The Rise of the DFW Brew

In 1994, if you were to drive east along Commerce Street in downtown Dallas (perhaps in a new convertible Mazda Miata) past all the skyscrapers and under the banal veins of Central Expressway, you'd soon enter Deep Ellum. At the neighborhood's gateway under the freeway, you'd be greeted by the distended beer tanks glistening inside Copper Tank Brewing Company. Surrounded by dark wood and well-aged bricks, the drums had a stately presence.

Inside the brewpub, drinkers leaned on a long, custom-made walnut bar where they sporadically ordered pints of house-made beer. The brewmaster at the time, John Sims, got his first professional brewing job at Yegua Creek Brewing before soon moving to the Copper Tank in 1993 to help it get started. He also worked on constructing that long wooden bar. As a craftsman, Sims took pride in helping with any projects, not just the beer running through the taps.

At night and on the weekends, a DJ often spun tunes at the Copper Tank. The brewpub's identity was sort of up for grabs: It was bar, but also a restaurant, all centered on one of the oldest trades of all time — brewing. Mix in a dance-club vibe with some great happy hour specials and you get the sort of multiple-personality disposition that marked Dallas' first craft beer boom.

That brewpub movement was triggered when the Texas Legislature passed a measure in 1993 that allowed restaurants to both make and sell beer in Texas. Soon Dallas was immersed in brewpubs like Yegua Creek Brewing, Moon Under Water, Routh Street and Copper Tank, among others. They all took the bait in unfounded faith that they could successfully sell craft beer in Dallas.

For about seven years, Sims managed a 10-barrel system at the Copper Tank and produced more than 2,000 barrels of beer a year, all sold in-house. In that time, Copper Tank won six highly regarded Great American Beer Festival awards, including a gold medal in 2000.

Not that it mattered.

"It all fell on deaf ears around here," says Sims, now the brewmaster at Four Corners Brewing Co. "The public wasn't ready for craft beer. I'd tell people I brewed craft beer back then and they would say, 'Oh, do you brew Miller Lite?' And that was really the only focus."

Sims tried to promote Copper Tank's beer with table-top signs at the restaurant, but Copper Tank's management did little to promote the beer and its awards. Hiring a good DJ was a higher priority. By 2001, Sims saw the writing on the wall and left Copper Tank in search of other craft brewing opportunities. At one point, he considered an out-of-state job, where local beer scenes had more traction.

"Needless to say, those were difficult days." Sims says. "I needed to be in the brewing industry and there just weren't any jobs around here. They were disappearing faster then they were opening up, so it was difficult."

Not one independent brewpub survived that first craft beer boom. Today only a handful of those original chains remain.

That same trend played out across the country. According to the Beer Institute, 461 specialty breweries churned out suds in 1993 across the United States. In 1998 that number peaked at 1,625. Then for five years, between 2000-'05, growth receded and then flattened out at around 1,500. The Dallas craft beer scene was dormant, and most of those brewpubs were selling off their equipment. The Copper Tank's tanks got plucked out of Deep Ellum and sold to a craft brewer up north; Sims can't remember exactly where.

The craft beer buzz may have faded away, but it never died. Across the state and country, a steadfast group of homebrewers have always kept the hobby alive. The Dallas palate wasn't ready for craft beer, but that didn't mean their homebrewing kits disintegrated.

"People who loved craft beer back then didn't stop loving it," Sims says. "We just started recently to gain a whole new appreciation from other crowds."

"New appreciation" may be a bit of an understatement. Something more like a tent revival began as small brewers caught a gust of wind across the nation from 2005 to 2011, when around 700 new specialty breweries opened, bringing the U.S. total to 2,289.

Fort Worth's Rahr & Sons Brewing Co. led the charge locally in 2004. They were the first at the scene of a stirring sleeping giant. Being first comes with a price, though, and Rahr was forced to lay off some workers in 2005. Even worse, a freak snowstorm in 2010 collapsed the brewery's roof, knocking it out of production for months. In the end, Rahr's survival was a testament of will — plus some savvy marketing via social networking — on the part of owner Fritz Rahr and a group of devoted volunteers. Brewery tours at Rahr always had the vibe of a block party.

"People come into our brewery and feel at home," Rahr says. "There's a sense of ownership over the local brewery. I wish I could take credit for that, but we actually learned it from Brock at Saint Arnold's in Houston. It was a goal of ours to open a brewery and for it to feel like a family. We wanted people to be part of it, take ownership and pride. And without our volunteers, we wouldn't be here today."

The brewery was repaired and running at full steam before the year was out. In 2011, Rahr honored its customers, workers and volunteers with a special brew called Snowmaggedon.

"It's a special community environment. It's really a brotherhood," Rahr says.

Meanwhile, in 2008 Franconia Brewing Co. opened in McKinney. Founder and brewmaster Dennis Wehrmann has a long family history in brewing that dates back to the 1800s. In 1999, he graduated from the Doemens Brewmaster School in Munich, Germany, and then moved to the States, where he worked at Two Rows brewpub for a few years. He's inspired by what he sees happening now in North Texas.

"Austin has always had a great microbrewing community," Wehrmann says, "but in the last three years it has really begun to move into Dallas and North Texas. It's really interesting, and it opens a lot of doors. More locals are thinking about it and are willing to try new stuff."

That became obvious in 2011, when the local craft beer scene's cup began to runneth over. Deep Ellum Brewing Co. (DEBC) got its brewer's license in July, quickly followed by Peticolas Brewing Co. in August.

From July 2011 to July 2012, six breweries opened in North Texas. According to the Texas Alcohol and Beverage Commission (TABC), today 10 breweries have either an active or pending brewer's license in the area, and a handful of others are actively planning to file for one.

Evidence of a strong local commitment to craft brewing was as clear as the hot summer sky this past September at the first Untapped Festival. The Common Table came up with this idea as a way to celebrate local beer. A few months into planning, the organizers were overwhelmed with interest and thought better of the original arrangements, a street party in front of their restaurant, and opted instead for a large empty block in Trinity Groves. There the sold-out crowd had more elbowroom to swill more than 120 craft beers. Hopheads committed to one long line after another and never a foul word crossed their lips about the wait. A few hours after the event started, a line of ticketless hopefuls snaked down the street in a beer-tasting waiting room.

The local craft beer boom lags just slightly behind the overall craft beer industry in Texas. According to the TABC, Texas craft breweries produced 1.4 million gallons of beer in 2008 and they estimate a total of 1.9 million gallons by the end of 2012; that's a 36-percent increase in just four years.

So, barring unexpected snowstorms, life is looking sunny for Dallas' craft brew scene. On the other hand, any fool knows the doom awaiting those who don't learn from the past. Besides, Dallas has a habit of quickly picking up and dropping trends (see: "The Dougie," Jeremy Lin, etc.). Building local allegiances can be a tough sell in a city loaded with a transplanted workforce, too. Craft beer is fizzing right now, but could this be just another beer bubble?

Brock Wagner, the founder of Saint Arnold's Brewing Co. in Houston offers an encouraging perspective.

"I've been doing this for 18 years," Wagner says, "and for me the trend has been going for a while. But I'll say it's a different world today. Selling craft beer in the '90s was challenging. We were educating people about what it was; people had no idea what craft beer was."

Looking back at the first boom, Wagner doesn't fault an uninterested public, but rather brewpubs with a different set of priorities.

"In the mid '90s there was a little boomlet in craft brewing," he says. "And, some people were getting into it for the wrong reasons. You saw a lot of raspberry wheat beer. People were getting into it from just a marketing standpoint. Those have all washed out now. Those are long gone."

There's another factor that's helping the craft beer movement: buying local. Consumers want products that manifest their local identity and pride. Carrots, chicken and cheese are all part of the home team now, but none of those examples carry the tall, frothy appeal of craft beer.

"Now being knowledgeable about beer is fashionable," Sims says. "If you went out on a date and didn't know a thing about beer you probably wouldn't go out on a second date. All we needed was a little bit of education."

A little bit of education is a start, but what Texas' craft beer movement really needs is a little bit of help from the Texas Legislature. While craft beer is booming in Texas, it's also being restrained by decades-old regulations that can be summarized with one term: the three-tier system.

After the repeal of Prohibition in 1933, states created a system of regulating beer with a directive to prevent racketeering or monopolies. Texas' system was (and is) based on three distinct tiers: manufacturers, distributors and retailers. No one company can operate in multiple tiers. Manufacturers can't distribute; distributors can't sell; sellers can't manufacture; and so on. Historically, this was seen as the best way to ensure equality among the different parties.

A report recently released by the Texas House Research Organization (HRO) explains, "Supporters for the three-tier system say it strikes an appropriate balance between control of and access to alcohol. ..."

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."

Dallas lawyer Scott Frieling, one of the founders of DEBC, says that's one reason he's fashioning a lawsuit based on equal protection grounds.

"The law can't treat entities differently for any reason," Frieling says. "That's what equal protection is about."

He gives the example of the brewpub Gordon Biersch. Based in California, the chain operates more than 33 restaurants across the United States, including two in Texas. They also sell kegs and packaged beers in liquor stores in Texas. Lone Star brewers can't do that.

"So, we're at a distinct disadvantage to out-of-state brewers," Frieling says. "From a legal stance, what you have to ask yourself is, 'Is there a rational basis?' And the answer is no. The only person who would organize their laws so that out-of-state breweries have an advantage is a crazy person."

Frieling, who has a firebrand spirit, believes the judicial route offers less resistance than the Legislature and is the cheaper option. "If you really want a fair shake," he says, "the court system is set up for a David versus Goliath situation where you're on the same footing."

Meanwhile, Metzger, the Texas Craft Brewers Guild and Open the Taps will continue to work the legislative angle.

"If I had an hour with every legislator in the state," Metzger says, "I think I could convince them because I think we have a really good, reasonable argument. But, it takes me an hour to explain it, and I don't have an hour with everyone. That's part of the challenge."

The next legislative session begins January 8, less than three months away. The Texas Craft Brewers Guild has hired a lobbyist and Open The Taps is considering doing the same. Unfortunately, the WBDT has its own PAC and many on its payroll.

A mid-year growth analysis released by the Brewers Association reported a 14-percent jump in dollar sales for craft beers in the United States for the first half of 2012. Volume jumped 12 percent during that same time period. Craft brewers sold 6 million barrels of beer in the first six months of 2012.

"Beer-passionate Americans are opening breweries at a rate faster than at any time since the day Prohibition ended for the beverage of moderation," wrote Paul Gatza, director of the Brewers Association regarding the study. "There is nearly a new brewery opening for every day of the year, benefiting beer lovers and communities in every area across the country."

North Texas has 14 breweries either established or in the works today. And as brewers promised, they are cooking up quality stuff. To drive home the point, Peticolas Brewing Co. recently won a rookie-year gold medal at the Great American Beer Festival for Royal Scandal, an English-style pale ale. Like the swift flight of a well-launched dart, Dallas craft beer hit a bull's-eye.

"I don't know how things are going to change after the gold medal," says owner Michael Peticolas, "but in just three days since the announcement I've already had probably a record number of orders."

Peticolas had already purchased more brewery space, which will triple his output capacity. Meanwhile, calls from Austin to sell his beer there are largely ignored. "For years I drove down there for good beer, now they need to come up here."

John Sims at Four Corners is working hastily to keep up — or catch up. The brewery plans to ship its first beers, Rojas Red Ale and Local Buzz Honey Rye Ale, in early November. This time around, bars and restaurants call him wanting to know when their beer is going to be available. What a difference a decade can make.

He also sees a shift in preferences compared with his days at the Copper Tank. Back then the best-seller was light beer. Now, consumers' palates are more diversified and exploratory, or as Sims puts it, "Their preferences have changed in the favor of flavor."

Sims is giddy about the second craft beer boom to hit Dallas. "I'm not a kid in a candy store, but I am a man in a beer factory, and that's about the same."