We May Have Just Over-Regulated Brewing Beer

It won’t surprise you that breweries make a lot of money. Beer, wine, and spirits are all great businesses to get into, but they aren’t for everyone. They’re not very family friendly, and the government oversight that regulates what they can and can’t sell, and how exactly they should operate, is probably even more extreme than you might imagine. That hasn’t stopped the new Texas House Bill 3287 from requiring that all breweries that craft greater than 225,000 barrels annually use an outside distributor for beer delivery.

While that might sound great–you know, sort of like it has the interests of small business in mind–there’s more to it than meets the eye. Regulations that arose out of Prohibition determined that there needed to be a separation between the brewers, distributors, and retailers. This new law guarantees that the separation between brewer and retailer, for example, remains in place. But it does a lot more than that. Because of the new law, a brewer needs to pony up the extra dough to use a distributor for beer delivered to its own facilities. That means extra costs that no company would want to pay.

While the new law also seems guaranteed to help smaller businesses thrive–it is unusual for newer craft breweries to pass that 225,000 barrel threshold–it might actually deter investors from funneling the usual cash into aging businesses who now have an additional expense that seems unreasonable. Then again, the bigger the business is, the less the law would impact a bottom line. The big names we’ve all heard of won’t even notice the difference, but a “smaller” big business that hasn’t yet made it to the corporate playing field definitely needs to brace for the perhaps unfair impact of the law. Beer lawyers will be on their toes battling the fallout for quite a while.

Even though the Texas bill will probably have undesired consequences felt by everyone, it only arose after an older 2013 bill gave breweries permission to sell 5,000 barrels or less on site. If you’ve been reading closely, that means that the Prohibition-era regulatory hurdle that keeps distance between brewer, distributor, and retailer was broken. By selling on site, the brewery essentially transformed into the retailer. This dent in the aging laws irked a few people in and out of government, and so House Bill 3287 was born.

Part of the reason behind the blowback was due to the unintended consequences of the last law. When the 2013 bill took effect, larger national breweries started to buy up the smaller Texas breweries in hopes of turning a larger profit by skipping the need for that distributor. Even though the difference was only 5,000 barrels a brewery, the profits add up when you buy a number of them.

Proponents of the law need to ask the question: who does the law really stand to benefit the most? Chances are you’ll come to the same conclusion as any brewery affected by the new law and not yet owned by a huge national beer company. House Bill 3287 may be more about keeping distribution systems up and running–and profitable–more than keeping distance between systems of operation in the beer brewing business.

Melissa Thompson writes about a wide range of topics, revealing interesting things we didn’t know before. She is a freelance USA Today producer, and a Technorati contributor.