Texas Package Stores Association65th Annual Convention

“Facing the Future Together”

Sherry Cook, TABC AdministratorDallas, Texas - August 6, 2012

• Industry Growth• Delinquent List• 83rd Legislative Session

– Interim Charge on Licensing Process– Code Inconsistencies and “Leveling

the Playing Field”– Package Store Issues– LAR Exceptional Items

• TABC Organization

“Facing the Future Together”

Local Option ElectionsFY 2008 – FY 2012

FY 2008 FY 2009 FY 2010 FY 2011 FY 20120

10

20

30

40

50

60

70

80

90

66

8375

86

475161

5266

36

ElectionsJurisdictions Holding Elections

76% Overall

Success Rate

May 199829 Wet Counties54 Dry Counties

June 201246 Wet Counties22 Dry Counties

Wet / Dry Counties1998 and 2012

Growth is expected to continue at anaverage rate of two percent annually.

Growth of Texas Businesses

2008 2009 2010 2011 201238,000

40,000

42,000

44,000

46,000

48,000

50,000

41,47142,090

43,619

47,31045,422

42,04742,690

44,283

48,059

46,201

As of July 15th of each year.

Licensed Retailers

All Licensed Businesses

Texas Package Stores

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20122,000

2,100

2,200

2,300

2,400

2,500

2,600

2,700

2,171

2,2092,249

2,296

2,393

2,364

2,3762,417

2,4292,457

2,642

2,489

14.6% growth from July 2001-July 2012

FY 06 FY 07 FY 08 FY 09 FY 10 FY 2011 FY 2012* est

610,000,000

620,000,000

630,000,000

640,000,000

650,000,000

660,000,000

670,000,000

680,000,000

690,000,000

700,000,000

642,963,576647,611,244

678,614,857

689,626,550

669,452,000

684,162,737

692,435,567

Gallo

nsWholesale Alcohol Sales in Texas

8% growth FY06-FY12

692 million gallons of alcohol to be sold in Texas in FY 2012.

Distilled Spirits Sales in Texas

FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12* est

22,000,000

23,000,000

24,000,000

25,000,000

26,000,000

27,000,000

28,000,000

29,000,000

30,000,000

31,000,000

24,200,743

25,303,413

27,566,94527,469,924

27,854,240

29,563,292

30,856,328

Gallo

ns

22% growth FY06-FY12

Wholesale AB Sales in Texas Growth FY08-09, FY09-10, FY10-11, FY11-12*

-6%-4%-2%0%2%4%6%8%

10%12%14%16%

10%

0%

3%1% 1%

13%

1%

4%

-5%-3%

8%

6%8%

1%2%

15%

4%

8%

-1%

1%

FY 08-09

FY 09-10

FY10-11

FY11-12**Estimate

Ale Spirits Wine

Beer

TOTAL

Texas Wineries and Gallons Produced (in millions)

64 75 89116

132 139 151

189 195

1517

3839 33

4558

4362

1.92 2.08 2.22 2.212.52

2.96

3.05 3.28 2.93

0

0.5

1

1.5

2

2.5

3

3.5

0

40

80

120

160

200

240

280

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12* est

Mill

ions

of G

allo

ns

Num

ber o

f Tex

as W

iner

ies

Wineries Not Producing

WineriesProducing

Gallons of Wine Produced

Number of active winery permits at the end of the fiscal year.

0

381

573

749878

979 1017 1069

59,392

163,299199,980

250,529

347,254389,309

462,309

0

200

400

600

800

1000

1200

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

FY 05 FY 06 FY 07 FY 08 FY 09 FY 10 FY 11 FY 12*

Num

ber o

f Dire

ct S

hipp

ers

Gallo

ns Sh

ippe

d

(est)

Out of State Winery Direct Shippers and Gallons Shipped

Number of active permits throughout the year.First Direct Shipper permits were issued on 10/24/05.

Texas Distilleries and Gallons Produced (in millions)

3 37

10 812

18

25

33

68 10

13

19

0.58 m0.63 m

1.22 m

1.80 m2.59 m

0

0.5

1

1.5

2

2.5

3

0

5

10

15

20

25

30

35

2004 2005 2006 2007 2008 2009 2010 2011 2012*

Mill

ion

Gal

lons

Num

ber o

f Tex

as D

istil

lerie

s TotalProducingMillion Gallons

Number of active permits throughout the year.Data on number producing and amount produced not available prior to 2008.

Number of active permits on December 31st.Small Brewery = Producing less than 75K bbls/year

Data on number producing and amount produced not available prior to 2008.

2004 2005 2006 2007 2008 2009 2010 2011 2012*0

5

10

15

20

25

30

35

40

45

50

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

6 6 7 8 9 9

17

36

44

8 8 8

16

30

1.41.9

2.3

1.4 m1.9 m

Active PermitsPermits ProducingAle/Beer Produced

Num

ber o

f Sm

all B

rew

erie

s

Mill

ions

of G

allo

ns

Small Texas Breweries and Gallons Produced (in millions)

Number of active permits at the end of the year.Data on number producing and amount produced not available prior to 2009.

2004 2005 2006 2007 2008 2009 2010 2011 2012*0

5

10

15

20

25

30

35

40

45

50

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

24 23 23 24 2527 28

34

45

2427

33 34

328,634347,285

385,397403,528

Active PermitsPermits ProducingAle/Beer Produced

Num

ber o

f Bre

wpu

bs

Gallo

ns

Growth in Brewpubs and Gallons Produced

Increase in Label Applications FY 2008 – FY 2012

FY 08 FY 09 FY 10 FY 11 FY 120

5,000

10,000

15,000

20,000

25,000

1,360 1,139 1,368 1,738 2,6851,664 1,344 2,074 2,056 2,914

11,6059,900 9,245 9,993

14,88314,629

12,383 12,68713,787

20,482

Malt Beverages Distilled SpiritsWine All Classes

97% growth 28% growth 40% growth75% growth

Cash / Credit Law StatuteSec. 102.32. SALE OF LIQUOR: CREDIT RESTRICTIONS.

(c) On purchases made from the 1st through 15th day of a month, payment must be made on or before the 25th day of that month. On purchases made on the 16th through the last day of a month, payment must be made on or before the 10th day of the following month.

(d) Each delivery of liquor shall be accompanied by an invoice giving the date of purchase. If a retailer becomes delinquent in the payment of an account for liquor, the wholesale dealer immediately shall report that fact in writing, including by e-mail or fax to the commission or administrator. A wholesale dealer may not sell any liquor to a retailer who is delinquent until the delinquent account is paid in full and cleared from the records of the commission. An account becomes delinquent if it is not paid when it is required to be paid under Subsection (c).

Delinquent List Rule History• 2009 - Implemented a web-based reporting system.• 2009 - Eliminated any delay between the publication

date and the effective date of delinquent list.• 2009 - Announced plan to align the delinquent list

publication date with the credit law payment due date. Through Rulemaking, TABC intends to reduce the period before the publication date by two days every year for five years.

• 2010 - Through Rulemaking, moved the publication/effective date up two days (10 to 8 days).

• 2011 - Through Rulemaking, moved the publication/effective date up two days (8 to 6 days).

Delinquent List Current Rule

• Rule 45.121 Effective November 10, 2011• 45.121 (j)(2) The Delinquent List will be published

the 3rd day of the month for purchases made from the 1st to the 15th day of the preceding month, for which payment was not made on or before the 25th day of the preceding month. The Delinquent List will be published the 18th day of the month for purchases made between the 16th and the last day of the preceding month for which payment was not made on or before the 10th day of the month.

• 45.121(j)(3) The Delinquent List is effective at 12:01 A.M. on the date of publication.

Delinquent List Future• Rule 45.121• Planned rule changes

– 2012 - Move the publication date up two days (6 to 4 days).

– 2013 - Move the publication date up two days (4 to 2 days).

– 2014 - Move the publication date up two days to coincide with the credit law payment due date as laid out in statute 103.02 (10th and 25th day of the month).

FY 2010 FY 2011 FY 2012 (est.)0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,00036,252

27,91932,212

Reported Credit Law Defaults

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 (est.)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

$0

$100

$200

$300

$400

$500

$600

$700

28,628

31,612

11,1605,325 5,589

$619

$600

$86 $37 $78

Published Credit Law Defaults

# DefaultsAmount (millions)

Publ

ishe

d D

efau

lts

Valu

e (M

illio

n D

olla

rs)

FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 (est)

$0

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

$1,600,000

$1,208,163$1,380,621

$1,498,297

$526,644

$1,098,390

Unpaid Credit Law De-faults

FY 2008

FY 2009

FY 2010

FY 2011

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000

$612,200

$418,462

$855,717

$171,388

$348,084

$664,311

$470,703

$302,937

$247,879

$297,848

$171,877

$52,319

$1,208,163

$1,380,621

$1,498,297

$526,644

Unpaid Credit Law DefaultsBy Permittee Class

Total Unpaid DefaultsAll OthersMixed Bev-eragePackage Stores

Looking Ahead:83rd Legislative Session

November 6, 2012 – General Election

November 12, 2012 – Pre-filing of bills

January 8, 2013 – 83rd Legislature convenes

March 8, 2013 – Last day to file regular bills

May 27 – Sine Die

June 16 – Last day Governor can sign or veto bills

LAP Interim Charge

Review the alcoholic beverage licensing and permitting process. Explore possible reforms with interested stakeholders to streamline and improve the process.

Code Inconsistencies “Leveling the Playing Field”

AKA avoiding lawsuits the state may lose

– Wineries– Breweries– Brewpubs– Distilleries

• Sunday Sales• Limitations on Package Store

Ownership• Consanguinity Exception• Public vs Private Ownership

Package Store Issues

Legislative Appropriations RequestExceptional Items

FY 2014 – FY 2015

TABC General Revenue Base Request GR Exceptional Item Request 1. 1% Health Insurance Cost 2. Data Center Services Contract Increase 3. Operational Cost Increases 4. Public Safety Initiatives 5. Ports of Entry - Regulation 6. IT Enhancements 7. Education/Prevention Programs 8. Transfer to Texas Dept of AgricultureTotal, GR Exceptional Item Request

Total, TABC GR Request

Biennial Total $83,180,005

629,899113,330

2,266,9583,338,1861,292,1152,583,285

380,000500,000

$11,103,773

$94,283,778

TABC Organization Chart

Posting for Chief of Field Operations

August 6th to 24th

Posting for Asst Administrator

July 16th to August 3rd

Questions?