The Rise of the DFW Brew

Free from the hangover of the '90s craft beer bust, Dallas' small brewers cheer another round of growth.

Also from the HRO report, "Critics of the three-tier system say it imposes an artificial regulatory structure onto the market that stifles innovation, drives up process, restricts consumer choice and inhibits economic development. [It] also fails to prevent monopolistic practices in the brewing industry, which is dominated by a small number of large, multi-state brewers that provide the vast majority of the country's beer."

One exception to the law allows microbreweries, which by definition produce fewer than 15,000 barrels of beer annually, to sell directly to retailers without going through a distributor. Also, wineries and brewpubs under strictly limited circumstances can sell their products directly to consumers.

Microbreweries find that parts of the three-tier system stifle their business. They want to be able to sell beer to consumers for off-site consumption, say, after a brewery tour, just like wineries are allowed to do. Additionally, brewpubs — a different animal from microbreweries when it comes to regulations — want to package and sell their products to distributors and directly to bars, restaurants and stores.

Wholesale beer distributors are the biggest opponents to any type of changes to the three-tier system, simply because they fear that if breweries could sell beer off their back docks, they could cut into distributors' profits.

Two groups working for craft breweries to change these laws are Open the Taps and the Texas Craft Brewers Guild, which are both prepping for the 2013 legislative session in another attempt to tweak the law.

"We're very engaged with legislators, distributors and different industry groups," says Wagner, who serves on the guild's board. "It's something we've been working at for a while. It would certainly benefit Texas and continue the growth of craft brewing. Plus, the number of jobs created if this legislation went through would be significant."

During the 2011 legislative session several bills were filed, the most significant being HB 602, which would have allowed Texas breweries to charge for tours and allow tour-goers to take home up to a 12-pack. The bill died after the Wholesale Beer Distributors of Texas (WBDT) bartered a stipulation in exchange for its support. That stipulation, which stated only breweries that produce a maximum of 75,000 barrels a year were eligible, in turn made Anheuser-Busch InBev pull its support, even though it doesn't hold tours in its Texas breweries. Those two interests, WBDT and A-B InBev, have the greatest bargaining chip of all, money, and no legislator was willing to dismiss their concerns.

The WBDT Political Action Committee received more than $400,000 in contributions from January 2011 through October 2012, and the biggest single contributor was Barry Andrews of Dallas-based Andrews Distributing, who donated more than $47,000 in that period. (He didn't return our call for comment.) The expenditures for the PAC basically go to pad the coffers of every legislator in Texas.

To get ready for the 2013 session, Open the Taps and the Texas Craft Brewers Guild are participating in "working groups" created by state Senator Leticia Van De Putte, a San Antonio Democrat. The working groups bring everyone together in one room in an attempt to iron out the main issues. In the end, they hope to flush out the inconsistencies in the alcoholic beverage code and bring together all the parties that have pushed for these changes over the past decade. Distributors are also involved in the working groups, and Wagner is emphatic about cooperating with them.

"We believe very strongly in the preservation of the three-tier system and that is critical to the existence of craft breweries," he says, speaking slowly so his point isn't missed. "It doesn't mean that it can't be modified in ways that benefit everybody. But, that's an important thing to remember. We do not view the distributors as enemies. Sometimes it gets portrayed that way."

Recently the Texas Craft Brewers Guild commissioned an economic impact study authored by Scott Metzger, a University of Texas-San Antonio economics professor and founder and chief executive of Freetail Brewing Co.

Metzger estimates that craft brewers had a $608 million impact on the Texas economy in 2011. Additionally, 92 percent of the brewers he surveyed for the study responded that they would further increase their investments if statutory restrictions on their access to the market were lifted. Based on states with a more liberated craft brewing industry, the report estimates that within a decade, "The Texas craft brewing industry could have an economic impact estimated at $5.6 billion if certain statutory reforms were enacted and craft beer followed the same trajectory as Texas wine."

While an optimist by necessity, Metzger is also pragmatic.

"Eventually the kind of changes we've been seeking will pass," he says. "It's inevitable. It might be in 2033 instead of 2013, but we think our chances are better than ever. The momentum is on our side."

Open the Taps doesn't want to get their hopes up after three unfruitful legislative sessions, but the group has faith. "The more groups in the industry that can rally together and support the cause, the better chance we stand to get laws changed," says Leslie Sprague, a member of the grassroots group.

Metzger points out that Texas has fallen behind other states' craft brewing industries, and that's a message that resonates with legislators, particularly because out-of-state craft breweries have an advantage over those in the state. "We discriminate against our own as it stands now," he says, "which is fairly anti-Texas."

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6 comments
brendan_j_smith
brendan_j_smith

Home brewer here. Great article. Thanks for supporting our local brewers. The Temptress (Imperial Milk Stout) by Lakewood Brewing is AMAZING. But, Rahr, DEBC, Peticolas all make quality stuff as well. My friends and I hope to join them in the business someday soon...

jdaylett
jdaylett

@Dallas_Observer Really great article, keep up the awesome work!

hinmanpe
hinmanpe

While Humperdinks is a brewpub they make some of the finest beers in the Metroplex.

 
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