As in many states, the 3-Tier System in Texas has always been a nightmare.
It took wineries over a decade to persuade the legislature to allow for retail sales at their wineries. Finally, in 2001, after seeing the financial potential of the burgeoning wine market, the legislature and the Texas Department of Agriculture decided to promote the Texas wine industry. Along with establishing the Texas Wine Marketing Assistance Program, they also allowed for onsite tastings and retails sales at wineries. The State realized there was a difference between small wineries having tastings, selling from their tasting rooms and self-distribution, versus large distilleries and mega-wineries distributing nationally or even globally.
Later through a succession of amendments and changes, Texas wineries finally achieved decent shipping laws that allowed them to sell and ship to their loyal customers in and out of state. It was a long hard battle to have post-Prohibition laws establishing the 3-Tier System changed. As you know, it’s not only the fight-for-your-rights with the State, but you are battling the big wholesale distribution lobbies who profit and operate because of the 3-Tier System. Although small wineries got a few things changed, they are still dealing with laws that were created to deal with mass distribution.
One of the biggest challenges right now: The Winery Permit vs the Retail Permit
The Texas Winery Permit states that a winery can buy and sell wine from distributors, and sell wine to customers. And the Texas Retail Permit states that the retailer can sell alcoholic beverages for consumption on or off the premises, but cannot sell for resale, i.e. not be a distributor. But what if you are a winery with a permit and you want to sell your wine in another location other than your original winery? Example: Your winery is in one area of the state, but you would like to sell your wine on another wine trail or in another area without building a new winery. The law states if you have a winery permit, you cannot have a retail permit and cannot get a second location permit. Thus if you want to sell your wine direct to the customer in a second location you have to build another winery and get another winery permit. Building another winery is ridiculous. One way wineries get around this is by having a very small winemaking operation on premises. Because they can buy and sell wine, they buy their own wine and sell to the customer!
Texas has almost 300 wineries – up from 46 wineries just 10 years ago. The laws that we are dealing with were created to prevent monopolies by the large distilleries and tied houses, i.e. pubs that are required to buy their alcohol from a certain distributor. Through the years the many revisions to the laws and new policies have become a patchwork that doesn’t always make sense, i.e. the Retail Permit working with the Winery Permit above. And Texas isn’t the only state in this mess. Every single state has wineries now. We really do mean The Other 46! Those states, more than likely, have not dealt with the realities of their wine industry either.
Currently, the same archaic laws that plagued the wine industry for so long are being battled once again by the small breweries. In 2001, when the winery laws were revised, there were few craft brewers in Texas, but now the industry is growing and growing fast. They have had some breakthroughs recently in court and have finally been given the right to tell customers where they can purchase their beer, as well as label their products correctly regarding whether it’s a beer or ale regardless of alcohol content. What still has not changed is their ability to sell beer on premise. The only way around this law is to function as a restaurant too. Then they can sell their own craft beer.
I recently was at the VinCO Conference, Colorado Association for Viticulture & Enology, and they brought in some craft brewers and small distillers to discuss the challenges and successes they were having. Just by having them there this year, they created an environment to learn from each other and an opportunity to work together.
Currently the Texas Craft Brewers Guild and the Texas Wine and Grape Growers Association do not work together, at least on a formal basis. Perhaps this is worth investigating – not only in Texas, but throughout The Other 46. Facing the convoluted and messy State laws around these issues is BIG. Strength in numbers and in partnership is a possible way to help each other out. Think about it.
What messy laws are the craft brewers and small wineries facing in your state? Are they working together? Is there potential to help each other out? Let me know what you think.
Salut and Cheers!
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