Jester King Craft Brewery Goes to Bat for Texas Brewers

Where can you find this? Dont ask the brewery - apparently (Photo: Wayoutwestaustin.com)

 

Hey Texans: Are you enjoying that 6% Lager “Ale” or that 4% Pale “Beer”? Confused why the brewery can’t tell you where to score a six-pack Jester King Pale Ale ? What? Huh?

 

Well, according to one of your state’s best and brightest breweries, Texas law prohibits the use of commonly-used descriptive beer terms. That brewery has decided file a lawsuit, in federal court, challenging those regulations.

 

Austin-based Jester King Craft Brewery has filed a lawsuit in US District Court for the Western District of Texas. The lawsuit was filed to challenge six particular portions of Texas beer regulations enforced by the Texas Alcoholic Beverage Commission. If we ever thought we had it tough here in Washington, check out these allegations about the Texas code:

 

1.  Prohibit breweries and distributors from telling customers where their products

can be bought;

 

2.  Mandate the use of inaccurate statutory definitions of “beer,” “ale” and “malt

liquor” to describe malt beverages;

 

3.  Prohibit advertising the alcoholic content of brewery products and using words in

advertising and labeling that suggest alcoholic strength;


4. Prohibit breweries from selling their products at the point of production while

allowing wineries and brewpubs to do so;

 

5.  Prohibit brewpubs from selling their products to distributors and retailers while

allowing wineries and microbreweries to do so; and

 

6.  Treat foreign breweries as the first American source of supply of malt beverages

while treating importers as the first American source of supply of wine and
distilled spirits.

 

My initial reaction is that much of what is found in the Texas code is probably located in many other state codes. The restrictive language is part of a slowly-decaying uniform three-tier regulation package that was pushed decades ago. Many states have slowly altered former portions of that code, updating it to make sense for their brewers. This is especially true in states with proactive brewer groups, who demand change. Washington, Oregon and California have responded favorably to pressure from their brewing industry members.

 

Here, Jester King is up against a difficult task. Booze is heavily regulated and states have strong interests in regulating how it is produced, marketed and sold. The interesting argument here is whether the state’s means of regulating booze actually serves that interest.

 

  • Does improperly labeling a product recognized otherwise by the mass consumer base actually help better inform the consumer? Surely not.
  • Does preventing the direct sale of beer from one type of beer producer while allowing it from another almost identical producer serve a governmental purpose? Probably not.
  • Does prohibiting brewers from providing public information about the location and availability of alcoholic beverage help to sustain a government’s interest? Maybe, depending on whether that purpose of reducing consumption or preventing brewers from looking like distributors.

I think that Texas, and several other states, will have trouble upholding some of the labeling regulations. But those laws directly resulting from the three-tier model regulations may prevail. The courts have already clearly permitted three-tier regulations. Regardless, its a clear sign that Texas needs to take the time to better understand an industry that has grown incredibly over the past decade.

 

Jester King has wisely approached its action with an open mind about the challenges it faces. The brewery informed its consumers about the case in an open letter, correctly reflecting that the state only needs to show a rational basis for the challenged regulations. But, I think that their hearts and brains are in the right frame of mind – the challenge is a worthwhile one.

 

Here is what the brewery had to say about its claims. You can read more at their website and in the pleadings which can be found here (Beernews.org):

 

Our claim under the Equal Protection Clause of the 14th Amendment, maintains that breweries, like wineries, should be able to sell their products directly to the public. Right now in Texas, we cannot sell our beer at our brewery. We can only sell beer through a retailer or distributor. When people visit Jester King and ask to buy our beer, we have to tell them, “Sorry, that’s illegal.” Brewpubs are faced with an equal and opposite restriction. They can sell beer on-site, but cannot sell beer through a retailer or distributor. Texas wineries on the other hand are allowed to sell on-site and through retailers and distributors. We are suing because the State has no rational interest in maintaining special restrictions aimed at limiting the sale of beer.

Finally, the lawsuit challenges the State’s requirement that every foreign brewery wishing to sell beer in Texas obtain its own separate license. Foreign wineries and distilleries are not burdened by this requirement. They may simply sell their products in Texas through an importer that has one license for all the wine and spirits it brings into our state. The result is that small, artisan beer makers often have their beer kept out of Texas by unduly burdensome fees.

 

 

 

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What About Us? I-1183’s Impact On Washington’s Fledgling Craft Distillers

Sound Spirits' Ebb & Flow Gin may find more consumers if I-1183 passes

 

The liquor initiative is all I hear about. If you watch television ever, you are bound to see an ad supporting I-1183 followed immediately by an ad opposing I-1183. Costco has dumped more than $22 Million into its support for the initiative! Its pandemonium.

 

Last year, I really got into the discussion, posting regularly here on the Brewery Law Blog. But last year, the craft brewer was heavily involved. The Washington Beer Commission came out strongly opposing I-1100 with concerns that complete deregulation would harm their ability to earn a reasonable margin. But this year, the WBC has been silent.

 

Someone that has been lost in the shuffle of big corps trying to gain market share and public interest groups lobbying for safety: craft distillers. Yesterday, the Seattle Weekly ran an interview with Steven Stone. Steven is the owner of Seattle’s first craft distiller, Sound Spirits, located on 15th Avenue. In addition to making an unbelievable craft gin (get the oak-rested one), Steven has always been willing to talk about his industry. Here, he talks about the burden set on craft distillers:

 

“Most of the small guys, we’ve tended to stay out of it,” says Steven Stone, founder of Sound Spirits in Interbay. “If we come out for it, we’ve pissed off the only retailers of our products. And if you come out against it, you might upset the public.” Stone says that when he criticized an earlier liquor-privatization measure on hisFacebook page, he was called a communist.

 

Check out the full article by following this link. I have always thought that the craft distilling industry might benefit from the brewery/winery model, that allows for direct sales to the public. Steven correctly points out that grocery store competition will be fierce, but with a wider market, I am sure that craft distillers will see sales pick up.

 

 

 

 

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Alternating Proprietorships: Getting Started Without a Brewery

Look at all that space? Room for one more? (Photo: GoodLife Brewing in Bend, OR - and my wonderful family Jess and Axel)

 

The craft brewing industry is ablaze with growth. More and more American craft beer is being sold; more and more brewers are popping up across the country. Its beginning to seem doable – starting your own brewery.

 

Many of you want to take that big step into professionally brewing. There are probably thousands of homebrewers who have systems and product worthy of floating through the open market. So why aren’t we all selling our grog? Well there’s an easy answer to that – regulation. The federal Alcohol, Tobacco, Tax & Trade Bureau and the Washington Liquor Control Board each enforce regulations that demand a level of professionalism, investment, and most daunting – commercial space.

 

Well, there is an answer for you. If you believe you have the recipe and drive to make it big, but lack the investment to setup your own shop, you might want to consider an Alternating Proprietorship (AP). The AP is also an option for those of you brewers with lots of space, and empty brewing, who are looking to offset your investment.

 

An AP is a permissible means of developing a brewing operation without your own shop. In short, the AP structure allows a “host” brewery (a previously existing entity holding a Brewers Notice) to provide brewing operation for a “tenant” brewery, who remains responsible for taxes, records and label submissions.

 

The AP is not a new concept, having been around for decades. But back in 2005, the TTB publicly issued Industry Circular 2005-2, which shined a light on this less expensive, startup option for brewers. The Industry Circular helps provide guidance on what types of relationships are permissible and what roles the tenant and host brewery must play.

 

There are a number of huge benefits to considering the AP option, if you plan on starting a brewery in the future:

 

  • AP’s allow you to develop a brand well before you are ready to invest in your own space
  • The host brewery takes on much of the physical pressure, burden and liability of the brewing operation.
  • AP’s allow a brewer to begin placing their product in the stream of commerce to better preserve intellectual property rights
  • AP host breweries often serve as a buffer to allow for easy transition into a highly-regulated industry.
If you are ready to take the plunge or ready to share your space – consider an AP. Contact your attorney to discuss structuring such a relationship – and get brewing.

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Washington’s Chuckanut Brewery Takes Home Coveted Awards at Great American Beer Fest

Chuckanut Pilsner, Kolsch and Alt. Wonderful.

 

Congratulations to the wonderful people at Chuckanut Brewery, who took home the coveted Small Brewing Company of the Year award at the Great American Beer Fest. But, that wasn’t all. The Bellingham brewery took home Small Brewing Company Brewer of the Year (Nice work Will!), two golds (Helles and Kolsch), a silver (Dunkel) and a bronze (Alt). Their haul is beyond comparison, and a testament to their creativity and unmatched quality.

 

If you haven’t been up to Bellingham to visit the brewery, expect a friendly and intimate look at one of the country’s best small brewers. At the brewpub, you can sit along the inlet, taste excellent local food and even poke into the brewery and smell the fine scent of German Alt, Kolsch and Helles.

 

What I love about this brewery – their commitment to making perfectly crafted German beer, in a NW market. We have a tendency to ignore anything that doesn’t have more than 50 IBU or 7% ABV. Its just the way of the NW, where we dig our big beer. But Chuckanut is passionate about crafting perfectly balanced beers with utmost clarity. In fact, I have never seen any brewer (not even in Germany) work clarity from filtering the way that Will Kemper does. Kudos to the Kempers for bringing incredible German beer to this great state.

(more…)

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