The Beer Alliance of Texas

Trade association representing beer distributors from the Texas coastal region to the panhandle.

The Beer Alliance of Texas Supports our state's long-standing Three-tier System

The Beer Alliance of Texas advocates for a strong "Three-Tier" regulatory system comprised of distinct tiers that traditionally have not allowed for cross ownership and/or operations. This system has long been the cornerstone for regulation of Texas alcoholic beverage markets. Market conditions, technologies and consumer tastes do evolve and the Texas Legislature updates and modernizes the TABC code frequently to keep pace. Our membership believes the Three-Tier system serves Texas very well and advocates to maintain the system, with minimal disruption, to ensure an orderly and safe alcoholic beverage marketplace in Texas.


Maintaining the Spirit of Texas' Three-Tier Regulatory System:
Tell your legislator NO on HB 3172

HB 3172 - Relating to authorizing the online ordering and purchasing of alchoholic beverages, would allow direct shipment of alcoholic beverages to the ultimate consumer, bypassing the current regulatory structure. As with other pieces of legislation filed this session, HB 3172 undermines the safeguards that Texas' tried, and true three-tier system provides. This system not only ensures quality but provides a safeguard for the consumer and limits underage drinking.

Direct shipping compromises longstanding alcoholic beverage regulatory practices that have made Texas the gold standard for safety, quality, and variety. Futhermore, this bill is a carve out for large out-of-state corporations allowing them to bypass current regulations and putting them first, all while Texas businesses and jobs are destroyed.

Vote NO on HB 3172 to save Texas jobs.


Cross Tier Ownership Prohibition

The Texas Alcoholic Beverage Commission has heretofore strictly enforced De Minimis investment holdings when evaluating market control, adhering to the strict prohibition of cross tier ownership.

Research indicates that a five percent hurdle, while appearing reasonable, is much too expansive based on the scale of larger corporate and individual investments held by parties in the state. The whole concept of cross tier ownership being a prohibited activity rests at the cornerstone of the three-tier regulatory system that has been in place since the repeal of the 18th Amendment (Prohibition). There were a number of causes that inspired the "great experiment" including virtually unregulated consumption and the undesirable promotions that grew from interests owning the manufacturing, distribution, and retailing of alcoholic beverages. That is why the system that is in place today precludes cross tier ownership.

By way of example, five percent ownership in several example companies in different TABC tiers is shown below. Large investors or individuals could greatly influence market conditions across all three tiers with mega-sized holdings.


Rationale for "Tied House Law":

The term "tied house law" refers to the broad statutory scheme regulating the marketing of alcoholic beverages and the cross ownership of licensed operations.

Policy rationale for this law:

  • to promote the state's interest in an orderly market.
  • to prohibit vertical integration and dominance by a single producer in the marketplace.
  • to prohibit commercial bribery and predatory marketing practices.

 

Magnitude of 5% Ownership

Entity 5% of Entity's Market Capitalization (as of March 16, 2015) # of Shares Comprising 5% of Issued & Outstanding Shares Top Holders (Percentage of Ownership)
Wal-Mart Stores, Inc. $13,422,974,318 161,159,495
  • The Vanguard Group, Inc. (3.08%)
  • State Street Corp. (2.39%)
  • Berkshire Hathaway, Inc. (1.87%)
  • BlackRock Institutional Trust Company, N.A. (1.28%)
The Kroger Co. $1,892,827,236 24,566,220
  • FMR, LLC (5.39%)
  • The Vanguard Group, Inc. (5.17%)
  • State Street Corp. (4.64%)
  • BlackRock Institutional Trust Company, N.A. (2.85%)
  • AllianceBernstein, L.P. (2.72%)
Anheuser-Busch InBev SA/NV $9,832,773,590 80,392,230
  • Soroban Capital Partners LLC (.46%)
  • Wellington Management Co. LLP (.43%)
  • Waddell & Reed Financial Inc. (.36%)
  • Gardner Russo & Gardner (.32%)
  • Bank of America Corp. (.31%)
Darden Restaurants, Inc. $402,591,189 6,202,298
  • Starboard Value LP (9.38%)
  • Capital Research Global Investors (9.14%)
  • The Vanguard Group (7.55%)
  • FMR, LLC (7.37%)
  • State Street Corp. (4.94%)
Murphy Oil Corp. $422,098,648 8,875,077
  • Southeastern Asset Management Inc. (9.37%)
  • The Vanguard Group, Inc. (7.91%)
  • T. Rowe Price Associates Inc. (5.73%)
  • Hotchkiss & Wiley Capital Management, LLC (5.38%)
  • State Street Corp. (4.96%)
Diageo plc $3,519,990,250 31,325,000
  • Harris Associates L.P. (1.17%)
  • Brown Brothers Harriman & Co. (.74%)
  • Wellington Management Company, LLP (.69%)
  • Wells Fargo & Co. (.58%)
Fromento Economico Mexicano, S.A.B. de C.V $1,614,126,020 17,891,000
  • Aberdeen Asset Management PLC (1.51%)
  • Vontobel Asset Management, Inc. (.34%)
  • Dimensional Fund Advisors LP (.24%)