May 022017

TexCraft BrewersMarc Sorini, the noted lawyer for the law firm, McDermott, Will, and Emery, recently outlined his opinion, noting that the expansion of brewery owned brewpubs or retail outlets, sometimes referred to as satellite outlets, will not disrupt the market.  He goes on to state that even in California, a state that has as many as six outlets, such brewery expansion would not mean much in terms of market penetration.

Sorini believes that having that many “would be fine,” but he also goes on to state that the industry has to be “vigilant” and not destroy the current system.  Likewise, he believes that taproom expansion is over blown and that every state has limits on the number of brewery-owned taprooms.

It is safe to say that many wholesalers do not have the same point of view as Sorini.   Texas House Bill 3287 clearly states that all license-holder-locations should count toward taproom cap totals for on-site sales. The current law allows taproom sales from a brewery up to 225K bbls. per year, however, when the law went into effect, none of the industry tiers had the foresight to know the ramifications of either AB or MC buying a Texas craft.  Which, as we know, is exactly what happened with the sale of Revolver and Karbach to MC and AB, respectively.

Texas wholesalers, sensing that in such situations as stated above, wholesalers could lose more control over the middle tier, introduced House Bill 3287.  This house bill was meant to modify the law, thus ensuring that all locations would be included with the license holder.  Thus, in the above mentioned case, AB and MC sales would be included in Revolver and Karbach sales, thus making the operation of such taprooms illegal.

The WBDT have asked the Texas Craft Brewers Guild for their support, and at this moment, no member has supported the bill.  Interesting!  While the wholesalers sense these acquisitions as a threat to the three tier system, the craft brewers see it as a possible threat to the value of their business.

Since taprooms are a key part of any breweries’ revenue stream and marketing, if one eliminates the taproom aspect of a breweries’ operation, the value of that brewery will significantly decline.  Such actions also close the door to a breweries’ ability to leverage themselves to potential buyers.

In essence, what this bill brought to light is a snapshot of the direction of beer.  AB and MC, losing massive volume, are buying key crafts in markets that make sense, while at the same time, using their ability to access taprooms to control the retail tier of the three tier system. Wholesalers in Texas are protecting the tied house provisions, while the craft breweries are looking to protect their own interests and keep their ability sell out at a premium or top dollar.

There might not be another situation in this country which is more the personification of the beer industries’ special interests than this HB 3287.  On the surface, there does not appear to be any compromise available, but the industry should know soon.  Stay tuned.

There are times in politics when you must be on the right side, and lose.

 Posted by at 6:00 am

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