand is an American Amber) and they were all happy I was delivering some more beer.  It was almost a "Norm!" moment.

The AB guy looked rather depressed. 

(Of course as soon as I got my check, I ordered a beer.  The AB guy couldn't do that)

Title: New Texas law?
Post by: duboman on March 08, 2013, 07:20:43 PM
My state allows self-distribution. 

On Wednesday as I was delivering two kegs to one of my accounts, The AB distributer was there as well.  It was funny because the customers of this place know me as "the Amber guy" (Our flagship brand is an American Amber) and they were all happy I was delivering some more beer.  It was almost a "Norm!" moment.

The AB guy looked rather depressed. 

(Of course as soon as I got my check, I ordered a beer.  The AB guy couldn't do that)

That's awesome!
Title: Re: New Texas law?
Post by: reverseapachemaster on March 08, 2013, 07:31:03 PM
It is one of the bills introduced but I do not believe it has been passed by either house.

There are several bills introduced that would benefit craft brewers but then there is the poison pill bill introduced by the wholesalers that will cut off the right of brewers to sell their distribution rights and fix prices. Personally I don't see any of the legislation getting passed.
Title: Re: New Texas law?
Post by: micsager on March 08, 2013, 07:36:17 PM
It is one of the bills introduced but I do not believe it has been passed by either house.

There are several bills introduced that would benefit craft brewers but then there is the poison pill bill introduced by the wholesalers that will cut off the right of brewers to sell their distribution rights and fix prices. Personally I don't see any of the legislation getting passed.

Can you explain "fix prices" a bit more?

In my state, I must sell all wholesale beer at the same price to every account.  Once we get our taproom open, I can charge whatever I want to, to whomever. 

Is that what you mean?
Title: Re: New Texas law?
Post by: Thirsty_Monk on March 08, 2013, 08:24:00 PM
Could not do it without self distributing.
I think you have to charge the same price to all accounts per geographical area per same package.
Check with your state laws.
Title: Re: New Texas law?
Post by: nateo on March 08, 2013, 08:27:38 PM
Some states require price posting, some don't. I know MO does.
Title: Re: New Texas law?
Post by: reverseapachemaster on March 11, 2013, 03:35:50 AM
It is one of the bills introduced but I do not believe it has been passed by either house.

There are several bills introduced that would benefit craft brewers but then there is the poison pill bill introduced by the wholesalers that will cut off the right of brewers to sell their distribution rights and fix prices. Personally I don't see any of the legislation getting passed.

Can you explain "fix prices" a bit more?

In my state, I must sell all wholesale beer at the same price to every account.  Once we get our taproom open, I can charge whatever I want to, to whomever. 

Is that what you mean?

Yeah, whatever price you wholesale is the price all accounts enjoy. I'm not sure what state you're in but in Texas it's more expensive to send beer across the state than smaller states, so a brewery either has to not sell beyond a limited market or raise prices locally to maintain profit margins by averaging out the cost to send beer to all markets in the state. There's no discounting beer for preferred accounts, etc. Of course, there's also no taprooms allowed. Breweries here have to sell glasses with the tour and offer free samples to fill it and it kind of gets around the law but when you're selling 5-6 12oz pours for $5-10 you're not making anywhere near what you could selling each pour at taproom prices.

It's not the kind of regulation you would expect out of a very conservative state like Texas but for all the drum beating here about hands off government it's actually a much more corrupt version of conservatism that says hands off, unless it helps me make money. Here, the wholesalers have imbalanced control over the market and they are the sole advocates and beneficiaries of the proposed legislation. Even AB InBev's people spoke against the bill.
Title: Re: New Texas law?
Post by: dcbc on March 20, 2013, 08:04:03 PM
Here's my attempt to summarize what's going forward here in Texas.  There are basically 3 bills.  Two are good.  They would allow production breweries to sell beer directly to consumers without having to deal with previous restrictions that required them to give beer away with the tour for the price of the tour, the glass, etc.  The other would allow brewpubs to distribute. 

Here's the problem.  SB639 has now been tied to these other two bills.  This is the bill that prohibits manufacturers, i.e. breweries from (1) charging different prices to different distributors and (2) (this is the really bad one), receiving payment from distributors in exchange for their territorial distribution rights.  In other words, the breweries, who could have previously sold these rights to distribute their beer in a territory, for example, in the Houston area, now have to give the rights to the distributors.  Of course, the distributor who has been given these rights, can turn around and sell them to another distributor.  Basically creates less incentive among breweries in the state to try to grow their brand.  There may be a way around it (kind of like getting around the tasting room rules), but it's just a bad law.  I could see the breweries charging a "convenience fee."  Worked for Ticketmaster.

Also, I think they are working to up the bbl cap that would allow the brewery to self distribute, but, in turn, lowering the amount of beer that can, in fact, be self distributed to 40,000 bbls.  This does not seem to be as big of a deal since it does not make much sense for a brewery to try to self distribute that much beer. 

This is my understanding of things.  Word is that it will probably pass.  It has support from the distributors, obviously.  That's a lot of lobbying money.  The breweries who are spearheading this stand to benefit more than the smaller breweries that haven't had a seat at the table for as long.  Good for the brewpubs.  Good for the already widely distributed breweries like St. Arnold who have already been paid for the lion's share of their distribution rights.  Not so good for pretty much all the other smaller breweries who are in the early stages and are still mostly self distributing.

Distributors and Texas legilators laughing and patting each other on the backs on this one.  Hope it doesn't pass.  Time will tell
Title: Re: New Texas law?
Post by: reverseapachemaster on March 20, 2013, 08:11:16 PM
My understanding is that the bill prohibiting different prices was dropped and the other three parts have been merged together into a single bill so either all passes or all fails.
Title: Re: New Texas law?
Post by: dcbc on March 28, 2013, 03:16:00 PM
That appears to be the case with the language in 639 on the price fixing, which is was rightly excised.  SB 639 (now tied to SBs 515--518 a/k/a/ the good bills) has passed the senate and is now in the house.

This is a pretty good summary of it.  Good for brewpubs and large breweries like St. Arnold and Real Ale, which have already sold their major market distribution rights.  Stinks for most of the rest of Texas Craft Brewers despite the good bills, 515--518.

http://blog.mysanantonio.com/food/2013/03/laws-reforming-texas-beer-laws-pass-to-full-senate-but-upset-some-brewers/ (http://blog.mysanantonio.com/food/2013/03/laws-reforming-texas-beer-laws-pass-to-full-senate-but-upset-some-brewers/)
Title: Re: New Texas law?
Post by: nateo on March 28, 2013, 03:35:02 PM
I don't really have a problem with banning sale of distribution rights, but it makes no sense at all to ban breweries from selling those rights, but allowing distributors to turn around and sell them after breweries give them away.
Title: Re: New Texas law?
Post by: reverseapachemaster on March 28, 2013, 04:28:29 PM
I deplore that they have tied all the bills together but I think on balance we are better off seeing the whole package passed than the whole thing fail. Brewpubs will get a chance to distribute, which hopefully will encourage growth of more brewpubs in the state, and production brewers will be able to sell a limited amount of beer on site. For the brewers as a whole I think that's a bigger win than the loss on the distribution rights issue.

The craft brewers are already planning a judicial attack on 639 after it goes into effect. I'm not sure they will win the day on that one considering the storied history of monied influence on the state judiciary but they can always try to fix it through the legislature.
Title: Re: New Texas law?
Post by: dcbc on July 09, 2013, 07:18:12 PM
I like Jester King's response to all of it.  Switch over to a brewpub license.  Cap production at 10,000 bbls per year, self distribute 1,000 bbls per year, and have a distributor sell the rest.  I think they were at 1,400 bbls last year.  Now they can charge for beer in the tasting room and sell bottles to go.  Their model, with lots of barrel aging, really lends itself to this. 
Title: Re: New Texas law?
Post by: reverseapachemaster on July 11, 2013, 01:54:12 PM
I like Jester King's response to all of it.  Switch over to a brewpub license.  Cap production at 10,000 bbls per year, self distribute 1,000 bbls per year, and have a distributor sell the rest.  I think they were at 1,400 bbls last year.  Now they can charge for beer in the tasting room and sell bottles to go.  Their model, with lots of barrel aging, really lends itself to this.

Hops and Grain did the same thing. It makes a lot of sense.