Why beer middlemen stand in the way of craft beer legislation that would help Texas thrive

Manhole.jpgCollectively, small Texas craft breweries make up only a 3% share of the total beer marketplace in Texas. While these businesses serve as incredibly outsized sources for economic impact, jobs, and industrial revitalization, there’s no denying that 3% is a sliver of the overall beer industry pie. Meanwhile, a disproportionate amount of the nation’s largest beer wholesalers call Texas home. Protected from competition and fueled by consolidation, these wholesalers hold duopolistic control of nearly every Texas market, and monopolistic control of individual brewery rights inside of those territories.

It’s illegal for a brewery to sell its territory rights to a distributor in Texas. Instead, all of the brand equity a brewery builds must be given away for free to a middleman that now holds exclusive distribution rights for the life of the business unless extraordinary cause for termination can be demonstrated. Meanwhile, distributors are free to profit from the sale and exchange of brewery rights with one another if they decide its in their own best interest to do so.

Top Distributors for Political Contributions. 2013-2016. Courtesy of the Texas Tribune.

You may ask yourself why Texas beer wholesalers spend so much time fervently opposing positive craft brewery legislation (not to mention pushing insidious anti-craft legislation and misinformation of their own), given Texas craft beer’s growing, but still disproportionally small, market share. The answer is clear. When beer wholesalers lobby against common sense, consumer-friendly legislation that will lead to more jobs, tourism, and economic impact for Texas and its craft beer industry, maintaining unparalleled economic protectionism is the chief motivation.

The Texas Alcoholic Beverage Code was largely crafted in a time when a few powerful breweries (now owned internationally) could exercise control over mom-and-pop retailers and bootstrap wholesalers with small territories and limited portfolios caught in the middle.

Today, these same laws have become a protection racket to preserve the multigenerational wealth of a small handful of politically connected families in this state. Meanwhile, hundreds of persevering craft breweries operate under some of the most restrictive laws in the country in a time where consolidation has led to two effective choices for wholesale partners in each market.

Craft breweries want the Three-Tier System to work for everyone—not just wealthy wholesalers. It’s in the Texas Legislature’s power to ensure that a more equitable, prosperous path forward begins in 2019. We need passionate craft beer enthusiasts across Texas to join the cause.