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As Macrobreweries Get Bigger, Local Brewers Worry About the Legislature

Last week, beer giant AB-Inbev completed its deal to swallow SABmiller for $107 billion. Already huge, AB-InBev is now truly gargantuan, looking at potential annual revenue of $64 billion and controlling roughly 30 percent of beer sales worldwide. It's so big, in fact, that AB-InBev had to sell its nearly 60 percent stake in MillerCoors in the U.S. just to stave off an antitrust investigation.

In the greater scheme of beer, Dallas' small craft brewers are gnats circling around the head of AB-InBev's ox. One super-big brewer getting super-duper big is not, in itself, going to have a direct effect on Texas craft beer, says Michael Peticolas of Peticolas Brewing Co., thanks partly to Texas' "three-tier" system, which rigidly segregates ownership of breweries, wholesale distributors and retailers. The system has long been a headache for small brewers whose business model depends on reaching beer fans directly, but the same system prevents ginormous breweries from snapping up restaurants and distributors and locking out smaller competitors.

At least for now.

The bigger danger for craft brewers comes from politics. Distributors are a powerful lobby, with the National Beer Wholesalers Association and the Wine and Spirits Wholesalers of America contributing roughly $6 million to political parties in the 2012 election cycle. In Texas, perhaps the best example of distributors' sway over legislators is a 2013 law that banned breweries from selling distributors the exclusive rights to peddle their beer. Breweries now must give away the rights to distributors, which can resell them, taking potentially millions of dollars from breweries and handing it to distributors. At the same time, the law offers brewers little protection from bad service from distributors, saddling breweries that break distribution contracts with heavy penalties. That's why last December Peticolas, Live Oak and Revolver breweries sued the state to overturn the law.

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And it's not just the distributors with friends in high places. In several states, recently passed laws allow breweries to purchase alcohol distributors so long as they "operate independently." Of the 500 companies that distribute Budweiser, the manufacturer owns more than 15. That's not many, but AB-InBev acknowledged its interest in buying distributors in California to the U.S. Justice Department. Imagine distributors and an amped-up AB-InBev joining forces and you can see how independent breweries like Peticolas have more to fear from the Legislature than they do from just one more corporate merger. 

But that's tomorrow's battle. Right now, local breweries are struggling to deal with the wounds already inflicted on them by the Legislature, which has also failed to budge on changing the law to allow small brewers to sell cans and bottles of suds to customers who want to drink at home. Wineries, brewpubs and distilleries can sell their products for off-site consumption, but not craft brewers.

Craft beer in Texas is a young industry, but it has grown to a point where the state as a whole is raking in awards at a level that competes with Colorado, Oregon and California. Whether the brewers' future stays rosy depends on decisions from legislators with a solid history of drinking whatever the big guys are serving.

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