***First, a programming note: I’ll be in San Francisco for the Craft Brewers Conference until Sunday – so updates may be sporadic until then.***

By now, you all know that yesterday House Bills 602 and 660 were heard before the Licensing and Administrative Procedures Committee.

Briefly on HB 602: No one expressed opposition, not even the Wholesale Beer Distributors of Texas, who have opposed the bill in the past. There is some forthcoming compromise on that bill that apparently everyone is happy with and it looks like you’ll be able to take beer home after a brewery tour later this year.

HB 660 had a tremendous number of supporters, and the roll of names read into the record as supporters of the bill was long and impressive. Among those in support but not wishing to testify were a number of beer distributors and the Texas Restaurant Association.

As you may have read, we’ve gained the support of the other tiers through thoughtful discussion with interested stakeholders. Beer distributors were concerned about self-distribution for a business type that already sells directly to the consumer, and we understand their points. Self-distribution has been removed from the bill. We also lowered the annual limit for aggregate production to 15,000 barrels per brewpub. A number we are very comfortable with. I’m pleased that we were able to come up with a bill that all three tiers really like.

We did have one person oppose our bill, however. Keith Strama, representing the Wholesale Beer Distributors of Texas, stood up and presented a semi-coherent rambling about how we should not allow these kind of changes to the code because… well, just because. Seriously. Strama did present some other barely comprehensible argument, which was called onto the rug in short order by Committee Vice-chair Chente Quintanilla of El Paso. Video of the entire hearing, which you can find here, proves quite entertaining. Strama should have just stuck to “Uh… just because” – turns out that was a better argument than the one he was trying to make. 

A real comedic gem came when Mr. Strama suggested that HB 602 already accomplishes what brewpubs are trying to achieve by allowing us to simply change our license to a brewery and charge for tours and give away beer. Yes, that is MUCH simpler than just allowing brewpubs to sell to distributors.

Most interesting, to me, was that not a single industry member of the WBDT (of which many were present in the room) submitted themselves in opposition. It’s not hard to oppose in these kinds of hearings, you just fill out a card with your name, occupation, and your position. Why wouldn’t WBDT members bother to oppose? Could it be… they aren’t opposed?!??!?!?! This begs the question, who does the WBDT really represent? Certainly not their members, a handful of which have approached me about carrying my brand should the bill pass.

The conclusion seems obvious: the WBDT’s attorneys and lobbyists represent only themselves. They have to ensure they have a job in two years when this bill inevitably comes back up if it is defeated this time. These guys don’t care about brewers, that much is obvious. But now it is becoming clear they don’t even care about the distributors they supposedly represent, or the state’s best interested.

The writing is on the wall. The WBDT’s era of rule is coming crashing down around them as they have failed to keep up with changing times. They continue to lose members, fed up with the stuck-in-the-mud thinking of Keith Strama and his bosses, and they continue to lose influence.

What’s Next.

With the WBDT exposed, the ball is back in our court. We have one or two weeks at the most to earn the votes of the committee, after that it will be too late to advance this session. Right now I think we have 4 votes. We need 5. Time to turn up the pressure and continue to urge members of the committee that this the right thing to do. Continue those calls and emails (I’ll post a sample follow up letter tomorrow).

Here is the list of committee members again.

Around the Web

Lee Nichols has a great story on the hearing for the Austin Chronicle. His article is also one of the last chances you’ll have to see my beard, which I said goodbye to this morning.

The blog, I Love Beer, has a great post on yesterday’s hearing.

D Magazine had a story leading up to yesterday’s hearing.

KXAN (Austin) has a story.

And so does KVUE (Austin)

And of course the Texas Tribune was covering the story as well.

My Testimony.

And lastly, here is a written version of my testimony from yesterday in the event you were curious.

Members of the committee, thank you for allowing me the opportunity to speak on the matter of House Bill 660. My name is Scott Metzger, Founder and Chief Executive Officer of Freetail Brewing Company in San Antonio; Adjunct Professor of Economics at the University of Texas – San Antonio; and Executive Director of the non-profit organization, Texas Beer Freedom.

This bill is specifically about Texas brewpubs, establishments that brew artisanal, hand-crafted beer for sale to consumers on the premises of the brewery. Currently, the state’s alcoholic beverage code restricts brewpubs from participating in the well-established three-tier system and does not allow them to provide their products to the state’s wholesale tier for resale to the retail tier.  This statutory restriction has significantly stunted the growth of the brewpub industry in Texas: while the number of brewpubs in the United States has gone from 5 in 1986 to over 1,000 today – we actually have fewer brewpubs in Texas today than we had in the 1990s.

The code as it is currently written not only restricts our state’s small businesses from growing but also provides a wide-open market for out-of-state producers of craft beer to come in and sell their products without the worry of competition from local brewpubs. I have a wealth of economic data to support the need for legislation like HB 660, but the argument is best demonstrated by this simple fact: brewpubs from California, Colorado, Delaware and Oregon are selling tremendous quantities of beer within our state’s borders while Texas brewpubs are shut out from competing in their own backyard. Put simply: currently, the best option for my brewery to expand the reach of our products in Texas is to move our brewery out of Texas. As a proud native Texan, that is a painful statement to make about any of our businesses.

In our great state, it is important to remember that we really have a five-tier system. In addition to the producers, wholesalers and retailers – we must not forget the consumers and the state itself. In the case of HB 660, all five tiers stand to benefit from this bill’s passage.

The benefits to brewpubs, the producers of the beer, are self-evident: the bill would enable them to grow beyond their existing walls. I was commissioned to perform an Economic Impact Study on behalf of the Texas Craft Brewers Guild to estimate the economic contribution of our industry today and in the event of statutory reforms such as HB 660. The study found the potential for more than $680 million of new economic activity, 6,800 new jobs and $192 million of new annual payrolls created. 

The benefits extend to the wholesale tier. Today, the beer industry is declining in the aggregate with the exception of one sector: craft beer. Wholesalers are continuously expanding their portfolios to include artisan, hand-crafted beers like the ones Texas brewpubs make. HB 660’s passage would provide wholesalers with a wider-range of Texan products to offer. Speaking only for my brewery, since HB 660 has been introduced I’ve been approached by wholesalers from the Wholesale Beer Distributors of Texas and The Beer Alliance to discuss the possibility of carrying my brand. Quite simply, wholesalers want my beer.

Retailers stand to benefit by focusing their product offerings on high-quality local products. Every year, the National Restaurant Association releases its Top Trends. And for the last few years, “Local Food and Beer” has been at or near the top of that list. Thinking local is no longer a progressive ideal; it has become the standard way of life for Texans.

Consumers benefit by gaining a wider access to the products they desire. At my brewery, I am constantly flooded with calls and emails from folks around the state who want to know where to buy my beer. For Texans in Beaumont, El Paso or Garland, my answer of “only in San Antonio at my brewery” is disheartening.

Perhaps most timely is the benefit to the fifth tier, by which I mean Texas itself.  The Texas Craft Brewers Guild Economic Impact Study concluded that statutory reforms like HB 660 can create upwards of $57 million of annual tax revenues for the state, without raising or creating any new taxes. That is enough for 1,300 teachers and firefighters or policemen. And $57 million is just a start. That number is based on the beer industry replicating the Texas Wine Industry’s growth following statutory reform in 2003. When we consider that Texans consume 19 times more beer than wine, we can see that we are only beginning to scratch the surface.

In closing, I ask you to support HB 660 not only for the brewpubs it will help grow; but for the wholesalers who will have an expanded range of supply, retailers who will be able to feature Texas-made products, consumers who will have access to the products they desire, and the tax revenue that you will be able to use in funding our state’s future.

Thank you, and I look forward to answering any questions you may have.

Freetail Brewing

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