Brew News

Senfronia Thompson Introduces Bill to Reduce Craft Beer Distribution

Small breweries could suffer greatly if a piece of legislation proposed by a state representative from Houston passes into law.

By Katharine Shilcutt March 17, 2015

Small breweries could be in jeopardy if a proposed bill makes it through the Texas legislature.

Image: Shutterstock

Currently, if you're a small brewery in Texas—that is, if you produce fewer than 125,000 barrels of beer a year—you are allowed to sell your beer directly to consumers. You can skip the middle man, a beer distributor like Silver Eagle or Ben E. Keith, and truck your coffee porter or rye pale ale directly to a store or restaurant once you've put it into kegs, cans, or bottles. For a small business such as a microbrewery, being able to cut out the middle man—also known as circumventing the three-tier alcohol distribution system that's been in place in Texas since Prohibition ended—means important cost savings that can be funneled back into your business. More importantly, it means having direct control of your product from beginning to end; you get to decide where your product is sold, how much it's sold for, and how much of a profit you make. Capitalism—ain't it grand?

All of this is possible thanks to the hard-fought passage of a series of laws in 2013 that sought to reform an antiquated system that forced beer to be sold through distributors. Now here's the thing: distributors aren't bad. If you want to make and sell a really high volume of beer, distributors can be a partner in making that happen on a large scale thanks to a huge network of accounts and big, refrigerated trucks and people whose careers are solely devoted to buying your beer, shipping it all over creation on your behalf, and making a tidy little profit while they do.

What's bad is a system that forces a business to go this route—which often doesn't make financial sense for a microbrewery—if they want to brew and sell smaller quantities of beer in Texas. What's worse is when distributors contribute big money to politicians who introduce bills aimed at dismantling those 2013 beer reform laws—the same laws that saw the middle men lose a good chunk of potential profit when small breweries were suddenly allowed to self-distribute 40,000 barrels of beer per year instead of only 5,000 barrels. (Coincidentally, another three-tier system that currently forces manufacturers to go through a middle man is also being fought in Texas: the system which prevents Tesla from selling its cars directly to consumers.)

Enter Texas state representative Senfronia Thompson (D), who represents District 141, which comprises areas of Houston like Greenspoint, IAH, Trinity Gardens, Homestead, and parts of Humble, in the Texas House of Representatives. Thompson has served in the state legislature since 1972 and would seem to have no real connection to breweries whatsoever except for the fact that she's consistently received large donations from organizations that lobby on behalf of Texas beer distributors. According to the National Institute on Money and State Politics, a nonpartisan group that tracks political contributions, Thompson has received a total of $34,000 from the Beer Alliance of Texas since 2002, and since 1998, she's received a total of $20,050 from a lobbying group called Licensed Beverage Distributors. She's also received $15,670 during that same timeframe from Wholesale Beer Distributors of Texas, whose raison d'etre is self-evident. These contributions constitute three of her largest supporters to date, and the list goes on.

Last Friday, Rep. Thompson introduced House Bill 3389, which would essentially reduce the amount of beer a small brewery could sell to its consumers from 40,000 barrels per year to only 5,000. This would be greatly detrimental to microbreweries as well as its consumers—who may find themselves having to pay more for a pint at the pub or who could see their favorite breweries go under altogether—but could also greatly benefit beer distributors who saw potential revenues lost when those beer laws passed in 2013.

"It's pretty disheartening, and this is way out of the norm for the national trends," says Rassul Zarinfar, owner of Houston microbrewery Buffalo Bayou Brewing Company. "5,000 barrels is less than we'll self-distribute in 2015, so this is absolutely changing the rules in the middle of the game."

We reached out to Rep. Thompson for comment on why she introduced this bill—when, as far as we know, John Q. Public has no interest in seeing small businesses handicapped for no reason—and whether or not this bill has anything to do with the generous funding she's received from big beer distributors over the years. We will update this post if/when Thompson replies.

In the meantime, Open the Taps—a consumer group that lobbied for the original beer law reforms to be passed in 2013—released this statement on the proposed piece of legislation: "OTT is disappointed with Representative Thompson’s attempt to stunt the growth of the craft beer industry in Texas. This deeply flawed legislation would reverse the progress we have made in Texas and punish small businesses in the process."

Open the Taps is not alone in fighting back against the new bill. "The [Texas] Craft Brewers Guild is lobbying hard against it," reports Zarinfar, whose brewery is one of several local breweries that count themselves as members of the guild, including craft beer giants Saint Arnold and Karbach. "This is definitely outside of the spirit of the negotiations that we had in the last legislative session."

"It will hurt our business and force us to change our model, and it will absolutely cripple and destroy some other small breweries," warns Zarinfar of the new bill. "And that's just the stuff we can see right away. There will be many negative unintended consequences to this legislation that will restrict investment, hamper creativity, and limit consumers' choice in the long run. I'm not clear on what positive outcomes the legislation is trying to achieve because from my vantage point I can't see any."


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