A Long Time Coming
If there's one thing that I've learned about opening a small business it's that nothing ever happens as fast as you'd like. From construction permitting to regulatory modernization, building a brewery in Texas is an exercise in patience.
Four years ago I set about to change the license for our small brewery from a manufacturing permit to a brewpub permit. I won't bore you with all the gritty details of why these two permits are different in TX but I'll sum it up like this;
Manufacturing permit- make as much beer as you want but can't sell any beer to go from the brewery.
Brewpub permit- limited to making 10,000 bbls of beer per licensed location but allowed to sell beer to go from the brewery.
There are plenty of other operational differences between these two permits but what I outlined above highlights the one that is most important to me, to go sales. And it's not just because of the high margins a business can make on these sales. While that is a nice perk, the advantage in selling beer to go, for me, is that you are able to offer customers the full brewery experience that is becoming not only the norm across the US but an expectation. And if you can't offer that experience to folks that visit your brewery I firmly believe that you're at a disadvantage.
Sadly the Texas legislature fails session after session to pass common sense legislation to modernize our archaic alcoholic beverage code. Legislation that would generate more tax revenue, create new jobs and build a stronger, more robust, three tier system. Texas could finally be viewed as a friendly state for brewers but there are some strong interests that lobby our legislators to keep the archaic system in place and thereby solidify their position and control over the entire system. And they have no appetite for breweries selling their product to go.
But for a brewery in Texas that doesn't have an interest in large scale production, the brewpub license is ideal. It gives a brewery the ability to start relatively small and still maintain a viable financial position by selling what they make right on site. Daily sales coming in that don't require extending credit terms is a nice proposition for any bank account. In a brewpub customers can buy flights of samples, pints and pitchers and when they find something that they really like they can purchase some of it to take home. Seems pretty common sense right? In fact, when one looks at the most successful states in terms of breweries per capita and economic impact from beer sales you'll find that these common sense allowances are the norm.
In 2011 when Hops & Grain Brewing opened our doors manufacturing breweries were not even allowed to sell beer for on-site consumption, much less selling beer to go. We operated a small tasting room where we gave away free samples and sold merchandise. It was important to me to build our brand and reputation by opening our doors and letting customers see where the beer was made and meet the folks that made it. Even though we couldn't sell beer the exposure that our tasting room gave us is something that I still attribute to our early success.
In the 2013 legislative session we saw passed a package of bills that finally allowed manufacturing breweries to sell a small amount of beer directly to customers for on-site consumption only. While this was a huge win for manufacturing breweries it was just barely scratching the surface. At this point we made the decision to try and switch our license from a manufacturing permit to a brewpub permit. A couple reasons factored into this, mostly was the fact that we had run out of space in our Austin brewery and only had the capacity to produce around 9,000 bbls of beer annually. So, if we had that limitation already in place then why not switch over to a license that also gives us the ability to sell to go. That started an incredibly painful process that ultimately ended with us giving up due to a portion of the city zoning code requiring that we operate a kitchen and generate at least 51% of our revenue from non-alcohol sales if we were to be granted a brewpub license.
So I decided to try another route. During that process it was also brought to our attention that per the Austin city code we actually weren't even allowed to sell beer for on-site consumption due to our breweries proximity to single family residences. Yes, you read that right. Because we are located in the middle of a neighborhood the city would not allow us to sell beer for on-site consumption. Apparently the city would prefer beer drinkers to drive outside of the city center to an industrial strip to consume beer at a brewery, and then drive back home. Walking down the street to a local brewery was apparently not something the city wanted. Our building was zoned such that it only allowed the manufacture of alcohol, not actually selling it on site. In 2011 when we were granted out certificate of occupancy beer sales on site weren't legal so it didn't really matter.
But I did learn of one option that was available to us. We could apply for a conditional use permit that would allow us to sell on-site. It required city council hearings and multiple meetings with local neighborhood associations but it seemed worth it so we started that process. 18 months and thousands of dollars later we were finally granted a conditional use permit and were able to start selling beer in our tasting room, albeit only for on-site consumption. September 2013 was the month that the laws were changed for manufacturing breweries and in June of 2016 we were finally able to take advantage of those new state laws.
Something else that changed with the 2013 legislation was a bill that allowed brewpub license holders to distribute their beer to retailers. Before then brewpubs had to sell all of their product on-site. Once we had our conditional use permit we immediately saw a massive increase in both customer traffic to our brewery as well as increased sales to our distributors. The latter of which I absolutely attribute to our ability to sell beer directly to customers. We were able to build a relationship with customers that we otherwise didn't have the ability to do when selling beer solely through a wholesaler.
Having been introduced to the craft beer industry while living in Boulder, CO I still longed for the ability to fill a growler for someone or send them home with a fresh six pack. Unfortunately though, we didn't have the space or the money to build out a kitchen making a brewpub license a distant and unattainable reality. That is until I came to the realization the our conditional use permit actually gave us the ability to sell beer on site without the need to sell food. So I did some research to make sure that I wasn't mistaken in my assumption. Sure enough, we could apply for a brewpub license for our location, holding a conditional use permit, without the need to take on the 51% non food sales requirement.
Papers were filed and months went by as we waited. And waited. And waited. And then the phone rang this past Friday and I was given some of the best news I've received in quite some time. For those that know me, answering the phone is not generally something that I would say I'm very good at. But when I see the caller ID pop up with TABC, I generally try and answer the phone. And there it was, the permit that I'd been trying to receive for 4 years was finally ours!
That's correct friends, Hops & Grain Brewing is now a licensed Brewpub!
So what does this mean for our business?
1. Our current distribution will not change at all. We are still expanding our distribution to new territories in the state and will continue to grow our presence in our home market.
2. We will still operate our tasting room as we have been, opening our doors 7 days a week from 10am-10pm.
3. You can now buy our beer to go! We'll begin selling cans and bottles to go and starting on January 1st we'll begin offering crowlers and growlers of all the beer that we currently only offer on draft.
4. I theorize that I may eventually get back to my pre-brewery ownership days of actually sleeping through the night.
Stay tuned to the Hops & Grain Brewing website and social media feeds for more details coming next week. It's a big evolution for us as a company and I can't wait to finally be able to say "yes" to the countless customers that visit our brewery and ask "do you sell beer to go?".