RICHMOND, Va. (WRIC) — Major legislative change could be coming to Virginia’s craft beer industry if recently announced lobbying plans are successful in the upcoming General Assembly session.

The Virginia Craft Brewers Guild (VCBG) announced its intent this month to develop the Virginia Beer Distribution Company, modeled after the Virginia Winery Distribution Company (VWDC) within the Virginia Department of Agriculture and Consumer Services (VDACS), and allow all brewery licensees to have limited self-distribution directly to retail licensees.

As codified in the Beer Franchise Act in the Code of Virginia, the current model for the Commonwealth’s craft brewers limits them to a single distributor, which is then responsible for the delivery and circulation of products.

“These laws were written a very long time ago, and this is when most distributors were smaller, family-owned distributors, who were getting contracts with very large breweries,” David Gott with Richmond-based Legend Brewing Co. told 8News. “It was meant, at that point, to shield a distributor from taking on a big brewery and really kind of building their brand, spending their treasure and their sweat and their blood building the brand, and then having the larger distributor yank it away from them.”

But, since the introduction of SB 604 during the 2012 legislative session, Gott said that the landscape has changed.

“The problem now is, it’s the exact opposite. The distributors are huge conglomerates, some of them nationally owned — many of them nationally owned — and the breweries are small,” he said. “The onus is kind of put on the breweries to try and get distributors to pick up their beers and push their beers, and with the onslaught of a number of breweries that have been coming up over the last, say, 12, 13 years, there’s so many and there’s so few distributors now.”

A proposed legislative change could allow small, local breweries like Richmond-based Legend Brewing Co. to independently distribute their product right to retailers. Credit: Olivia Jaquith.

Gott noted that each of the few distributors in and around the greater Richmond area only have so many beers that they can purchase and then circulate.

“They can hold X amount of cases of beer and X amount of kegs, and if you quadruple the amount that is available, they have to start cutting somewhere,” he said. “When we started, our distributor carried everything we would make, […] now, they cut us back to, ‘We’re going to sell this, this, this and this,’ and, ‘You have a pilsner, but we’re not going to sell your pilsner because I got to sell this guy’s pilsner, keep him happy, and this guy’s got a porter, so I’m going to sell his porter and not your porter.'”

Gott said that Legend Brewing Co. has “a good relationship” with its distributor. But the model as it currently exists makes distribution difficult for smaller and new breweries.

“If you’re trying to break into the business, I mean, you practically have to go in on your hands and knees, begging,” he said. “They’re going to give up a footprint for something they’ve already got, and you’ve got to convince them that what you’re trying to bring them will make more money with that footprint.”

Gott said that distributors also have the final say on pricing, and that breweries are not permitted, by law, to engage in circulation contracts with multiple distributors in a single territory.

The proposed Virginia Beer Distribution Company could change that.

Under current distribution practices, small breweries like Legend Brewing Co. may not be able to stock all of their products with retail partners. Credit: Olivia Jaquith

According to a VCBG release, the company would share the VWDC order, fulfillment system and staff for purposes of efficiency and economies of scale. It would also have an advisory board of industry representatives. Participating brewery licensees would pay a license fee, as well as a transaction fee to support the operation. The Virginia Beer Distribution Company would then operate virtually within VDACS.

“The VCBG’s founding was driven by the need to make important legislative changes that would ensure the growth of craft beer in Virginia,” VCBG Leadership Council Chair Janell Zurschmeide, with Dirt Farm Brewing, said. “We are now the number-one southern craft beer state per capita, so this initiative is part of a long legacy of responding to market needs.”

8News spoke with VCBG President and CEO Brett Vassey on Friday, who said that the guild is pursuing “some of the most aggressive public policy priorities in its history.”

According to a release, VCBG is currently working with the Virginia Alcoholic Beverage Control Authority (ABC), VDACS, the Virginia Wineries Association, the Virginia Wine Wholesalers Association, the Virginia Beer Wholesalers Association, key General Assembly members, and Governor Glenn Youngkin’s office to “conduct research to determine the appropriate fee structure and general fund appropriation to adequately address staffing needs and information technology system upgrades for the company, develop rules for operating within exclusive distribution territories; and determine the annual number of barrels that will be allowed to be distributed by beer licensees.”

“Primarily, these are going to be brewers under 5,000 barrels a year. These are the small breweries. There are 314 licensed breweries in Virginia, and the vast majority, well over 70%, fit that profile,” Vassey said. “This is a way for the industry to build brands on its own, and it gives a lot more opportunity for the existing distribution companies to pick and choose who they can help take to the next level, once they’re ready.”

The working group will make a report to the Virginia House and Senate by Oct. 1, 2022.

“It gives them a venue for their beer outside of their tasting room,” Gott said. “I think for the smaller breweries, if they go with the Virginia Beer Distribution Company, […] what it means is mostly — probably almost all — draft beer going into small, privately owned venues, you know, your local, favorite place.”