Dallas Senator John Carona Files Bill that Would Close a Tap for Craft Brewers

Categories: Drink This

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Recently we wrote about four bills Republican state Senator Kevin Eltife of Tyler introduced that would open new revenue opportunities for craft breweries around the state. As the law stands now, Texas requires a clear separation between those who make, distribute and retail beer in Texas. None of those three tiers can overlap. This prevents monopolies and general back-alley mischief. Supposedly.

For decades, small craft breweries have pushed hard for legislative tweaks that would allow them to make limited retail sales at their breweries, the same way wineries can sell bottles of wine directly to drinkers. This issue and others regarding brewpubs and out-of-state brewers are touched on in Eltife's bills.

And then there's Dallas Senator John Carona's Senate Bill 639, introduced this week, which would take a sizable bite out Texas craft brewers bottom line by prohibiting breweries from accepting payment for distribution rights.

The text reads:

No manufacturer shall ... accept payment or agreement to bear any costs in exchange for the territorial assignment of a brand to a distributor ...

Selling distribution rights is one of the few liberties craft brewers have, and it historically has helped the craft brewing business survive. Current law regarding paid distribution rights isn't explicit. There's no law that reads "manufacturers can sell distribution rights." So Carona, with the help of the Wholesale Beer Distributors of Texas, has drafted a bill that would forbid this exchange and, no doubt coincidentally, save wholesale distributors money.

For small breweries that can't directly retail their beer, the cash wholesalers pay for the right to be the brewers middlemen is "a great source of value for craft breweries," says Brock Wagner of Saint Arnold's Brewing in Houston. "Brewers can use that money to expand." He calls Carona's legislation anti-capitalistic, because breweries create value in their brand names, which under SB639 they would have to give away.

Carona sees it differently. In an email response to a question regarding this legislation he asked, "What happens when the large manufacturers decide to require payment from a distributor for the right to distribute their brand? We could be back where we started from, with those who won't pay to play getting muscled out of the marketplace."

Wagner, who serves on the Texas Craft Brewers Guild board, says that scenario is not realistic.

"The big breweries want their products to be distributed and they have to go through a distributor," says Wagner. "Big breweries are not in the business of selling distribution rights."

Wagner points out that if large manufactures like ABInBev wanted to sell their rights and their distributor didn't want to pay, there are very limited options. "Where will they go? Not to the MillerCoors distributor. Not to a start-up with no ability to service the market. So from a practical standpoint this argument is not valid."

John Reardon with Deep Ellum Brewing Co. raises similar objections, "This bill would allow them to get our distribution rights for free and then they could still buy us like baseball cards from each other. And where's the guarantee that they'd actually work to build our brand?"

The bill is still before the Business and Commerce Committee. Eltife, who filled the pro-craft brewing bills last week, and Senator Leticia Van de Putte, who is also a craft beer advocate, are both on that committee. Neither have anything to say on the issue right now.

The Wholesale Beer Distributors of Texas Political Action Committee has donated $39,500 to Carona's campaign over the past decade. In all, the beer, wine and liquor industries, including Barry Andrews of Dallas-based Andrews Distributing, are some of his largest contributors.


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24 comments
StevenPolunsky
StevenPolunsky

Senator Carona, who I work for, appreciates the Dallas Observer's coverage of this important issue and has issued this statement:

“The outlook is bright for legislation to create new opportunities for craft brewers and brewpubs in Texas.  For months we have worked to get to this point -- several important pieces of legislation have been filed and placed before the public for discussion and debate.  I applaud Senator Eltife, Senator Van de Putte, and the others who have brought these ideas forward. 

“My support of craft beer is well known.  Pro-craft beer legislation has passed out of my committee before and will again.  I have insisted on bringing stakeholders to the table, created the framework for it, and was one of the first few legislators to respond to the Open the Taps survey.  The bill I filed is a step along the path to passage of comprehensive legislation.  We are remiss if we do not take the long and wide view on these important provisions.  Provisions such as reach back pricing, the alteration of a price by a manufacturer based on the price a distributor charges a retailer.  This practice borders on price-fixing and must be addressed.  But comprehensive legislation also includes a “tap room” provision, which will allow brewers to serve customers beer at their brewery, as well as legislation that will allow brewpubs to use a distributor to get their product into stores and in front of more customers. 

“As with any issue, there are many stakeholders with varying interests -- this is the very reason I created working groups during the interim to begin to address these important issues.  We will continue to work together, and in the end I am confident that this Session we can pass legislation beneficial to craft brewers and brewpubs.”

John Davis
John Davis

Carona is also a beer from Mexico.

John Davis
John Davis

The Senator in question must not appreciate what he was able to succeed in Texas. Why is he bond to not make Texas brewery to rise up like those in the midwest that are the biggest breweries in the world today.

John Davis
John Davis

So the Dallas Senator has a bad idea.

Patriot
Patriot

Beer gods, save us. 

I know that the local brewers will see this post. Ya'll need to organize and put us to work. If anything the last few years has shown me is that TX wants craft beer. I have no doubt that you could start a grassroots campaign and have an army of helpers within days...

Scott W. Hatfield
Scott W. Hatfield

we're shocked that a Dallas-area politician participates in patronage and back alley deals? this fat egocentric f' is the epitome of the fat cat politician. he's doing this. he's killed HOA reform because his company is the largest HOA management company in the State. he has to go one way or another...either is acceptable...and he represents my district.

Rex Curry
Rex Curry

Another politician on the take. No surprise there.

Crash Stitches
Crash Stitches

Smells like politicians working for big businesses. What else is new?

Kelly Tomlinson
Kelly Tomlinson

Damn corporate-owned Republicans! Get out of the way and let the free-market decide who makes better beer.

GoingBoeing
GoingBoeing

Another politician on the lobbyists' tit. Or tap, in this case.

JustSaying
JustSaying

@StevenPolunsky "The Wholesale Beer Distributors of Texas Political Action Committee has donated $39,500 to Carona's campaign over the past decade. In all, the beer, wine and liquor industries, including Barry Andrews of Dallas-based Andrews Distributing, are some of his largest contributors."

JM64
JM64

@Kelly Tomlinson I agree with what you are saying overall, but do not single out Republicans for your scorn. Democrats are equally 'owned' by their donors. Some contributors hedge their bets by paying bribes  (ahem, campaign contributions) to BOTH parties. It is not about supporting a D or R, but about buying access and obedience.

JustSaying
JustSaying

@GoingBoeing At first I thought maybe he hated beer because of living his whole life with a last name that sounds remarkably close to a certain shitty mexican beer. Nope. The guy is just another sell-out doing the bidding of big beer.

hamyjunior
hamyjunior

@stephensapps phone calls to these committee members - John Carona (R) Chair - 512-463-0116, Larry Taylor (R) Vice Chair - 512-463-0111, Kevin Eltife (R) 512-463-0101, Craig Estes (R) 512-463-0130, Kelly Hancock (R) 512-463-0109, Leticia Van De Putte (D) 512-463-0126, Kirk Watson (D) 512-463-0114, John Whitmore (D) 512-463-0115. Please call and voice your opposition to SB639! Cheers!

hamyjunior
hamyjunior

@stephensapps and having conversations with the staff of all of these committee members, it is quite comforting that not all of them agree with the bill...  many are completely against it!  MAKE CALLS!  It works...

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