The Three-Tier Texas Beer Regulation System: House Bill 3287
Recently, clashes in the Texas Legislature have emerged involving the beer crafting industry and the distributors, one of Texas’s most powerful associations. The craft beer producers compete against each other as well as with other players in the industry, such as non-alcoholic beverages, wine, and liquor manufacturers. The controversy resulted from House Bill 3287, which supported the wholesale beer distributors under the three-tier system, regulating the production, distribution, and sale of alcoholic products. The small beer producers circumvent the three-tier system to increase their profit margins. Therefore, the wholesalers are fighting with the state after the court of appeal reversed the decision that had allowed them to be paid for their distribution rights. Besides the several laws regulating the beer industry in Texas, a three-tier system has been implemented to standardize the sale and distribution of alcoholic drinks.
The H.B 3287 for the Beer Distributors
According to the beer wholesalers, House Bill 3287 should be passed since it will play a key role in regulating the beer industry. The distributors should benefit from the bill since they play a significant role in marketing the beer products. The House Bill 3287 is anti-competitive and damaging to the taproom and targets to cap the success of craft brewers in Texas. The beer has been regarded as one of the most popular drinks amongst a larger part of the U.S. Consumers always enjoy a wide choice of malt and beer beverages. In recent years, there has been an expansion in the beer market to unforeseen levels, and this is due to the marketing role played by the beer distributors. Therefore, I would show the role played by the distributors and the contribution they have made in the beer industry. Additionally, the Texas Legislature has responded by creating an alcoholic code in 2013 and later in 2017 to accommodate the craft brewers while creating an orderly market for the alcoholic beverages (Marfa Public Radio, 2017).
Thus, to ensure the beer market remains orderly, passing the HB 3287 bill is crucial. The three-tier regulatory law would regulate the beer industry, and the distributors would gain from their work since they market the beer products. In addition, passing the bill would benefit the parties involved in the beer supply chain while still ensuring safety in the market. The Texas alcoholic codes are usually updated regularly to ensure safe production, distribution, and retail of malt beverages and, most importantly, guarantee customer the safety of the beverages. The passage of the House Bill 3287 would ensure that the limited exemptions safeguard the small craft brewers from transferring in case the business is acquired or merged by a larger manufacturer. The bill would allow the manufacturer to sell directly to consumers or retailers. However, I would suggest that the distributors be paid a royalty fee since they play a crucial role in marketing various beer brands.
Additionally, the law states that in case a small brewer is bought or relinquishes more than 25 percent operational controls and exceeds the 175, 000 barrels per annum, they would not be accorded the privileges by the law passed for the startup craft brewers (The Beer Alliance of Texas, 2017). The HB 3287 main goal is to create a level marketplace between the long-standing retailers and the craft brewers, providing equal treatment for all players in the market. I would support the bill since it does not prevent any out-of-sale or investor from entering the Texas beverage marketplace through the three-tier system. Lastly, to ensure that the bill passes, I would state that it does not affect the brewpubs in any case (The Beer Alliance of Texas, 2017). The House Bill 3287 is critical to ensure and maintain an orderly and regulated alcoholic beverage marketplace.
Defeating the H.B 3287 When Representing the Craft Brewers
The view of a craft brewer is that the bill should be defeated or changed since the wholesalers will be earning from work they have not done. To defeat the HB 3287 in the legislative house, I would maintain that the Bill would harm the beer industry. I would state that the House Bill 3287 is harmful, anticompetitive, and damaging that seeks to cap on the success of the craft breweries, especially after larger or multinational brewers have acquired them. Thus, this would hurt the beer industry’s value and leave no room for expansion for the Texas breweries (Brewers Association, 2017). To ensure that the HB 3287 does not pass, I would indicate that it would limit beer production at 175 000 barrels per year if they want to keep the taprooms open. Moreover, they are also supposed to pay the wholesalers and distributors under the tax on taproom sales. Essentially, it means that the wholesalers would be paid for each beer sold in the brewery’s taprooms even though the beer never left the brewery. The Bill, in its present state places the wholesalers or distributors as the current regulators of the existing and future rights of the Texas brewers. Furthermore, it is wrong for the wholesalers to regulate the rights of Texas craft brewery’s business that they have built from scratch (Brewers Association, 2017). Additionally, the bill is anti-competitive, thus jeopardizing the growth of the craft beer business and reducing the job creation rate. Therefore, I find it important to reject the passage of the H.B. 3287
Response to the Groups’ Arguments and Activities as a State Legislator
As a legislator, I would encourage both groups to meet and agree since this would benefit both parties. As much as the law may seem good, it has some unfavorable clauses, especially for the beer crafters. Thus, it would be unfair for the distributors to regulate the beer producers. Additionally, on the issue of the fee paid to wholesalers for any beer sold in the crafter’s taprooms, it would be unjust since the distributors would be paid for services they did not render (Brewers Association, 2017). The Beer Alliance of Texas supported the new law and insisted that the craft breweries should not have taprooms to sell beer to the public. Otherwise they would have to pay for every alcoholic drink sold. In cases of self-sell and distribute, the law should not limit the area of distribution or the number of barrels each crafter should produce since the move would affect competition, lowering the revenue and job creation (The Beer Alliance of Texas, 2017). Therefore, it is crucial for the parties involved, the distributors, wholesalers, and the producers, to agree instead of engaging in legal battles.
Texas State has adopted a three-tier system to regulate the sale and distribution of alcoholic products. The State keeps on updating their alcoholic beverage law in a bid to regulate and ensure fairness for the parties involved. The system indicates the roles of the three entities in the beer industry, including the retailers, brewers, and the distributors. The separation of these units plays a key role in tax collection. Despite the right intentions of the law, it is clear that some sections may harm the beer crafters. The law is likely to affect the businesses since it is reducing the amount of revenue collected from the sale of beer as it regulates the number of barrels produced by each crafter. However, as a legislator, I would advise both parties to seek a common ground for mutual benefit.
Brewers Association. (2017). Stand with Texas craft brewers and oppose House Bill 3287. Retrieved from https://www.brewersassociation.org/current-issues/stand-texas-craft-brewers-oppose-house-bill-3287/
Marfa Public Radio (2017). HB 3287 & How it could affect beer in Texas. Retrieved from https://marfapublicradio.org/blog/hb-3287-how-it-could-affect-beer-in-texas/
The Beer Alliance of Texas. (2017). Accommodating independent beer startups while preserving the state’s sound, effective three-tier regulatory system of alcoholic beverages. Understanding Legislative Revisions to the Texas Alcoholic Beverage Code by Passage of HB 3287. Retrieved from http://www.beeralliance.com/Beer-Alliance-of-Texas-Viewpoint-HB-3287.pdf