AUSTIN — Texas craft brewers will need more than a delicious pale ale to keep growing their business.
They’ll have to start paying politicians, too.
That’s one of the lessons reinforced by this year’s legislative session when the state’s largest beer distributors dumped more than a million dollars into lobbying and campaign contributions for a law requiring medium-size breweries to pay them money.
Craft brewers that produce more than 225,000 barrels per year must now pay a distributor to deliver it — even if the beer is being sold at the brewery’s own tap room.
“You’re forced into a distributor relationship that you may not want to be in, and it discourages you from being a successful business,” said Chip McElroy, the president of Austin’s Live Oak Brewing. “I don’t see the state’s interest.”
An analysis of campaign contributions by The Texas Monitor may provide part of the answer.
During the 85th legislative session, beer distributors and the families who own them spent at least $1.1 million on lobbying for House Bill 3287. The Texas Craft Brewers Guild, in comparison, paid at least $125,000 for their lobbyists to push back against passage of the law.
The contrast is even more stark in an analysis of campaign contributions.
Over the last 10 years, Texas lawmakers have accepted upwards of $8.8 million in campaign contributions from both distributors and breweries. Almost all of that, at least $8.5 million, came from distributors.
The largest of those is John Nau, president and CEO of Silver Eagle Distributors, the nation’s largest distributor for Anheuser-Busch. He and his family donated nearly $2 million to Texas lawmakers since 2007.
The nine members of the House Licensing and Administrative Procedures Committee, which handles legislation relating to the beer industry, received at least $588,000 of that total, with each member receiving about $65,000, on average.
During the same time period, Austin’s Jester King Brewery paid lawmakers $1,500. Austin Beerworks managed $4,500.
To fight back, brewers need to be paying politicians as well as lobbyists, said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild.
“This legislative session clearly pointed out that we need to be doing both,” Vallhonrat said.
That’s why the guild is about to launch a new political action committee to raise money and pay politicians to see things their way, he said.
“Obviously, they are throwing tremendous amounts of money at this. Can we ever match that? No.” Vallhonrat said. “That’s not to say we’re not going to lobby and start campaign contributions as well.”
Distributors and defenders of the law claim that it will protect small breweries from buyouts by multinational companies like Anheuser-Busch InBev and MillerCoors, which only last year bought Houston’s Karbach Brewery and Granbury’s Revolver Brewing, respectively.
But the law also exempted those exact breweries from the 225,000-barrel cap.
The Texas Monitor contacted Tom Spilman and Keith Strama of Wholesale Beer Distributors and Rick Donley, president of the Beer Alliance of Texas.
None responded to requests for comment.
Few breweries in Texas will be immediately impacted by the legislation, but Vallhonrat said the law will have a chilling effect on investors. When they see that aspiring breweries must also contend with costly state regulations, Vallhonrat said, they’ll be more likely to take their money someplace else.
At the moment, the only Texas brewery that would be immediately affected by the law is Oskar Blues, which moved here from Colorado primarily because they could open a tap room.
“They decided to open up here, and now [the legislature] has taken away part of the value of that, for no particular reason,” McElroy said.
“They have to pay a distributor to move their beer from their brewery to their tap room,” he said. “The distributor has not touched that beer, but they have to be paid for it.”
Like the vast majority of craft breweries, McElroy’s Live Oak Brewing is far from the 225,000-barrel cap. The brewery produces just 17,000 barrels a year.
But the long-term ramifications are still there, he said.
“You want to sell a lot of beer,” he said. “It discourages you from being a successful business.”
As far as political money is concerned, McElroy doesn’t see brewers successfully competing with distributors.
“I think our best place to stay is in this reasonable argument arena,” he said. “I think we win there. I don’t know how we can beat them in spending money.”