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Why Is the Brew Pub Business Hot in Dallas, Texas

Why Is the Brew Pub Business Hot in Dallas, Texas?

Industry experts have been asking for years whether craft beer’s bubble will burst, or if it would continue to prosper with no end in sight. In 2015, Sam Adams founder Jim Koch insisted there was no such thing as a craft beer bubble. The best place in the world to be a beer drinker is the United States, Koch said. His company, Boston Beer, represents a little over 1 percent of the total beer market, and craft brewed beers are a small fraction of the beer industry overall.

Indeed, the industry continues to experience significant growth. In 2016, there were 5,234 craft breweries in the United States, up 16.2 percent from 2015, according to the Brewer’s Association. The number of brew pubs alone has increased as well, up 10.8 percent in 2016, with 1,916 brewpubs in the US. That total has likely risen since then. In North Texas specifically, the number of breweries and brew pubs has skyrocketed from just 2 in 2011 to more than 50 in 2016.

But Dallas seemed to be slow on the uptick. In 2011, it was the largest US city without a microbrewery. The demand was there from consumers — bars and grocery stores carried beers brewed locally in other cities, and there were plenty of entrepreneurs interested in starting their own business. Plenty of red tape had to be cut in order for brew pubs and breweries to establish themselves in Dallas, and that’s one of the reasons it was hard to get started, along with zoning laws that didn’t accommodate breweries. Finally, between 2011-2012, three microbreweries launched in Dallas: Deep Ellum, Peticolas and Lakewood.

Deep Ellum Brewing Success

Deep Ellum Brewing in Dallas is an excellent example of the growth of craft breweries in the Dallas area. In April 2017, it was announced that Deep Ellum Brewing in Dallas was on track for double-digit growth. Part of that success can be attributed to its partnership with Chicago-based Storied Craft Breweries, which purchased 56 percent of Deep Ellum Brewing in December 2016.

After the acquisition, Deep Ellum’s sales increased significantly for the first quarter of 2017. Sales of its blonde ale and IPA were up 79 percent and 47 percent, respectively, and sales of packaged beer and draft offerings were also up — 61 percent and 30 percent. Overall, growth through the first quarter put the business on track for 50 percent growth in 2017. Part of the acquisition included access to $8 million to grow the business, so its success is predicted to continue for the foreseeable future. Deep Ellum’s success doesn’t preclude other craft beer businesses from making a home in Dallas; instead, the story should be seen as inspirational.

Tax Benefits

The recently passed tax reform bill provides significant tax benefits for small to medium producers of beer, wine and spirits, and that includes Dallas’s brew pubs. The bill essentially slashes the excise tax that producers pay for the wine, beer or spirits they make. For craft brewers, defined by the bill as those brewing less than 60,000 barrels a year, the excise tax per barrel has been cut in half, from $7/barrel to $3.50.

The founder of Deep Ellum Brewing indicated that the tax savings for his brewery will be significant. The increased savings mean breweries can hire more workers or spend money on R&D to bring new flavors to the market. Based on numbers alone, Deep Ellum is hoping to save about $200,000 during the 2018-19 tax year. The general consensus is that small breweries will be putting the tax savings back into businesses, whether it’s for purchasing new brew tanks, hiring new staff or awarding bonuses to existing staff.

The recent success of Deep Ellum brewing and others like them, along with substantial tax breaks, are just a few reasons why the brewery and brew pub industry is growing in Dallas. Many opportunities exist for interested buyers to purchase an establish brew pub business in the Dallas area.

Contact LINK Dallas today at (214) 710-2558 to speak with a broker about purchasing a brew pub or to find the right business for you.