Craft Breweries Seeing New Doors Open

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Over a shot of whiskey in a New York City bar, Josh Horowitz and Zack Perry decided to make craft beer.

“Two guys walked into a bar and walked out with a brewery,” said Perry, who moved to Texas to begin his venture with Horowitz.

This spring, Infamous Brewing, based in Austin, made its first deliveries to retailers, and it plans to produce up to 2,000 barrels in its first year.

The efforts of Infamous Brewing and other craft brewers to gain a foothold in the Texas market received a boost this year with the biggest legislative overhaul the industry has seen in 20 years.

Lawmakers this year approved legislation that allows small production breweries to sell their products directly to customers to drink in the brewery’s tasting room. The old law prohibited any direct sales by a production brewery, requiring samples to be free. Now these breweries can sell up to 5,000 barrels at in-house bars and beer gardens. Additionally, brew pubs, which had been restricted to selling their beers only at the brew pub, can now sell to distributors.

“In the old model, there were significant start-up costs because you had to hit certain production levels,” said Charles Vallhonrat, executive director of the Texas Craft Brewers Guild. But the new legislation allows brewers to sustain themselves on a smaller level, he said, "by just selling on your premises and using those sales to grow.”

Vallhonrat said he expected that the new legislation would fuel tremendous growth in the industry.

The new state laws also leave room for more creativity in the recipe, said Josh Haley, founder of Texian Brewing Company in Richmond, near Houston. He makes a watermelon wheat beer that customers can now pay to sample, and Haley can afford to adjust the brew to fit the feedback for his next barrel.

“We’ll be able to have our market share dictate what we brew,” Haley said.

Craft brewers have battled for years to loosen restrictions on distribution.

“The old-style distribution has served the big brands,” Haley said.

Rick Donley, president of the Beer Alliance of Texas, which represents wholesale distributors, spoke out against changes to the system in 2011. But this session, he led the charge to reform craft brewing license regulations, citing its strong economic potential.

“Craft brewing could end up being 10 percent of the overall marketplace,” Donley said. From 2011 to 2013, craft brew permits in Texas, including brewpubs and production breweries, have grown from 70 to 115, said Carolyn Beck, a spokeswoman for the Texas Alcoholic Beverage Commission.

Small brewers and their supporters faced a mid-session challenge by another lobbyist for distributors, the Wholesale Beer Distributors of Texas, which threatened to block the bills.

State Sen. John Carona, R-Dallas, set up a timetable for stakeholders to make a deal. The Wholesale Beer Distributors wanted to work with craft brewers, “but not give away the store,” said Randall Yarbrough, a consultant for the lobbying group. 

Legislation by Carona said that manufacturers could not sell their distribution rights, but the language was softened in negotiations to only prohibit cash payments for territorial distribution rights.

“The talks were certainly contentious,” said Brock Wagner, owner of Saint Arnold Brewing Company in Houston. He said the compromise, while successful, showed the institutional pressures at work.

But Horowitz and Perry see the deal setting up big things for their small tasting room overlooking Lady Bird Lake in Austin.

“We may build a beer garden,” Horowitz said.