Pour me another: Overturned Texas law may mean lower craft brew prices

(Dallas Business Journal) -- The overturning of a state law may mean consumers pay less for their craft brews.

Last week, District Court Judge Karin Crump sided with Dallas-based Peticolas Brewing Co., Granbury’s Revolver Brewing and Austin-based Live Oak Brewing Co. in a lawsuit against Senate Bill 639, passed in 2013. Under the bill, craft breweries were required to pay to use distribution companies to get their suds into restaurants or beer drinkers’ hands.

Part of the bill also required craft breweries to sell their beer in any part of the state for the same amount, leading the breweries to price their suds as high as possible.

“The question was, don’t you ever see a Budweiser or Coors truck deliver? So why would you restrict craft beers local to Texas?” said Craig Weichmann, founder of Fort Worth-based Weichmann & Associates, an investment banking consultancy specializing in restaurants.

“The issue in (the craft breweries’) minds was the law was blocking commerce by restricting the way they did business,” he added.

Crump’s decision means craft breweries like Peticolas and Revolver can use their own trucks to distribute products, and skip the costs of using distributors. They can also decide how to price their beers in different markets.

Breweries are then able to pass the savings on to consumers.

“When you increase the distribution costs, who’s paying? The local customer,” Weichmann said. “It begins to push the price out of what consumers would be willing to pay. It restricts trade because it imposes an additional cost factor.”

Distribution savings will also help breweries expand faster, said Sam Littlejohn, assistant vice president with retail broker Retail Solutions.

“This will allow these breweries to have more money to invest in new staff and additional equipment so they can grow their business,” he added.

But that’s not to say breweries may not opt to use distributing companies in the future. Peticolas currently delivers kegs to eateries and bars in the North Texas area, but if it chose to expand into packaged products or offer its brews in other markets, it might use a distributor.

“For me, where that would really fit in is in connection with entering new market segments. I’m not in bottles and cans, and off-premise sales are a much bigger part of the beer market than on-premise sales,” said Michael Peticolas, owner and founder of Peticolas Brewing.

“There is an avenue where I could sign with a distributor to distribute my packaged product,” Peticolas added. “But where I stand now, I don’t think my brewery has the resources to compete … when it comes to packaged goods.”

For now, distributors like Dallas’ Ben E. Keith Beverages and Austin-based Brown Distributing Co. are likely to see little impact. As of March 2015, small and independent craft brewers made up just 12 percent market share of the entire U.S. beer industry.

“The distributors for the most part, are going to go back to the way things were (before) 2013,” said Paul Salyards, senior manager with innovation consulting firm Kalypso. “So I think there’s a small financial impact to them, but it’s really just returning to where they were.”

Ben E. Keith did not return calls for comment.

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Copyright 2016 WFAA


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