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Texas craft breweries in for a fight

Texas: House tightens reins on Texas breweries

Source: Houston Chronicle

By Ronnie Crocker

May 6, 2017

The Texas House on Saturday voted overwhelming to place new constraints on craft breweries that grow beyond a set size or become acquired by a larger beer company.

Supporters of House Bill 3287 also fought back efforts to amend the legislation to give craft brewers the right to sell some beer on site for consumers to take home – something the smaller brewers have tried to secure for years.

HB 3287, blasted as anti-competitive by critics, is opposed by the Texas Craft Brewers Guild and Anheuser-Busch InBev as well as pro-business groups and a conservative Texas think tank.

“Now we prepare for the Senate battle,” guild executive director Charles Vallhonrat said after the vote.

A 2013 package of laws gave breweries that produce less than 225,000 barrels of beer annually to sell up to 5,000 barrels directly to customers, who must drink the beer in the taproom before they leave.

On-site sales

As originally written, House Bill 3287 would have extended the prohibition against on-site sales to any brewery that is acquired by another company that collectively exceeds that limit.

That group includes Houston’s Karbach Brewing Co., acquired last fall by A-B InBev, which makes many of millions of barrels of Budweiser and other products across the globe.

A revision to the bill allows Karbach and the other larger breweries to continue to operate taprooms, but it would force them to sell their beer to a distributor and then buy it back for sale to the public.

The brewers say the bill would discourage investors and will hurt their ability to grow.

The only beneficiary, they say, are the distributors who already exert near-total control over how beer gets from producers to retailers.

Two other amendments that failed to pass targeted the wholesalers directly. One would have forced distributors, once they bought the beer, to take it to a warehouse before delivering it back to the brewery.

The other amendment would have forbidden distributors who merely collect their payment without touching the beer from charging more than an administrative fee.

‘Hurts no one’

The sponsor of the bill, state Rep. Craig Goldman, R-Fort Worth, opened the discussion on the House floor by asserting that his proposal actually would save craft breweries by offering protection from large multinational companies that might buy Texas breweries in the future.

“This bill hurts no one,” he said, neither craft brewers nor consumers.

Goldman also accused the Texas Craft Brewers Guild of spreading misleading information – a charge that Vallhonrat, the head of the guild, vigorously denied.

Vallhonrat called the accusations “misplaced and inaccurate.”

Rep. Jason Isaac, R-Dripping Springs, introduced the amendment that would have allowed brewers to sell some beer for off-premise consumption. He said his amendment would put brewers on par with Texas wineries and distilleries.

Goldman objected, and that amendment also was soundly defeated.

AB-InBev to buy Wicked Weed

From Chris Furnari – Brewbound

Anheuser-Busch InBev is making its first U.S. craft brewery purchase of 2017, today announcing the acquisition of North Carolina’s Wicked Weed Brewing.

Specific financial terms of the transaction were not disclosed and the deal is subject to regulatory approval. Recall that last year, the U.S. Department of Justice promised to “carefully scrutinize any future craft acquisitions” by A-B.

“We have chosen to partner with The High End to position ourselves to make Wicked Weed what we imagined it could be when we first sat at a craft beer bar and talked about opening a brewery,” co-founder Walt Dickinson said via a press release. “As a brewer, giving our team more resources to continue innovating our portfolio and the ability to reach more craft drinkers, allows us to keep putting the beer and the people first.”

Wicked Weed, based in the popular craft beer-soaked mecca of Asheville, North Carolina, is the 10th U.S. craft brewery to sell to Anheuser-Busch InBev since 2011. It joins Goose Island (Chicago), Blue Point Brewing (New York), 10 Barrel Brewing (Oregon), Elysian Brewing (Seattle), Golden Road (Los Angeles), Breckenridge Brewery (Colorado), Four Peaks Brewing (Arizona), Devils Backbone (Virginia) and Karbach Brewing (Texas), in A-B’s craft and import focused “High End” portfolio.

Wicked Weed currently produces beer out of four breweries. It’s fourth facility, built last year, is located on 17 acres in South Asheville and spans 57,000 sq. ft.. It is entirely devoted to the production of sour, farmhouse and wild-fermented beers.

The company opened its third production space, a 40,000 sq. ft. brewery that features a 50-barrel brewhouse, in July 2015.

Read the full article here

 

Matthew McLaughlin, Esq. Awarded 2017 Brewers Association F.X. Matt Defense of the Craft Brewing Industry Award

Craft Beer Attorney Coalition member, Matthew McLaughlin, Esq. of McLaughlin, PC and the Mississippi Brewers Guild, was awarded the 2017 Brewers Association F.X. Matt Defense of the Craft Brewing Industry Award at the annual Craft Brewers Conference that took place April 11th-13th in Washington, D.C..

This award is named for the late F.X. Matt, president of the F.X. Matt Brewing Co. in Utica, N.Y., from 1980-1989, and a tireless and outspoken champion for the small brewing industry. Nominations are open to individuals who have given aid and support to the causes of small, independent brewers, and by doing so have supported the Brewers Association’s goal of vigorously defending the craft beer industry.

Matthew serves as General Counsel for the Mississippi Brewers Guild and was instrumental in helping draft a bill to update state laws that would allow direct-to-consumer sales for small brewers among other items in the bill language.

This is the second member of the CBAC that has been awarded this prestigious BA award. In 2015, Brook Bristow of Bristow Beverage Law and the South Carolina Brewers Guild also received the F.X. Matt Defense of the Craft Brewing Industry Award.

The Craft Beer Attorney Coalition is a member-based, non-profit organization that has been developed to advance the professionalism of the craft beer industry’s legal representatives.  Our members dedicate themselves to the legal world of craft beer with their commitment to industry-specific education training and pro bono community services to existing breweries and breweries-in-planning nationwide.  http://craftbeerattorneycoalition.org/

Currently, we have members serving the following states:

  • California – Candace Moon, Esq.
  • Colorado – Candace Moon, Esq.
  • Georgia – Taylor Harper, Esq.
  • Minnesota – Jeffrey O’Brien, Esq.
  • Mississippi – Matthew McLaughlin, Esq.
  • North Carolina – John Szymankiewicz, Esq.
  • Ohio – Adam Armstrong, Esq.
  • South Carolina – Brook Bristow, Esq.
  • Tennessee – Matthew McLaughlin, Esq.
  • Texas – Angel Tomasino, Esq.

 

 

 

A-B Disapproves MegaMerger in Southeast 

Source: Beer Business Daily

April 6th

“‘Three A-B houses in the Southeast are joining forces to form a 35 million case red network operation in what is being described as a mega-merger,’ we reported in early February.

Recall the trio looking to team up included R.A. Jeffreys in North Carolina; Southern Eagle in Georgia and South Carolina; and Crown Beverages in South Carolina.

But word has come down that, after their due diligence, A-B disapproved the transaction Monday.

A source close to the matter walked BBD through it.

WHY DENY? A-B has encouraged voluntary consolidation in their network. (There’s actually a consolidation guide; all wholesaler have a copy.)

But there are limits to the benefits of consolidation. In this case — and these things are evaluated on a case-by-case basis — bottom line: the transaction would have involved large, complicated territories and wholesalers who are already stretched to their limits over the past decade’s-worth of consolidation.

The would-be merged wholesalers were not expected to be able to fulfill the service element expected under A-B’s equity agreement. (Indeed, one part of the merger’s plan was to add only one EAM [Equity Agreement Manager] who would cover the territory via personal plane.)

By now, we understand, both sides have filed suit.

MORE WHY? As we understand from the informed source, A-B had been working with the three wholesalers to understand the proposed transaction. Diligence included interviews with the three wholesalers’ principals to fact-gather and understand effects.

A-B had expressed concerns from the beginning, but became increasingly concerned about the complexity and implications of the proposed merger.

TOO LARGE? With this would-be monolith, you’re looking at basically 500 miles stretching from the southernmost part of Georgia all the way up to North Carolina. It includes major cities like Charleston, and Raleigh, as well as rural markets.

The combined territories would span three states (the Carolinas and Georgia). That also means three sets of regulations, state pricing, etc. AKA lots of complexity.

STRETCHED TO THE LIMIT? Southern Eagle is the southernmost piece.  RA is the northernmost North Carolina piece and Crown is in the middle. Southern Eagle and RA are the two big wholesalers, and each has grown significantly through consolidation in the last 10 years.

How significantly? In 2007, both Southern Eagle and RA Jeffreys added five territories each. In fact, the two of them combined have gone from 5 million cases in 2007 to 28 million today.

We understand that when the wholesalers submitted their proposal, they proposed one EAM would cover the territory with his personal plane.

So… A-B denied approval. Also:

THEY’VE FILED A LAWSUIT FOR DECLARATORY JUDGEMENT IN NC. They have no interest in litigating, we hear, but to protect themselves, A-B filed a lawsuit for declaratory judgment in federal court in North Carolina.

And the other side appears to be litigating, too, natch.”

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Senate Bill 85 Passes the House

Today, the House voted 147-14 to approve Senate Bill 85.  Now, the bill has to go back to the Senate for a vote, because a House committee amended the bill to offer similar privileges to distilleries (the original Senate version focused only on breweries).  There shouldn’t be an issue in the Senate, which means we might have a signed bill this week!

Wal-Mart Sued Over ‘Craft’ Labeling On Beer Collaboration

Wal-Mart Sued Over ‘Craft’ Labeling On Beer Collaboration

Source: Law360

By Kat Greene

February 14, 2017

Wal-Mart Stores Inc. has been accused of marketing and pricing a mass-produced beer as though it were a small-batch craft product, according to a proposed class action in Ohio that targets the retail giant’s collaboration with a supposedly small supplier that isn’t really small at all.

Ohio beer shopper Matthew Adam said he bought a 12-pack of beer that was packaged to look like, and priced to sell like, the beer from other small beer makers. The beer was from a line Wal-Mart is selling in a collaboration with Trouble Brewing, a company that purports to fit the “craft beer” name.

But Trouble Brewing isn’t small at all, Adam said in the proposed class action filed Feb. 10. Rather, it’s a unit of a much larger conglomerate that mass-produces beers, meaning it shouldn’t be sold for a premium craft price near the other premium craft brews, he said.

“He suffered an ‘injury in fact’ by paying for something he believed was genuinely ‘craft beer,’ when it was not,” according to the complaint. “Essentially, the craft beer is not worth the purchase price paid.”

The suit accuses Wal-Mart of fraud and violating the Ohio Consumer Sales Practices Act, among other claims.

Adam said that when he bought the Trouble Brewing variety pack, he’d assumed he was paying a premium because the beer was craft. To be called craft, according to the Brewers Association, a brewery must make fewer than 6 million barrels annually and be less than 25 percent owned by a mass producer.

Wal-Mart has been selling four different styles of its own line of beer since last year as part of a collaboration with Trouble Brewing, according to the suit. Trouble Brewing, Adam said, doesn’t really exist. Rather, its official name when it applied for a brewing license was Winery Exchange Inc., which has since changed to WX Brands.

That company’s brewery address isn’t for WX Brands, but rather, for Genesee Brewing Co., a mass producer in Rochester, New York, according to the suit. Genesee is in turn owned by an even larger company in Costa Rica, Adam said.

He seeks to represent a class of consumers who paid the premium price of craft beer for what ultimately is just mass-produced beer, according to the complaint.

Wal-Mart said in a statement that the company hasn’t yet been served with the complaint, but that it intends to defend itself against the allegations.

“We hold our suppliers to high standards and are committed to providing our customers the quality products they expect,” the company said.

The plaintiffs are represented by Brian T. Giles and Bryce Lenox of Giles Lenox.

Counsel information for Wal-Mart couldn’t be immediately determined.

The case is Matthew Adam v. Wal-Mart Stores Inc., case number A 1700827, in the Court of Common Pleas, Hamilton County, Ohio.

 

Beer economist: For somebody to grow, somebody has to shrink

The article below and, more particularly, the comments therein by Bart Watson  – economist for the Brewers Association – serve to emphasize the importance of allowing direct-to-consumer sales by breweries.  If, by law, a brewery’s sole revenue stream is distribution, i.e., is prohibited from direct-to-consumer sales, it is going to have a difficult time surviving.  This has been true for some time now, but with current market trends and other states tweaking their laws in favor of craft breweries, the passage of SB85 becomes more and more vital.

Beer economist: For somebody to grow, somebody has to shrink

Source: Cincinnati.com

Shauna Steigerwald

Feb. 8, 2017

“There’s still growth out there, but it’s harder to find.”

That’s the message about the craft beer market that Bart Watson, chief economist for the Brewers Association, conveyed to an assembled crowd of brewing industry professionals at the Duke Energy Convention Center Wednesday morning.

Watson, whose organization is a national trade association representing small, independent craft brewers in the U.S., spoke as part of the third annual Ohio Craft Brewers Association (OCBA) Conference. The event had some 450 registered participants this year.

Nationally, craft beer’s growth rate is slowing, but the industry is still growing. Watson said. Some of the slowdown can be attributed to craft beer’s larger base: Consider that there are now more than 5,000 breweries operating in the country, more than at any time in U.S. history, and up from about 2,000 just five years ago. He expects to see the number of craft breweries continue to grow to as many as 8,000 or even 10,000 in the near term. Once closings are factored in, the U.S. currently nets an average of 2.1 new breweries every day, he said.

Being in the middle of states in terms of its number of craft breweries, Ohio in particular still has plenty of room for growth, Watson figures. Mary MacDonald, OCBA’s executive director, said the state ended 2016 with 194 active breweries, having grown by 44 last year. Expect to see that number increase again this year. Ohio currently has 236 licenses, meaning more than 40 new ones are already in the works.

The industry has big economic implications for the state: Ohio craft breweries have a $700 million impact on the state’s economy and provide nearly 4,000 full-time equivalent jobs, Watson said.

As for where Ohio’s growth could be headed, he points to Michigan’s 445 active licenses as a reasonable benchmark. Kentucky, by the way, has 60; Indiana, 163.

It’s also important to considering not just the number of breweries but also how much – or rather, how little – they are producing.

“The vast majority of these breweries are really, really small,” Watson said. “They’re operating more like a restaurant or a bar than a production facility.”

By his thinking, an occasional brewery closure, such as Ei8ht Ball’s recently announced local exit, is not cause for alarm but a sign of a more mature industry with increased competition.

“If 500 close, I wouldn’t blink an eye,” because twice as many would likely open in the same timeframe, he said.

He does expect to see changes in the industry, though. Before his speech, he said that beer drinkers shouldn’t expect to see breweries grow at the rate of local breakouts MadTree or Rhinegeist, which he singled out as anomalies in the industry to begin with.

“The era of moving from a microbrewery to a multi-state, regional is not dead, but it’s going to be very infrequent,” Watson said. “It’s going to be harder for everyone to grow in an environment like this. For somebody to grow, somebody has to shrink.”

Also, nearly 80 percent of drinking-age U.S. adults already live within 10 miles of a brewery, so it’s no longer enough to just find a new place to open one. Most likely there will already be competition when a new brewery enters a market.

So he talks about differentiation a lot now. “Now, I think you’re going to have to do something different,” he said. That might include things like launching beers that stand out in a crowded market or targeting underserved segments of the market, such as female beer drinkers, he said. “I think the next phase is going to be the interesting one.”