Several years ago this post ran a story on the inception of the Wholesale Beer Distributors of Texas. While playing golf one afternoon 30 years ago, I ran into the first Pearl Beer distributor for that market. This gentleman had started his distributorship immediately following the end of the prohibition period.
This man told me the story of how, during 1932 to 1938, he lost money with his distributorship despite living in the Pearl warehouse. In 1938, he, along with a number of other beer wholesalers, raised $60K and lobbied the legislators in Austin which resulted in the passing of a cash law. Up until this point, beer was sold on consignment. A wholesaler would drop off a case and come back the next day to collect, only to discover the bar had closed and the beer was gone, along with the owner. Once the cash law went into effect, this Pearl distributor said he made $1,000 the following year.
This story is very interesting in that it shows what can happen when special interest groups have the money with which to lobby. It is called buying influence. This time, the distributors ensured that they would be paid, taxes would be collected and bills paid. Obviously, this was win/win for the industry.
Fast forward 80 years. The watchdog group, Texans for Public Justice, found that, between 2013 and 2016, state legislatures received more than $11 million in campaign funding from alcohol industry players. And, according to the Texas Tribune, more than three-fourth of the funding came from the beer wholesalers. Silver Eagle President and CEO, John Nau, gave $2.4 million while serving as Texas Governor Greg Abbott’s campaign treasurer. During that four-year time period, Abbott received $1.4 million from the beer wholesalers. Texas Lt. Gov. Dan Patrick and House Speaker Joe Strauss received the second most money, $688,000 and $508,000, respectively.
This information was just published, because a bill is awaiting Abbott’s signature that requires breweries who sell more than 225, 000 bbls. annually, to buy their beer from a wholesaler for consumption on premise at the breweries taproom. The bill goes into effect on June 18th unless it is vetoed by Abbott. Furthermore, the bill grandfathers several breweries (Karbach Brewing, Revolver Brewing, and Independence Brewing) who were recently purchased by ABI, MC, and Lagunitas. Each of these breweries will be able to expand to new facilities.
On the other hand, Colorado based Oskar Blues Brewing, which recently built a $6.5 million brewery in Austin last June, is not included among the grandfathered breweries, and will have to purchase beer for their tap room from a distributor! The Texas Craft Brewers Guild is lobbying Abbott to veto the bill and has petitioned against HB 3287.
By the time you read this, the industry will know how this bill has shaken out, but given the amount of campaign funding the beer wholesalers have donated over the last four years, many would be surprised with a veto. All craft brewers have known for years what their challenges are in state legislatures. Craft brewers have, for years also attempted to get laws changed which lean in crafts’ favor, especially against beer wholesalers.
Crafts in Texas are less than 10% of the total business, but if, and when, the day comes that their market share exceeds 20%, you can bet their political influence will equal or exceed that of the influence of the beer wholesalers. Until that day, it will continue to be an uphill battle for crafts.
If it doesn’t matter who wins or loses, then why do they keep score?
Editors note, the bill became law but was not signed by the Governor.
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