Texas Wine Distribution Law Reform

**Texas Wineries Fight for Fair Distribution, Legislative Push Continues After Bill Stalls**

AUSTIN, TX – December 12, 2023 – Texas’s burgeoning wine industry, a significant contributor to the state’s economy and agricultural landscape, faces persistent hurdles in getting its products onto restaurant menus across the state. At the heart of the issue is a deeply entrenched distribution system that many in the industry argue unfairly disadvantages small, local wineries, prompting a renewed push for legislative reform led by the Texas Wine & Grape Growers Association (TWGGA).

The core of the problem lies in the application of Texas’s “three-tier system” for alcohol distribution – a regulatory framework requiring producers, distributors, and retailers to operate independently. While designed to regulate alcohol sales, wineries contend that a specific “franchise law,” primarily crafted to govern relationships between large beer brewers and their distributors, has been inappropriately applied to wine. This misapplication creates what many describe as a “distribution trap” for wineries.

Under the current system, once a small winery signs with a distributor, extricating themselves from the agreement becomes nearly impossible, even if the distributor is failing to effectively sell their product. This legal lock-in means wineries are often stuck in unproductive partnerships, unable to switch to a more effective distributor or adapt their sales strategy. While Texas wineries producing less than 125,000 gallons annually do possess the right to self-distribute, the logistical complexities and resource demands of managing their own distribution network are often prohibitive for small, family-owned operations.

To address this critical issue, Representative Stan Lambert (R-Abilene) introduced **House Bill 2735** during the recently concluded 88th legislative session, which adjourned in May 2023. The bill aimed to provide much-needed clarity by explicitly stating that the beer franchise law does not apply to wine produced by Texas wineries. More crucially, HB 2735 proposed a “right-to-reclaim” clause, which would empower wineries to terminate a distribution agreement under specific conditions. These conditions included a distributor’s failure to sell a specified amount of the winery’s product over a two-year period, or for “good cause,” such as disparagement of the product or consistent failure to meet agreed-upon sales goals.

Despite strong support from the Texas wine industry, **House Bill 2735 ultimately did not pass** during the 88th legislative session, stalling in the legislative process. This outcome leaves Texas wineries facing the same distribution challenges as they look ahead to future legislative opportunities.

The stakes are considerable for Texas. The state is now the fifth-largest wine-producing state in the U.S., boasting an industry that contributes a staggering **$13.1 billion to the state’s economy and supports 104,000 jobs**. With approximately 590 wineries operating across Texas, the vast majority of which are small, family-owned agricultural businesses, this legislative fix isn’t merely about selling more wine; it’s about supporting local agriculture, fostering small business growth, and preserving a significant economic driver for rural communities.

Despite the legislative setback, the push for reform continues with unwavering resolve. The Texas Wine & Grape Growers Association is actively urging Texans to contact their state legislators to advocate for these necessary changes. They also encourage consumers to champion Texas wines by requesting them at local restaurants, helping to solidify the industry’s rightful place in the state’s economy and vibrant culinary scene. The TWGGA remains committed to working towards a more equitable distribution system that allows Texas wineries to thrive and reach their full market potential.