Proposed legislation seeks to benefit brewery industry

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Craft breweries throughout Texas are restricted from selling their products for off-premises consumption as part of a law many in the industry describe as outdated and unfair. Due to a pair of bills introduced to the state Legislature in January, one of them from state Sen. Dawn Buckingham, R-Lakeway, craft brewers could see substantial benefits.

Senate Bill 312, in concert with House Bill 672, filed by state Rep. Eddie Rodriguez, D-Austin, seeks to allow craft breweries the same off-premises selling parameters as wineries and distilleries.

Allowing off-premises sales is a distinction in state law that most craft brewers, including those in the Lake Travis-Westlake area, say could help the industry and state in myriad ways, from increased craft beer tourism to smaller breweries’ ability to leverage more marketing power for their own products.

“The great thing about going to a winery is you get to bring home a few bottles of your favorite wine that you tasted,” Buckingham said. “Same if you go to a distillery. And we just feel like if you go to a brewery and you like what you tasted, you ought to be able to bring a little bit of it home with you.”

Local impact on the industry

There are many craft breweries and brewpubs in western Travis County, and a major distinction between the two is distribution caps. A brewpub is limited to 10,000 barrels of production per year, but it can sell its beer and other brands at its establishment to-go. Breweries, on the other hand, can manufacture up to 225,000 barrels per year, and as long as they do not go over that cap, can sell up to 5,000 barrels for on-site consumption, but not to-go.

That distinction is what is keeping Family Business Beer Co. in Dripping Springs a brewpub, according to co-owner and General Manager Gino Graul.

Graul said the proposed legislation will allow craft breweries to compete with wineries and distilleries by modernizing an outdated legal restraint on selling products to-go, which other alcohol-related industries have been doing for years.

Family Business started out as a brewery but relicensed to become a brewpub mainly due to the current state law, he said.

“So, if this bill does pass, I think what our brewpub and a whole lot of other brewpubs would probably do is immediately file for a license change to be a brewery, manufacturing facility,” Graul said. “Then, along with being able to sell beer to-go to patrons that come out to visit us, that would increase the ceiling of beer that we’d be able to self-distribute, which gives us more control over how our product is sold out in the marketplace versus having to rely on a third party to represent our brand the way that we want the public to interact with it.”

Independent craft brewer Kevin Jones, co-founder of Frontyard Brewing north of Lost Creek, said the ability to sell his beer to-go could have a sizable impact on his overall business.

Frontyard operates at a clip of about 100 barrels per year. At that production level, Jones said even a small percentage shift toward to-go beer sales could significantly raise his profit margins.

Frontyard opened in 2017, and even though the barrel production is small, it is licensed as a brewery. It still serves as a second job for Jones and his business partner, but he said it is popular in the neighborhood that he describes as a mix of businesses and homes. Having an outlet for customers to stop by, chat about his product and take something home would be a boon to his profit margins, Jones said.

“We get people stopping by all the time, and we have to turn them away and say, ‘Hey, we can’t sell you anything, sorry,’” he said.

Benefits to beer tourism

Official studies on the local impact of the burgeoning beer tourism industry do not exist yet from entities such as Travis County or the Captial Area Council of Governments, but Buckingham cited research from data analytics company Nielsen, which reported in May 2017 that craft beer sales increased 65 percent in the last five years, and nationwide sales topped out at $5.8 billion for the fiscal year ending Jan. 28, 2017.

Craft breweries in Central Texas alone have grown from four in 2005 to 60 by 2017, according to the National Brewers Association.

“Beer tourism has become quite a profitable business, and according to a June 2016 Neilsen Craft Insights panel, 20 percent of American consumers reported visiting between three and 10 craft breweries in the last year,” Buckingham said. “So, growing our breweries will also help grow our tourism industry and the folks who come to our various areas and hopefully increase interest in Texas products across the country.”

Charles Vallhonrat, executive director of the Texas Craft Brewers Guild, said while it is difficult to pin down cost benefits, beer tourism gives a financial boost to cities like Austin and regions like Central Texas.

Brian Dwyer, head brewer at Oasis Texas Brewing Co. off Commanche Trail near RM 620, agrees beer tourism is an important part of craft-brewing profits.

Oasis is licensed as a brewpub, and Dwyer said the ability to sell beer to-go carries extra marketing potential. Patrons can leave with their product and provide more opportunities for it to be seen by other people.  Realistically, to-go sales do not constitute a huge percentage of a craft brewery’s business plan, Dwyer said, but the peripheral effects help enhance a customer’s experience.

“Especially for the tourists, Austin is kind of elevating itself as a brewery destination,” he said. “If tourists want to come to the taproom and experience it and then be able to take something back to their hotel room and maybe share it with their friends, it’s just kind of an extension of the taproom
experience.”

Opposing the legislation

While most craft brewers are in favor of being able to sell their product to-go, not everyone sees the
benefits.

Rick Donley, president of the Beer Alliance of Texas, which represents distributors for brands such as Anheuser-Busch Co. LLC, said he is against the proposed bills as they
are written.

Allowing sales for off-premises consumption in craft breweries not only disrupts the three-tier system of manufacturing, distribution and retail sales, but it also potentially harms businesses such as bars, convenience stores and grocery stores, Donley said.

“If you’re a bar owner and have been in the Lakeway area for a number of years, or let’s say you’re a convenience store operator—either one—and all of sudden a craft brewer comes and builds a facility across the street from you. All of a sudden he’s allowed to sell in all three tiers,” Donley said.

It is not fair for craft brewers to be able to manufacture, self-distribute and sell beer on-premises, and then be able to sell beer to go when other businesses are limited to how they can operate within the three-tier system, he said.

Donley also said an argument, often cited by those in favor of the legislation, interpreting Texas as the only state in the U.S. that does not allow to-go sales in craft breweries is disingenuous. California and Florida do not allow brewpubs to sell beer to-go, and in Missouri there is only one type of brewery license allowing to-go sales, he said.

The proposed bills are too open-ended, Donley said. Case in point, beyond a 5,000-barrel cap, there is no limitation in the legislation on how much beer an individual can purchase to-go.

“You could drive up with a big flatbed trailer and I guess you could order 5,000 barrels to-go,” Donley said. “Whereas in every state that I’m aware of … there are limitations on how you can purchase to-go.”

The industry moving forward

Whether SB 312 and HB 672 pass in the 2019 state Legislature, there are many indicators to suggest the craft brewery industry in Central Texas is not going anywhere.

Data from the national trade group the Brewers Association state small and independent craft brewers contributed $76.2 billion to the U.S. economy in 2017 as well as more than 500,000 total jobs across the industry. Those statistics account for the total impact of craft breweries, including non-beer products sold by brewpubs and brewery taprooms.

Graul said because he would seek a license change to become a brewery if the law passes, he would also double his staff and drastically increase the amount of equipment within his brewery, thereby contributing more overall to the economy.

“We would probably go from 16 employees to 32, along with buying more local vehicles to service more accounts,” he said. “So, I think that the financial benefit would come a little bit later on down the road. But we would invest more in our operation and job growth in the local community by having more positions to fill.”

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Brian Rash
Brian has been a reporter and editor since 2012. He wrote about the music scene in Dallas-Fort Worth before becoming managing editor for the Graham Leader in Graham, Texas, in 2013. He relocated to Austin, Texas, in 2015 to work for Gatehouse Media's large design hub. He became the editor for the Lake Travis-Westlake publication of Community Impact in August 2018.
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