State budget funds launch of self-distribution arm for Virginia breweries

beer1

The new regulation has been years in the making. (BizSense file photo)

Virginia’s beer industry had reason to raise a pint to last week’s signing of the state budget.

The General Assembly’s now-finalized annual budget included funding for the creation of the Virginia Beer Distribution Co., a new division of the state’s Department of Agriculture and Consumer Services that will allow breweries to self-distribute limited amounts of beer to retailers and restaurants while bypassing traditional third-party distributors.  

The VBDC’s existence was made official last week when Gov. Glenn Youngkin signed the state budget after months of delays. 

The new distribution company will offer Virginia breweries a limited way to side-step the state’s current “three-tier system,” that requires that breweries sell their product to a distributor, which then sells it to retailers and restaurants. 

The Virginia Craft Brewers Guild and the Virginia Beer Wholesalers Association spent years negotiating the matter, and successfully lobbied for it at last winter’s General Assembly session. Del. Roxann Robinson (R-Chesterfield) patroned the bill, which was branded as the Beer Industry Limited Distribution (BILD) Act. 

Under the arrangement, Virginia breweries are allowed to use the VBDC’s Alcoholic Beverage Control license to sell directly to accounts, however they can’t self-sell more than 500 barrels (approximately 1,400 kegs) annually. That limitation means the VBDC is likely to cater primarily to smaller breweries and those that don’t have a relationship with an outside distributor. 

Phil Boykin Jr

Phil Boykin

Phil Boykin, the VBWA’s President and CEO, said he’s glad that the many Virginia craft breweries that haven’t signed distribution agreements now have an avenue to explore shipping their beer out.

“(Craft breweries) now have a way to go to market to the retail side and grow their business,” Boykin said. “If they grow beyond what the VBDC can serve, that would be a success story…It’s just another option for small businesses to operate their business as they see fit.”

Brett Vassey, the VCBG’s President and CEO, said the idea of self-distribution for Virginia breweries was “fundamentally impossible,” 10 years ago, and that even after the BILD Act was passed in February, they were bracing for it to get tied up in the funding process. 

“We were really prepared for a 2-to-5-year window just to get it right. To get it in our first shot is really a testament, quite frankly, to everybody trying to help the industry,” Vassey said. “Everybody involved was trying to get to ‘Yes,’ without sacrificing some of their own principles.”

VDACS received an extra $458,000 in the budget to fund its start-up costs this year, and the BILD Act included an additional $784,000 to fund it for the following two years. 

vassey1

Brett Vassey

Vassey said the Brewer’s Guild projects that the VBDC eventually would more than pay for itself in new revenue. The guild’s projections show that if 100 breweries self-distributed 500 barrels of beer through the VBDC in a given year, it’d bring in $6.9 million in tax and fee revenue to the state.

The VBDC is planned to operate as an online portal through which retailers could purchase beer from registered breweries. Taxes and fees would be collected at the time of sale and would go into the ABC’s budget. The breweries would be responsible for delivering beer sold through the VBDC.

The next steps for the VBDC include hiring staff, appointing a board of directors, purchasing a point-of-sale system and developing a marketing and operations plan. If everything goes well, Vassey said Virginia breweries could be self-distributing through the VBDC by late 2024. 

“We’re trying to manage expectations and be good partners with (VDACS) and make sure that the (brewery) industry is patient,” Vassey said. “We have to get this right the first time.”

One unknown factor is what the demand would be from the state’s 344 craft breweries to use the VBDC. Boykin estimates that at least half of the breweries in the state don’t distribute their beer and that he has faith VDACS will roll out the program in a smooth manner.

“I want it up and running as soon as reasonably possible, I want it to be successful,” Boykin said. “I know there are gonna be hiccups. There’s always hiccups whenever you start something new, but I don’t want the hiccups to be big ones.”

As construction on new brewery Hidden Wit Brewing Co. nears completion in Moseley, co-owner Butch Taylor said it’s nice know that the VBDC might be an option, should Hidden Wit ever look to get into the distribution game.

“I’m hoping we sell every ounce of beer we make right here at the brewery, but I think (self-distribution) is good. We’ll take advantage of it if we can,” Taylor said. “We may do it one day, but we’re just trying to get our doors open now.”

Fine Creek Brewing Co., a farm brewery in Powhatan, bottles and distributes some of its beer to bottle shops around Central Virginia, but owner Mark Benusa said its production capacity is so small that distributing even more through the VBDC could put a strain on its taproom.

“We might be too small. We don’t plan to use it since we send out so little. It’s hard to make it worth it,” Benusa said. “When we were first getting going, we would have entertained it a bit more.”

Eric Tennant owns Benchtop Brewing Co., a Norfolk-based brewery that opened a Manchester taproom last year. He said if the VBDC were around when he founded Benchtop in 2016 he’d have looked to use it, however now that he’s signed with distributors, it’s not something he intends to use.

“It only really benefits breweries that haven’t previously distributed, or they’re new,” Tennant said. “It’s beneficial, and a step in the right direction, for sure, but it doesn’t really help (us).”

The VBDC was built to mirror a similar mechanism that the state’s winery industry successfully lobbied for in 2007, fittingly named the Virginia Wine Distribution Company.

Now that the VBDC is set up, Vassey said it might become a blueprint itself. 

“It’s the only one of its kind in the nation. We just had a meeting with our national (brewers) association and no (other state) has done limited self-distribution in this manner. We’re really excited to be the first,” he said. “If we can do it, others can do it.”

beer1

The new regulation has been years in the making. (BizSense file photo)

Virginia’s beer industry had reason to raise a pint to last week’s signing of the state budget.

The General Assembly’s now-finalized annual budget included funding for the creation of the Virginia Beer Distribution Co., a new division of the state’s Department of Agriculture and Consumer Services that will allow breweries to self-distribute limited amounts of beer to retailers and restaurants while bypassing traditional third-party distributors.  

The VBDC’s existence was made official last week when Gov. Glenn Youngkin signed the state budget after months of delays. 

The new distribution company will offer Virginia breweries a limited way to side-step the state’s current “three-tier system,” that requires that breweries sell their product to a distributor, which then sells it to retailers and restaurants. 

The Virginia Craft Brewers Guild and the Virginia Beer Wholesalers Association spent years negotiating the matter, and successfully lobbied for it at last winter’s General Assembly session. Del. Roxann Robinson (R-Chesterfield) patroned the bill, which was branded as the Beer Industry Limited Distribution (BILD) Act. 

Under the arrangement, Virginia breweries are allowed to use the VBDC’s Alcoholic Beverage Control license to sell directly to accounts, however they can’t self-sell more than 500 barrels (approximately 1,400 kegs) annually. That limitation means the VBDC is likely to cater primarily to smaller breweries and those that don’t have a relationship with an outside distributor. 

Phil Boykin Jr

Phil Boykin

Phil Boykin, the VBWA’s President and CEO, said he’s glad that the many Virginia craft breweries that haven’t signed distribution agreements now have an avenue to explore shipping their beer out.

“(Craft breweries) now have a way to go to market to the retail side and grow their business,” Boykin said. “If they grow beyond what the VBDC can serve, that would be a success story…It’s just another option for small businesses to operate their business as they see fit.”

Brett Vassey, the VCBG’s President and CEO, said the idea of self-distribution for Virginia breweries was “fundamentally impossible,” 10 years ago, and that even after the BILD Act was passed in February, they were bracing for it to get tied up in the funding process. 

“We were really prepared for a 2-to-5-year window just to get it right. To get it in our first shot is really a testament, quite frankly, to everybody trying to help the industry,” Vassey said. “Everybody involved was trying to get to ‘Yes,’ without sacrificing some of their own principles.”

VDACS received an extra $458,000 in the budget to fund its start-up costs this year, and the BILD Act included an additional $784,000 to fund it for the following two years. 

vassey1

Brett Vassey

Vassey said the Brewer’s Guild projects that the VBDC eventually would more than pay for itself in new revenue. The guild’s projections show that if 100 breweries self-distributed 500 barrels of beer through the VBDC in a given year, it’d bring in $6.9 million in tax and fee revenue to the state.

The VBDC is planned to operate as an online portal through which retailers could purchase beer from registered breweries. Taxes and fees would be collected at the time of sale and would go into the ABC’s budget. The breweries would be responsible for delivering beer sold through the VBDC.

The next steps for the VBDC include hiring staff, appointing a board of directors, purchasing a point-of-sale system and developing a marketing and operations plan. If everything goes well, Vassey said Virginia breweries could be self-distributing through the VBDC by late 2024. 

“We’re trying to manage expectations and be good partners with (VDACS) and make sure that the (brewery) industry is patient,” Vassey said. “We have to get this right the first time.”

One unknown factor is what the demand would be from the state’s 344 craft breweries to use the VBDC. Boykin estimates that at least half of the breweries in the state don’t distribute their beer and that he has faith VDACS will roll out the program in a smooth manner.

“I want it up and running as soon as reasonably possible, I want it to be successful,” Boykin said. “I know there are gonna be hiccups. There’s always hiccups whenever you start something new, but I don’t want the hiccups to be big ones.”

As construction on new brewery Hidden Wit Brewing Co. nears completion in Moseley, co-owner Butch Taylor said it’s nice know that the VBDC might be an option, should Hidden Wit ever look to get into the distribution game.

“I’m hoping we sell every ounce of beer we make right here at the brewery, but I think (self-distribution) is good. We’ll take advantage of it if we can,” Taylor said. “We may do it one day, but we’re just trying to get our doors open now.”

Fine Creek Brewing Co., a farm brewery in Powhatan, bottles and distributes some of its beer to bottle shops around Central Virginia, but owner Mark Benusa said its production capacity is so small that distributing even more through the VBDC could put a strain on its taproom.

“We might be too small. We don’t plan to use it since we send out so little. It’s hard to make it worth it,” Benusa said. “When we were first getting going, we would have entertained it a bit more.”

Eric Tennant owns Benchtop Brewing Co., a Norfolk-based brewery that opened a Manchester taproom last year. He said if the VBDC were around when he founded Benchtop in 2016 he’d have looked to use it, however now that he’s signed with distributors, it’s not something he intends to use.

“It only really benefits breweries that haven’t previously distributed, or they’re new,” Tennant said. “It’s beneficial, and a step in the right direction, for sure, but it doesn’t really help (us).”

The VBDC was built to mirror a similar mechanism that the state’s winery industry successfully lobbied for in 2007, fittingly named the Virginia Wine Distribution Company.

Now that the VBDC is set up, Vassey said it might become a blueprint itself. 

“It’s the only one of its kind in the nation. We just had a meeting with our national (brewers) association and no (other state) has done limited self-distribution in this manner. We’re really excited to be the first,” he said. “If we can do it, others can do it.”

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David Humphrey
David Humphrey
9 months ago

Wait, how is Fine Creek able to distribute an even smaller amount themselves? I thought all self-distribution was illegal before this. I hope they didn’t just out themselves.

Victoria Woodhull
Victoria Woodhull
9 months ago

I can’t decide if this is good or not. I do know that for small companies, large distributors like Brown, make it all but impossible for the small companies to get any real promotion/shelf space/etc. The article says “online portal through which retailers could purchase beer from registered breweries” Most retailers I know usually purchase from a sales rep that may offer some education/history/talking points on the micro brew. Good retailers want to tell the story to their retail customers. The retailers after the initial sale may reorder, but most will not without someone from the brewery “nudging” (selling) them… Read more »

Stephen Weisensale
Stephen Weisensale
9 months ago

I believe locally owned retailers like once upon a vine and Stellas will take advantage of this in order to separate themselves from the large retailers as the go to sources for small upstart brewers. Maybe even have a special section in the store for new small batch brewers. I would love to see this!

Victoria Woodhull
Victoria Woodhull
9 months ago

I agree – all I’m saying, is that most craft beer retail purchasers want to know they purchased something special – therefore they would love the “story”, and not just pick a bottle from the shelf at Stellas. Retailers who purchase the items on the online portal do not have the time to download the story from the portal – they need motivation/education from the brewery sales rep.

Ed Christina
Ed Christina
9 months ago

I think it’s more likely that the pent up demand for local brews would be met. There is a huge black market of people trading or selling beer from The Answer, The Veil and other places already. This would tap into that.

Shawn Harper
Shawn Harper
9 months ago
Reply to  Ed Christina

That’s pretty interesting Ed. HEY! Have you been to Tabol on the Northside? I frequently drive by there because I buy a lot from Habitat but have never stopped in — though when they opened they, like Veil, had a pretty funky-sounding mission statement for their recipies — I have a friend in Richmond who told me the beer they drank when his dad was stationed in Egypt was totally inconsistant — sometimes it tasted good, sometimes bad — and I said THAT will be the Latest Thing eventually — because hipsters are such ADD-novelty seekers!!! A beer that STAYS… Read more »

Ed Christina
Ed Christina
8 months ago
Reply to  Shawn Harper

Tabol is fine, I like The Lion’s Den better.

Shawn Harper
Shawn Harper
9 months ago

It’s good. And I never thought it would happen because the distributors have kept a gimlet eye on ANY weakening of their power/monopoly over this aspect of the EtOH industry in VA ever since the repeal of Prohibition. The intent of the VA (and other states, I know the NYS ones too) laws after the ammendment repealing another ammmendment (first in history of the USA) was to decrease the financial and hence political power of the alcohol industry by splitting up the profits into three parts. It was all political, and it had some rationale — as every leftist knows,… Read more »

Shawn Harper
Shawn Harper
8 months ago

Whoa!!! Lookit all the flying downvotes —- everyone got some BUT ME — that ain’t right!!! Someone give me a downvote so I don’t feel so nekked!!!

Oh, wait, Stephen down there got upvotes — never mind…