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Cover 03/20/2013

Winners and losers emerge in beer battles at the Texas Lege

Photo: Photos by Justin Parr, License: N/A

Photos by Justin Parr

Scott Metzger, owner of Freetail Brewing Co. and one of the craft brewing leaders

Photo: , License: N/A

"With the new laws, there would be incentive to ramp up production."

There's not much room to add equipment like additional fermentation or serving vessels at Freetail's popular North Side hang out for small-batch beers and brick-oven pizzas, but Metzger says the search is now on for a second location in the San Antonio area. That would allow for a new place with increased production, bottling and deliveries.

"All options are open," he says of what area of the city he has in mind.

If a brewpub does reach its 10,000-barrel a year cap, Metzger says they will have to make a business decision on whether it's worth getting a microbrewery license. The rub is that in most cities, including San Antonio, microbreweries are considered manufacturers and have to set up in areas zoned for light industrial activity, excluding them from the visible retail spaces most brewpubs need to succeed.

The primary thing brewpubs gave up in the compromise bills was the ability to sell beer from other breweries on their guest taps if they chose to self-distribute. Blue Star Brewing Co., the city's oldest surviving brewpub, only sells their house-made brews, and therefore wouldn't feel the pinch.

Metzger says Freetail, which usually keeps several Texas microbrewery guest taps, makes only a little money off of other breweries' beer. Losing that right, however, could have an impact on the future of the annual RealTail festival, which includes rare beers from Blanco's Real Ale Brewing Co.

Wholesale beer distributors also largely won in the compromise bills. The ability for brewpubs to grow and distribute means more breweries will likely hunt for a distributor to handle sales and deliveries, something most brewpubs don't have time for if they are reaching for more than a handful of stores and bars as customers.

Limited self-distribution, rather than hurting wholesalers, actually lets them sit back and watch while brewpubs grow. Eventually, they can pick up the rights to sell the beer after a market is established.

And the wholesalers will benefit at no cost.

Perhaps the biggest win for distributors is that Carona's Senate Bill 639, even after softening during negotiations, gives wholesalers distribution rights for nothing. In fact, the law prohibits breweries from selling their distribution rights to a wholesaler. The wholesaler, however, will own those distribution rights once a deal is struck with the brewer and can resell them. Some in the beer business say they've already started inserting back-door clauses in all their contracts with distributors to get out without a protracted legal battle if the distributor doesn't represent the brand well.

The pro-distributor bill SB 639, considered a "poison pill" by some to force brewers to negotiate with wholesalers, was introduced by Carona. And only through Carona's support could Sen. Ken Eltife's pro-small brewery bills make it out of committee.

Elected state officials have received about $7 million from beer wholesaler interests. Carona, as head of the Senate committee through which most alcohol-related bills travel, received $44,500 in the last decade from the Wholesale Beer Distributors of Texas political action committee. His second largest contributor and largest individual funder at $69,500, is Barry G. Andrews of Andrews Distributing in Dallas, according to a Texas Tribune analysis of filings with the Texas Ethics Commission. Small brewery interests have given just $18,000 and only in the most recent election cycle.

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