Senator John Carona's Bill Could Raise Cost of Beer Across State

On Tuesday morning the Business and Commerce Committee convened at the capitol in Austin to discuss, among other things, the future of beer in the state of Texas. In the front of the room, some of Texas' most powerful state senators sat behind their nameplates at a long curved table. Facing them in the back of the room stood some of Texas' most popular craft brewers, trimmed out in dark suits and starched white shirts.

For years Texas craft brewers have made trips to the capitol to plead their case for a tweaks to the three-tired system that shapes alcohol code, changes they say would better accommodate the modern market place but in the past have been fought by established wholesalers and giant breweries that make their livings off the existing system. Still, this session looked promising. Legislators and representatives from across the industry had been meeting over the past year to work on legislation that could open the taps for craft brewers. There shouldn't have been any surprises.

See also:
- Dallas Senator John Carona Files Bill that Would Close a Tap for Craft Brewers

But there was -- a big one that could raise the cost of six-packs statewide or perhaps bring a whole body of carefully crafted compromises crashing down. Again.

Chairman of the committee, Senator John Carona of Dallas, noticed the large crowds amassed in the back of the room and, seeking to quell a bit of tension in the air, addressed the group and asked them not to worry.

"Take a deep breath," were his exact words.

The nerves are understandable. Years of negotiation and work have been put into this. In the last legislative session, the craft brewers went home empty-handed after their bills died in committee.

After that session, Carona created "working groups" to hash out all these issues. It was a great show of leadership -- everyone get in a room, work it out, figure out your differences, find compromises. All the parties involved had more than a year to work on it.

The result was four bills authored by Senator Kevin Eltife of Tyler and introduced two weeks ago. Collectively, the bills cover most of the main issues, like allowing brewers to sell a small amount of beer at their breweries and letting brewpubs sell beer at the retail level, things not allowed under the current system with its strict segregation of manufacturers who sell to distributors who sell to retailers who sell to you.

Brock Wagner of Saint Arnold's Brewing Co. took a seat at a small table in front of the committee to voice his support of Eltife's bills:

"Over 100,000 people visited our brewery last year," said Wagner, "but we weren't allowed to sell them a single drop of beer. If we were able to capitalize on that, even minimally, it would have a big impact on business."

Wagner pointed out that other breweries around the country that opened the same year as his are four to 10 times larger than his now. He told the committee the state's restrictive beer laws are the reason why.

Scott Metzger of Freetail Brewing Co. in San Antonio testified next in favor of the bills. He explained that he could make more money if he moved outside the state. In-state brewpubs aren't allowed to sell beer at the retail level, but brewpubs headquartered in, say, California can, and do -- in Texas, as a matter of fact.

This was the easy part of the meeting. There were no negative comments about Eltife's bills.

But, then an elephant dropped into the middle of the room. During the last week of February, Carona (again, the man who created the working groups) introduced a new bill, Senate Bill 639, that would turn the entire beer industry on its head. Not only does this proposed legislation shock craft brewers, it even caused the major players in the industry, like Anheuser-Busch and a bevy of other groups, to gasp.

For the next 20 minutes, representatives from these groups took the stand in three-minute increments to make their case for why SB 639 should die a quick (perhaps painful) death. We reported on one aspect of the bill last week, which would prohibit craft brewers from selling their distribution rights to wholesalers; they'd just have to give them away, which would be a financial and marketing blow.

But another huge component of Carona's bill would affect every beer that hits a shelf in a retail store in Texas. It would establish a standard price at the manufacturer level for beer throughout the state and, in the end, would certainly affect the retail price.

Another measure would end self-distribution for breweries, which would be 10-steps back for craft breweries.

Carona filed this bill less than two weeks before this meeting and it was the first time most people had heard of these proposed laws. At no time did he bring the issues in SB 639 to his very own working groups.