Beer law practice developing in tandem with market
Matthew Chaney//August 13, 2018
Beer law practice developing in tandem with market
Matthew Chaney//August 13, 2018//
In Richmond, it seems that with every new month comes another new brewery, bringing with it all sorts of strange and unique hops and sours, saisons and stouts.
With each brewery comes the promise of urban renewal, as beer drinkers from inside and out of the city line up to sample the tasty beverages, often in converted warehouses and factories both on the city’s fringes and downtown.
Richmond is not alone in Virginia in its love of drink made from yeast-fermented malt, flavored with hops.
A quick glance at BeerAdvocate.com shows that virtually every city in Virginia—from Alexandria to Danville to Bristol to Virginia Beach—can now boast its own beer maker. Many have more than one brewery in town.
With such a renaissance in full effect, it begs the question, why is this happening now in Virginia, and what do brewers need to know, legally, to continue pursuing their hoppy dreams?
“A big change happened in 2012 when Virginia changed their rules to allow brewery tasting rooms to serve full pours of beer for on-premise consumption,” said Daniel J. Christopherson, an attorney at Lehrman Beverage Law in Fairfax County. “That was when the floodgates opened to the point where new breweries seemed to be opening every week.”
Christopherson is just one of six attorneys working in beer law at the Northern Virginia-based firm founded by Robert C. Lehrman. Without listing clients, he said their firm represents about 25 Virginia breweries.
Lehrman, who’s been working in the industry since 1988, and at his own firm since 2001, said that he thinks the biggest difference, besides the law, is that people followed the example of successful craft beer companies like Sam Adams and Sierra Nevada.
“I think what happened is a few people did it and succeeded … showed it could be done, that you can take on the Coorses and the Anheuser-Busches of the world and you can find your own way,” Lehrman said.
Lehrman said that beer laws vary drastically from state to state, largely because the 21st Amendment repealing prohibition gave states control over their own beer and alcohol laws.
Christopherson said Virginia differs from some of the surrounding states in that it has laws which make it illegal for breweries to distribute their own beer. Instead they must solicit the help of a third-party distribution company.
Brandon T. Carter, who deals in beer-related law in Richmond, described this model as a three-tier system.
“The biggest difference between Virginia and surrounding states is self-distribution,” Carter said. “You’ve got the manufacturer, the wholesaler and the retailer … In North Carolina, you can self-distribute a significant amount … but in Virginia, you can’t do it.”
Christopherson said the way the system is arranged sometimes leads to conflicts between distributors and manufacturers.
“Virginia has strict tied-house laws that make it very difficult for a brewery to terminate its relationship with a distributor as to an assigned territory,” Christopherson said.
“The idea is if we want to change wholesalers, may we do so?” Lehrman said, describing a common contract problem for brewers in Virginia. “It’s tricky because the wholesaler owns the rights to distribute the beer.”
Apart from the potential for conflicts between brewers and distributors, all three attorneys agreed that Virginia’s laws are favorable to brewing, which could also be a factor in the recent renaissance.
“Virginia is a very conducive, hospitable place for food businesses and beverage businesses,” Lehrman said. “I strongly recommend companies situate here.”
According to statistics published on the website of the Brewers Association, a national craft beers trade group, Virginia has 190 craft breweries. BeerAdvocate.com says the state has 242. In total, these businesses create about $1.4 billion in economic impact to the state, the Brewers website said. According to them, this makes Virginia the 18th most profitable craft beer market in the country.
Another factor could be the congenial nature of brewers in the state, which allows for a sharing of ideas and business.
“Guys tend to work together as much as they can,” Carter said. “They’re competitors, but they band together to form groups like Richmond Breweries United.”
According to the group’s website, Richmond Breweries United was formed in an effort to “educate others about Richmond’s rich beer culture and to grow beer tourism.”
Christopherson said that in Loudon County, brewers have banded together to form a similar guild in an attempt to leverage their collective bargaining and political power. As a result, they are leading the push, along with the Virginia Craft Brewers Guild, in proposing new laws concerning beer advertising.
“Breweries are now pushing to amend archaic rules prohibiting the advertising of sales on alcohol,” Christopherson said.
As to the question of how long can Virginia keep opening new breweries before the market is saturated, all three attorneys said as long as creativity continues, the market will continue to grow.
“I still think there’s room if you’re doing something different and something amazing,” said Lehrman. “It’s a complete waste of time if you say, ‘We’ll succeed because we’re buddies and we make great beer and we have a cool location.’ It has to be something more than that … a unique selling proposition, and then there’s room.”
Carter said innovation is key.
“As long as folks keep creating new styles of beer, as long as pioneering keeps happening, people will continue to drink beer and growth will continue,” Carter said.
Offering advice to the home brewers thinking about quitting their firm to join the blue collar world of beer manufacturing, Lehrman said it can be done, but it isn’t easy.
“It is attainable, but it is also pretty hard,” he said. “There’s tons of competition and the barriers to entry are fairly high, with permits and other regulations, but not outrageously high because so many thousands of companies have been able to penetrate the market.”