I have been part of several discussions lately that ultimately all result in someone trying to better understand the Texas beer legislation. The main questions usually end up revolving around distribution limits, the difference between a “brewery” and a “brewpub”, or why we can’t get beer so-and-so in this particular location.
So I’ll try to clean up the air a bit by providing somewhat of a summary. Note that I am not a lawyer or attorney, so don’t use any of the information below to base business plans or formal filings on. This is my summary and understanding of the current legislation, written by a beer lover upon request of several Facebook contacts. With that disclaimer out of the way, here goes:
What’s the difference between a “Brewery” and a “Brewpub” ?
At first glance one would say there isn’t much difference. A brewpub serves food…right ? Unfortunately, no. Not that simple.
When applying for your brewers license with the Texas Alcohol and Beverage Commission (aka TABC), you apply for either a “brewery” license or for a “brewpub” license. But before we even go and explain what those are, we have to go back in the murky waters of history. Somewhere in a long forgotten past, someone with, most likely, more time than common sense on their hands decided that Texas should make a difference between “Beer” and “Ale/Malt Liquor”. The former was any “malt beverage with more than a half percent alcohol by volume, but NOT more than 4% alcohol by weight (5% alcohol by volume)” while the latter included “malt beverages with MORE than 4% alcohol by weight“. In other words, anything under 5% ABV was beer. Anything over that limit, had to be labeled as “Ale” or “Malt Liquor”. This of course made for some very funny business where a Doppelbock Lager, which is therefor not an ale in the sense of beer type, had to be labeled as an “Ale” to satisfy the TABC regulations. There’s a famous example that Brooklyn Brewery’s Brooklyn Lager, carried the text: “In Texas, malt liquor” on the label. Yeah, it was crazy like that.
Luckily, the label requirements have disappeared thanks to a lawsuit in 2012, but unfortunately the distinction between “Beer” and “Ale” from a brewers permitting perspective has not. So when applying for a permit, you have to specify whether you want to brew “beer”, brew “ales/malt liquor” or both.
Fortunately that distinction only applies to true “Brewery” licenses. You are right to deduce that there are two “Brewery” licenses. One for brewing “Ales/Malt Liquors”, which is license type “B” and one for brewing “Beer” which is license type “BA”. For what it’s worth, the “B” license is actually considered “liquor” license by the TABC, but let’s just skip that little can of worms. The “Brewpub” license fortunately only has one type, “BP”, which allows both for the manufacture of beer and ales.
So, now we know we have two brewery licenses (B and BA) and one brewpub license (BP). We still haven’t talked about what the difference really is.
It’s all about whom you sell to
Or more accurately at least whom you intend to sell the most to. Yes, it’s actually as simple as that. A “Brewpub” (BP) intention is to sell directly to consumers out of their own premises. A “Brewery” is focused on selling to consumers via retailers. Granted, this intention comes with a few restrictions. Especially around production volumes.
A “Brewpub” cannot exceed annual production of 10,000 barrels, it also needs a retail permit to allow the sale for on-premise, off-premise or both. And we find the difference in retail licenses for beer (retail license type BE) vs ale/malt liquor (retail license type BG) cropping up its ugly head again. Although a BG allows you to sell beer, so most places just go straight for that one.
“Brewery” license type holders, both of the B or BA type, face some other restrictions. As long as their production doesn’t exceed 225,000 barrels, they can operate a taproom on the premises, in which they can sell only their own beer and total sales from the taproom cannot exceed 5,000 barrels. All their other production needs to find their way on store shelves to be sold to consumers.
Which one to pick ?
It all depends on what the main focus is. Local breweries such as Jester King in Austin and Braindead Brewing in Dallas, both hold a BP brewpub license and a BG retail license allowing them to sell beer on premise. Braindead also holds a “late night” BL retailers permit (yes…there’s one for that too..you’re not surprised are you ?) since they tend to stay open after midnight on most days. Operations that are more focused on selling beer via retail networks, all hold “B” and “BA” license types to operate a “brewery” producing beer and ale.
What about distribution ?
Now we’re entering the really funky world of who can sell what, where and how. In general, a “brewery” can either self-distribute or leverage a distributor. There’s not much difference, except for volume limitations. If a brewery would like to self-distribute, they would need to apply for a “DA” self-distribution license. Or of course, we’re back to the beer vs ale discussion and they need a “DB” license if they only distribute beer. Luckily, if you have a “DA” license, you can distribute both beer and ale, so most breweries will only hold a DA license. The regulation for self-distribution is a bit convoluted in the sense that the production cannot exceed 125,000 barrels, but the sale under the self-distribution permit cannot exceed 40,000. Or the way I understand it, is that as long as a brewery doesn’t produce more than 125,000 barrels they can self-distribute, but their self-distribution portion cannot be more than 40,000. For the remaining 85,000, they’ll have to partner with a distributor. Once you produce more than 125,000 barrels annually, self-distribution is out the window and they will all need to use a distributor.
Can brewpubs distribute and sell via other retailers ?
Well, another convoluted answer is in order. It depends. As long as the holder of the Brewpub license (BP) only sells their own beer, they can self-distribute. The actual legislation read that the holder of a Brewpub license “who sells alcoholic beverages manufactured only on the brewpub ’s premises [emph.added.] may […] sell malt liquor or ale produced under the license to those retailers“. However the total volume sold may not exceed 1,000 barrels annually for each licensed brewpub location or 2,500 barrels annually for all brewpubs operated by the same licensee. Basically, a brewpub can make 10,000 barrels annually and can sell 1,000 of those via other retailers as long they don’t sell any other beer but their own in the brewpub. If they sell any other beer in the brewpub, like both the aforementioned Jester King and Braindead Brewing do, they can only use a distributor to get their beer in retail stores, with the same volume limitations.
Summary
Yes, you probably should have skipped straight to this:
Breweries (license type B and BA): Make ale and beer to sell to consumers via retailers. Can sell 5,000 barrels of their own beer only in a taproom. Can self-distribute a portion not exceeding 40,000 barrels only if their total production is 125,000 barrels a year or less.
Brewpubs (license type BP): Make beer to sell in their brewpub directly to consumers. Can produce up to 10,000 barrels a year. Can sell 1,000 barrels of those via other retailers, either in self-distribution if they only sell their own beer or via a distributor if they sell other beer.
What about distribution rights ? Out of state brewers ? Retail locations ? I’m afraid those items will have to be part of another entry. But in the mean time, I hope this was at least somewhat helpful. If you want to have a look at what license type your favorite watering hole may possess, you can check the TABC license inquiry system, for more reading on the different licenses, you can peruse the license descriptions of the same state body.