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One Third of Texas Breweries Will Likely Close This Year

Faced with declining sales and the possibility of imminent closure, some breweries have tried to find legal loopholes to survive to no avail

A beer from Live Oak Brewing Company
A beer from Live Oak Brewing Company
Live Oak Brewing Company/Facebook
Nadia Chaudhury is the editor of Eater Austin covering food and pop culture, as well as a photographer, writer, and frequent panel moderator and podcast guest.

Texas breweries have been struggling to stay financially stable since their taprooms were ordered to shut down for the second time in late June due to rising novel coronavirus cases across the state. And according to a survey released earlier this week by the Texas Craft Brewers Guild (TCBG), many of these breweries will most likely have to close by the end of the year.

One in three Texas breweries predict that they’ll have to close permanently in less than three months, and two in three believe they won’t make it through the end of 2020, according to the survey. This is assuming if the bar and taproom shutter isn’t lifted and/or the government fails to provide substantial support to keep these businesses open.

The surveyed breweries (87 of TCBG’s 545 members) also shared that there has been a nearly 55 percent year-over-year decline, and that they have had to lay off or furlough about 36 percent of their staffs since the beginning of the pandemic.

Texas breweries and bars (aka businesses that make more than 51 percent of their gross receipts from alcohol sales) were first ordered to close in late March by Texas Gov. Greg Abbott to mitigate the spread of the novel coronavirus. In mid-May, Abbott allowed breweries and bars to reopen for in-person service with certain restrictions, such as limited indoor capacity, social distancing implementation, and the installation of tables so people would sit rather than stand. But in late May, several weeks after Texas began to reopen non-essential businesses, the state’s number of novel coronavirus cases increased rapidly, leading to the second shutdown.

During the most recent mandated shutters, breweries are still able to stay open for to-go beer sales. Likewise, breweries and brewpubs with on-site restaurants, such as Jester King Brewery, can remain open for dine-in services because of the heavy food components and permit type.

To boost their flagging sales and thus attempt to stave off the possibility of permanent closure several Texas breweries, including Austin Beerworks and Live Oak Brewing Co., had reopened or were planning to reopen their patios for self-service earlier this week. Customers could purchase to-go beers and then drink them on the patios by themselves. This self-service strategy arose from an interpretation of a new temporary license modification that the Texas Alcoholic Beverage Commission (TABC) issued on Friday, July 17; it allows businesses to temporarily disclude its alcohol permit coverage from previously covered areas.

Breweries interpreted the modification to mean they were able to “exclude patios and outdoor beer gardens from their on-site premises,” according to Community Impact, “allow[ing] guests to purchase their product to-go and then have the guests drink on that patio” without table service. TCBG executive director Charles Vallhonrat admitted to the newspaper that there was “confusion” over what the modification actually meant on Tuesday, June 21.

Then, on Wednesday, July 22, TABC issued an update stating that breweries were never allowed to legally reopen their patios for drink-in service under the license modification allowance. “TABC is not allowing breweries to alter their permitted premises in order for customers to consume purchased alcohol on the premises,” Chris Porter, the agency’s public information officer, clarified to Eater. The updated release stated that all businesses that make 51 percent or more of their sales through alcohol have to still remain closed because of the governor’s orders.

Valhonrat believes it’s unfair that Abbott “inexplicably” shut down breweries again, as expressed in a statement, when “they were operating under the same health, safety, and social distancing guidelines as restaurants and other businesses that the governor has allowed to remain open. We’re just asking for consistency and fairness.” According to the release, to-go sales at breweries have declined because “customers looking to enjoy a beer can simply go down the street for a drink at a restaurant who is permitted to stay open instead.”

In the same statement, Josh Hare, the founder of East Austin brewery Hops & Grain, echoed Valhonrat’s assessment:

Unfortunately, that business model [to-go beers] is not sustainable for most breweries, large and small, with the smallest breweries impacted the most due to their dependence on their community-centric taproom model. It’s had a decimating effect on the industry. While restaurants and virtually every other type of business across the state remain open, small craft breweries find themselves struggling to survive and make their communities aware that they need their support now more than ever.

It’s why TCBG launched the #SaveTexasBreweries campaign, which encourages people to to buy beer to go directly from breweries, as well as gift cards and merchandise. The nonprofit is also asking people to urge Gov. Abbott to allow breweries to reopen. According to statistics released by the Brewers Association in 2018, Texas craft breweries ranked third in the country for economic impact, which means if two-thirds of the state’s breweries disappeared, the state’s economy would be greatly decimated.