Is Virginia's Craft Brew Biz Fizzling Out, Even as Governor Pumps the Keg?

Oct 11, 2017

Governor McAuliffe has doubled down on Virginia’s craft brew industry, but some in the business wonder if that sector’s explosive growth has come at the expense of local players -- and if it's sustainable. WMRA’s Jessie Knadler reports on the craft brew enterprise in Virginia.

It’s no secret that outgoing Governor Terry McAuliffe has an ongoing love affair with Virginia’s craft brew industry.

GOV. TERRY McAULIFFE: There’s nothing like enjoying a cold Virginia beer here in the Commonwealth. That’s why I even installed a kegerator at the Executive Mansion.

A kegerator... That’s when you know it’s serious. So why all the brew love? It’s part of his administration’s push to diversify the economy by attracting businesses in new and growing fields. Craft brew spans several sectors of the economy: agriculture, tourism, manufacturing. Craft brew is good for a lot of businesses. And it’s not just about the beer.

LINDSAY DORRIER: We’re blessed with a number of orchards in close proximity to the cidery. We source all local apples from within 30 miles of the cidery.

Lindsay Dorrier is a vice president at Bold Rock, a five-year-old hard cidery headquartered along Route 151’s wine and brew corridor in Nelson County.

DORRIER: You’re more likely to purchase Bold Rock Hard Cider when you’ve visited us and you understand the ethos of the brand by actually being in the epicenter of it.

Other signs of McAuliffe’s bromance with brew: This year, he signed a bill that doubles the number of banquet licenses a brewery or winery can obtain in a year, which allows it to participate in more festivals. More festivals equal more tourism dollars. He  announced that Shenandoah Beerwerks Trail, a route of 14 breweries in the area, received $22,230 to develop a passport program. He recently approved a $15,000 grant to Stable Craft Brewery in Augusta County, and a $50,000 grant to Three Notch’d in Charlottesville. In exchange, the breweries will add new jobs and buy Virginia-grown products.

But his biggest brew coup by far has been to entice four major West Coast craft breweries to open East Coast facilities in Virginia: Deschutes, Stone, Green Flash and Ballast Point. All received millions of dollars in public funds – Stone alone received $33 million worth of public money to set up shop in Richmond. Such sweetheart deals are not uncommon, but for native players such as Devils Backbone it’s been a point of friction with McAuliffe’s mission.

STEVE CRANDALL: We have a belief that companies, especially wealthy companies, shouldn’t be using taxpayer funding to grow their businesses. We found a business solution to grow our business.

Steve Crandall is the CEO of Devils Backbone, and he’s referring to the 2016 sale of his company to Anheuser Busch InBev, a move that ended the brand’s craft status but allowed the company to keep growing amid stiffening competition from out of state. He says he’s “beer positive” and has nothing against the out-of-state breweries. His COO Hayes Humphreys says the problem isn’t so much the public funding itself, but rather whom the government decides it goes to – and how much.

HAYES HUMPHREYS: There have been a few nice incentive packages to craft brewers around the state but when you compare that to packages that have been put together for out of state craft brewers to open a second facility here, you know, there’s no comparison between those two dollars.

McAuliffe’s big push into craft is happening, ironically, in a cooling market. People aren’t knocking back as much craft as they were a few years ago. Production volume dropped to 5 percent from 8 percent last year, which itself was down from 18% growth in 2013, according to the industry journal Craft Brewing Business.  McAuliffe’s big bet on craft may actually backfire. A clue: Stone laid off 5 percent of its workforce last year, according to one industry observer.

CRANDALL: That sent shock waves in the entire industry. That great hey day of growth is slowing significantly. It’s more difficult for these little craft breweries to get out and make a decent living.

[fade up Great Valley Farm Brewery]

Nathan and Irma Bailey are still going to try. 

REPORTER: What are we looking at?

NATHAN BAILEY: So this is our brewing system right here…

They launched Great Valley Farm Brewery in Rockbridge County just one year ago, specializing in Belgian beer. They make a living selling pints from their taproom offering scenic views of the southern end of the County.

BAILEY: We've got a lot of entrepreneurial spirit -- we can do this. We make a quality product. We got a beautiful location. We wanted to share that with everybody.

To set himself apart, he’s growing grapes as well and hired a 25-year vintner veteran to help him make wine. Why? Remember the magic word – diversify.  Because not everyone likes beer.