Texas craft breweries are calling House Bill 3287, which just became law after sailing through the Legislature, a “disincentive for growth.”
The bill and its impact are complicated, but it all boils down to just how successful breweries can become.
“There’s no other industry in the United States and in Texas where a law like this is on the books,” says Justin Engle, owner of two-year-old Town in City Brewing.
Engle is just one of many craft brewery owners who testified against HB 3287 this spring. The Texas Craft Brewers Guild, which represents more than 220 breweries in the state, fought to prevent it from becoming law.
“The key is it takes away value from craft breweries. It puts a limit on their growth,” says Texas Craft Brewers Guild executive director Charles Vallhonrat.
“There’s a huge disincentive for someone to come in and make a big investment in us,” explains Brock Wagner, who owns Saint Arnold Brewing Company.
According to the new law, if a brewery – or any of its sister breweries affiliated with investors – produces a total of 225,000 barrels a year, distributors will start getting a cut on beer that never left the building.
“The state will never see the money that’s paid. It’s literally a distributor is going to come in, look at that room behind me and say, ‘Oh, you moved kegs 10 feet to your tap wall. Here’s the amount of money we want for that,’” says Engle. “That’s it.”
“It’s all about the money. If you want to understand what is wrong with our political system, look at this bill,” Wagner adds. “Essentially, this was acquired legislation. This was bought and paid for. It is not good for the state of Texas.”
Texans for Public Justice says the Texas distribution lobby poured $11 million to state lawmakers since 2013, including roughly $2 million to Gov. Greg Abbott, Lt. Gov. Dan Patrick and Speaker of the House Joe Straus.
“This is insane old-world Al Capone protection money. It shouldn’t happen. I think the only reason why it does happen is that the politicians themselves are being paid for their results,” says Andrew Wheat, the research director for Texans for Public Justice.
Though critics say the legislation flies in the face of Texas’ image of a free-market state, the investment appears to have paid off for distributors.
KHOU 11 reached out to the Texas Beer Alliance, an organization that represents some of the state’s distributors. President Rick Donley sent a statement that read, in part:
"Much has been made in the disinformation campaign waged by opponents of the bill about requiring brewers to go through the distribution tier. What hasn’t been mentioned is the fact that most of the people complaining are nowhere near the 225,000 threshold and most likely, never will be."
“I think distributors are uncomfortable with these craft brewers getting to be too large. If you’re a distributor, every beer sold in these tap rooms is money you’re not getting,” says Rice University Baker Institute fellow Mark Jones.
HB 3287 may be law, but breweries vow the fight isn’t over.
“When they talk with one voice, it’s powerful,” Vallhonrat says.
The law doesn’t apply to three existing breweries: Karbach, owned by AB InBev, Revolver, owned by Miller-Coors, and Independence, owned by Heineken. In fact, HB 3287 allows them to expand at two new facilities each.