When this article was originally written for the Houston Press — September 1992 — the debate over combination microbreweries/pubs had reached a fever pitch, with the liquor distribution industry, the state government, the major institutional breweries, and the independent micro-brewer segment all taking sides. Not long after the article was published, the battle ended on the side of the fledgling brewpubs. In retrospect a decade later, it is worth noting that most of those initial startup brewpubs in Houston have now closed their doors.

BEER WARS: A revolution is brewing in the Texas Legislature
There is a rebellion going on. A rising number of beer drinkers from coast to coast are starting to ask for out-of-the-ordinary brews. Instead of lites and drys, they are reaching for porters, ales and stouts. Miller and Coors are bypassed in favor of little known brands such as Celis, Sierra Nevada and Anchor Steam. This is all part of a growing trend in support of small independent beermakers. It is also the very thing that scares the hell out of the liquor distribution industry.

These small American breweries — microbreweries — produce only a fraction of the amount that a beer giant such as Anheuser-Busch generates. The Federal Bureau of Alcohol, Tobacco and Firearms defines a microbrewery as producing 60,000 barrels (one barrel = 31 gallons) or less annually. By comparison, Anheuser-Busch shipped 83.3 million barrels in 1991.

The main goal for the microbreweries is purity. In an industry that uses corn malt and a variety of other adjuncts in order to cut costs and produce a line of generic beers, the smaller brewers have looked to their European ancestors. Their rallying cry is “reinheitsgebot,” referring to the German purity law of 1516. This law specifies that four ingredients, and only four, can be used in the production of beer: Water, malted barley, hops and yeast. For the master brewers, reinheitsgebot served not as a limitation but as a challenge.

Houston’s beer pubs serve as a weigh station for sampling the best of these microbrews, along with various imports. The larger pubs carry close to 100 varieties, either in bottle or on tap. Some carry a connoisseur’s line of single malted scotches as well. But there is one thing you won’t find in a single Texas bar. . . fresh, house-brewed beer. The Texas Legislature won’t permit it. Brewpubs are still illegal in the Lone Star State, even though over four-fifths of the other states have them. And this makes a lot of beer lovers mad as hell.

Brewpubs are small breweries that are allowed to sell directly to the consumer, usually in the form of a retail pub or restaurant. This allows the brewer to showcase fresh hand-crafted beers directly to the drinking public. States such as Washington and Oregon have become havens for these entrepreneurs. Oklahoma passed pro-brewery legislation in April, and both New Jersey and Hawaii are expected to have brewpubs legalized before the end of the year. In Texas, it is still a crime.

This is not for a lack of trying. The last attempt, the fourth to date, went before the State Legislature in April of last year. Despite all the planning, it ran afoul of the Texas Wholesale Beer Distributors. The point of conflict lies in the three-tier system, with the beer going from the brewery to the wholesaler and finally to the retailer where it is sold to the public. As currently on the books, a brewer cannot sell directly to the public under any circumstances.

“The problem goes back to when the brewing industry was destroyed by the federal government in the first place during prohibition,” said Tim Case, the bar manager at the Ale House. “What happened when they repealed prohibition — you’re still back in the heat of all the anti-trust legislation — and there probably was a justifiable fear that a few big brewers would buy the industry from top to bottom. So they introduced the so-called three-tier system.”

What the pro-pub brewers are looking for is an exemption passed through the State. This is not uncommon, if the special interest group has enough money to do the proper legal and political oiling. An example of this is the Sea Mammal Exemption Bill which passed through a special session of the State Legislature several years ago.

The problem arose when Anheuser-Busch bought Sea World Amusement Park in San Antonio. Under the triple-tier system, Sea World would be unable to sell beer to their customers. Enter State Representative Ron Wilson, the Chairman of the House Committee on Liquor Control. During a special session of the legislature, a law was passed that says that any brewer can openly sell beer to the public at any marine park it operates. The definition of a marine park is “an enclosed restricted access area of not less than 245 acres nor more than 255 acres in a county with a population of over 950,000...”

How convenient for Anheuser-Busch. Sadly, laws of this kind have not been passed in favor of the lowly brewpubs who, as a whole, are not a wealthy lot.

Those in favor of brewpubs argue that it will generate revenues from excise and sales taxes, stimulate capital investments ranging from $1,000,000 to $8,000,000, increase tourism as a destination attraction and create more jobs, both directly and indirectly. They further claim that it will stimulate restaurant growth, as well as promote national recognition and demand for Texas-made, specialty beers. It would also offer an alternative to imported beers, thus keeping the money in the state.

“You’re talking about starting a new industry,” said Case. “You’re talking about a taxable business and it can only increase revenue for Texas, because they pay tax just like anyone else manufacturing in the state. It will probably make a big boost in employment.”

Another law on the books is even more surprising. “There’s the Shiner exception,” said Case, “which says that if you are a small manufacturer, you can distribute yourself if you produce less than 70,000 gallons a year. If I opened up a microbrewery of about the same size as a brewpub operation, I could carry it down in my truck to Whole Foods anytime. And I haven’t heard the beer wholesalers screamin’ and yellin’ about the Shiner exception.”

Allan Dray, executive director of the Texas Association of Brewpubs & Microbreweries in Dallas, has been heavily involved in the attempts to bring Brewpubs to Texas. With the failure in the last Legislative session, and $40,000 spent in the process, Dray has expressed disappointment but has not given up yet. He described the experience as similar to putting your foot in the door and having it slammed shut. Current negotiations are going on with the Wholesalers Association in an attempt to solve the problem but he is not ready to speak on the record about the progress. Until those talks produce results, Texas will still be dry, brewpub-wise.

While waiting for the brewpubs to become a reality, some have taken to brewing their very own. Since formal National legislation was passed in 1979 allowing home brewing, the number of people making their own beer has been on a continual increase. Houston’s brewing equipment store, DeFalco’s Home Wine & Beer Supplies, has been on operation since 1971.

“Homebrewing has hit a real peak nationally,” said Scott Birdwell, DeFalco’s owner since 1980. “It’s been a steady growth for the last 10 to 12 years, but it really has taken off in the last two.”

An immediate appeal is the low start-up cost for a brewing system. The basic equipment, enough for a first 5 gallon batch, can be bought for under $40.00. Ironically, even though homebrewing was legalized in 1978, Texas didn’t wipe it off the books until 1983, five years after it was made legal nationally.

“The problem,” said Birdwell, “with anything to do with liquor is that State law many times supersedes Federal law. I think a lot of this is a carry over from prohibition. When prohibition was repealed, a lot of laws were left on the books to more or less give the states more power, like local wet/dry options and things like that.”

The homebrewing age has opened up new avenues, but all eyes are still on the brewpub issue. Birdwell feels that a direct line with the wholesalers is the best approach. “I won’t say that as long as the wholesalers are against it, brewpubs will never go through,” he said, “but it is going to be more difficult.”

Case brings up another point, regarding the freshness of the product. Unlike wine, which gets better with age, beer has a short shelf life after it hits its prime drinking stage. Case, who has been a long time home brewer, explains that “Not to brag on my own beer, but there’s no way a bottle that’s 90 days old, that has come across on a ship, sat in a nominally refrigerated warehouse for 60 more days before it hits our cooler, can compete with the character of my beer or any other good beer.” He hopes to eventually go into brewing full-time.

So while a fresh set of negotiations are being planned, Texans sit and wait for the outcome. This line of dialogue is disturbing to a few brewers who feel that there’s nothing to negotiate. “The only proposal I’ve heard,” said Case, “was that the wholesalers would not be opposed to it as long as they got their cut, whether or not they handled the beer. Bull! That’s absolutely absurd because the beer is never going to leave the premises. So in order to be in business, I have to just cut a check to the distributor? And which distributor? Are they going to give each distributor a geographical location of Houston? Or is each distributor going to get a prorated cut of my profits for a brewpub? It’s ludicrous! This is between me and the state.”

Birdwell’s attitude is more optimistic. “If Allan can get, not the active support of the wholesalers,” he said, “at least their non-opposition to it, then I think that it has a good chance of going through. Because the last time alone, we had 14 people testifying for and one person testifying against it. If we didn’t have that one person, who happened to be the attorney for the Texas Wholesale Beer Distributors, it probably would have gone through.”

“I suspect that everything is on hold until the brewpub legislation is either passed or trashed,” said Case. “We’ll know by June 1, 1993 when the session ends. But the basic argument in favor of it is that there’s no Goddarn reason against it. They say Texas is a conservative state. Well, that’s true, but heck, Tennessee — Utah — for crying out loud. You can brew there, and you’re telling me that Texas is more conservative than Utah?”

The brewpub war took a new turn last month, not in the halls of the Legislature, but in the pages of the media itself. In the August 5th issue of the Public News, an editorial by Jim Sherman centered on the brewpub/wholesaler issue. The piece covered the three-tier system, the Sea World exemption and the unsuccessful attempts to pass brewpub legislation. Sherman alleged that Rep. Ron Wilson was chiefly responsible for the Sea World bill as well as the burying of the brewpub legislation in committee. Wilson, who was described as “Anheuser-Busch’s pet state representative,“ had been chairman of the House Liquor Regulatory Commission for the last three legislative sessions. Sherman ended the editorial by posing the question of how much it costs for a loyal state representative nowadays. The first blow had been struck.

The second round came two weeks later when the August 26th issue printed Ron Wilson’s lengthy reply. Wilson began by stating that “I simply cannot allow such insidious innuendo, rumor and accusation against my integrity go unchallenged.” He then denied being a lapdog for the liquor industry or any other special interest group, stating that as a non-drinker, his special interest lie with what was good for the State of Texas and its citizens.

Concerning Sea World, he explained that it was not one of favoritism, but of economic sense for Texas. The bill would allow for more jobs as well as more revenue through tourism. He also pointed out that Sherman made no mention of the Shiner exemption in his editorial.

In regards to the brewpub legislation, Wilson stated that although he was the chair to the committee, he was only one of nine votes and that his committee had given the measure a full public hearing during two sessions. He also explained that the Senate was also free to consider the proposal and that this move had not been attempted yet by the brewpub supporters. Wilson’s advice to Sherman was to “sell his brew to the Senate.” Yet any impartiality to the brewpub issue seemed to vanish in his last paragraph which is printed here in full:

“The three-tier system that has governed the sale of alcoholic beverages in Texas since the repeal of prohibition is one that has protected the consumers of Texas from exclusionary and predatory pricing on the part of manufacturers. I remain convinced to date that the consumers win by manufacturers sell to distributors, distributors sell to retailers and retailers sell to the ultimate consumer, the People of Texas. I challenge Mr. Sherman and others to convince the one hundred and eighty-one members of the Texas Legislature, of which I am one, to the merits of their arguments, and why it is so desperately needed in Texas.”

Public opinion to his letter was quick in coming from those in favor of the legislation. Both Tim Case and Scott Birdwell offered some insights to Wilson’s remarks.

First, according to Case, the legislation did in fact go to the Senate last year. Senate Bill 1251 was heard on May 9th, 1991 and the House Bill 1658 was heard on April 22nd, 1991. Also, according to Birdwell, it would not make any difference sending the bill to the Senate first. Any bill relating to alcohol will at some point have to go through the House Committee on Liquor Regulation. So far, it has never come up for a vote in the House because it has never made it out of the committee. It could also be insinuated, some say, that the chairman has a lot to say over what does and what does not get accomplished. “In Wilson’s letter,” commented Birdwell, “nothing was mentioned about the fact that during the last hearing, there were 14 people in support of the bill and one against.” These figures may or may not be right, since the written minutes from that hearing show only seven speakers in favor of the bill, those being Greg Carr, Mary Thompson, Allan Dray, Davis Tucker, Mike Hennech, Mike Leonard and Bob Judd. Speaking against the bill was attorney Wade Spillman, representing the Wholesale Beer Distributors of Texas.

The Public News, during the following weeks, has become a regular forum on the issue. With the September 2nd issue, a letter of response from Tim Case was featured, dictating a series of dates, bill numbers and statistics in an attempt to set the public record straight. This was followed on the 9th by a letter from Libertarian Senate Candidate George Hollenback, who stated his support for the issue as part of his election platform. Furthermore, he expressed the need to disband the Texas Alcoholic Beverage Commission (T.A.B.C.) as a whole. Jim Sherman, added his fiery rebuttal to Wilson’s letter on the 16th, as well as a letter from Richard Bye, who brought up an analogy between brewpubs and the corner bakery. Bye’s view was that no one thinks twice about going to the local bakery in order to get the freshest bread, made with all-natural ingredients and free of preservatives that would give it a longer shelf life. The same can be said about organic fruit, vegetables and the like. Yet some people have a hard time understanding why a person would want fresh-brewed beer over pre-packaged, additive-filled beer. It’s a quality issue at stake.

Ron Wilson has stated that he has no feelings either for or against the legislation, but he has expressed what he feels are valid concerns. “There’s a bit of a reluctance to open up another level of alcoholic beverage permits,” said Wilson, “because of the M.A.D.D. mothers coming out against the proliferation of alcoholic consumption and the whole move towards cutting back on alcoholic consumption. This really kind of goes against the grain, as far as that is concerned. You would open up a another strata, a whole other level of permitting.”

Concerning the Sea World exemption, Wilson pointed out that the basic liquor permit was already in place. He explained that “The city of San Antonio, plus the Chamber of San Antonio came to us and said ‘Look, we need to have this to keep these jobs.’ That’s why that was done. And everybody from the Governor, to the Lieutenant Governor, to the Speaker on down were in favor of that, to keep the jobs, and basically the economic development issue with Sea World. It was no big exemption for them.”

The real opposition, according to Wilson, is neither the major brewers, or the beer wholesalers. “The main opposition,“ said Wilson, “is going to be the constituency of members of the House and the Senate. People. There has been no cry in my community to say ‘Look. We need brewpubs in Sunnyside. We need brewpubs in South Park.’ As a matter of fact, what my people are telling me is, we need to shut down some of these places that sell alcoholic beverages, because we have too many of them in our community. They (supporters of brewpubs) are going to get the whole public sentiment right now, saying ‘Let’s open up more places that sell alcoholic beverages.’ And the whole thing right now is to shut them down. But there’s no big booga bear out there that’s against the brewpub issue, as far as I can tell anyway.”

Whether or not the booga bear is lurking in the shadows, Wilson does not like being portrayed as such by those in favor of the legislation. “That’s a very racist thing,“ said Wilson, “because they haven’t said anything about the Senator who had the same jurisdiction as I have over in the Senate. Why didn’t they say ‘We’ve never even had a hearing in the Senate.’ I at least gave them a hearing. I let them come down and we had a full-blown hearing. I think, at least, we had two hearings, as a matter of fact. And if you can get the votes on the committee, just like everybody else, we can rock’n’roll. But they weren’t able to muster enough support to convince the committee. I at least went the extra step to give them an opportunity to air their concerns before a legislative body. They have not had the same kind of courtesy in the Senate. But why are they focusing on me? The only reason I can figure is that they figure I’m black and, you know, I’m supposed to do it. I think that’s crazy!”

Although Wilson is incorrect about the absence of any Senate hearing, he is accurate on his being singled out as the lone villain. Regardless of his influence, if any, on the committee, the brewpub resistance is much larger than a single voice. When Senate Bill 1251 was introduced to the Legislature during its 72nd regular session, it was heard by the Economic Development Committee, under the chair of Temple Dickson. This hearing, on May 9, 1991, was left pending in committee much like House Bill 1658. Most likely, this is, as some would say, “politics as usual.”

It seems the next round has already begun. Most recently, a T.A.B.C. public forum was held at the Harris County Courthouse. During the course of the hearing, the subject of brewpubs was brought to the attention of the forum committee. The advantages of such legislation was covered in detail, much like it was in both the Senate and the House. The committee members listened attentively to the proposal. It most likely will not be the last time they hear about it.

Wilson expects to see brewpub legislation again during the next session. “If they can make a compelling argument, I think they’ll get it,” he said. “But they can’t just expect to just pop up one day and say ‘Hey. We aught to have brewpubs. You aught to change public policy so we can have brewpubs, because we like to go to a place that manufactures it’s own beer, and drink it for our own convenience.’ What public good is that? They have to make a compelling argument that is in the public good for us to create another level of alcoholic beverage permits just for that particular industry. That is a special interest.”

Meanwhile, the pro-pub factions are planning ahead. “Perhaps,” said Birdwell, “one of the strategies that will be different will be to have another sponsor in the Senate.“ Then he brings up the point that brewpubs would actually entice the opening of more small-size breweries, thus more Texas dollars working in and for Texas. “Microbreweries find it hard to survive. They must produce two or three thousand barrels a year to make it financially, and a brewpub can make it on five hundred. If we get five or six brewpubs in the state, the next thing you know there will be a couple of micros opening up.”

Yet his position on the brewpub legislation is adamant “It’s going to go through. It may be ‘93. It may be ‘95. It may be ‘97. If it’s ‘97, there may be brewpubs in the other 49 states at that point. This is going to happen!”

Until then, relax and have a brew.

©1992 David Welling