I am writing in support of approving "3VAC5-60-110. Contract brewing arrangements" as written.  The language of this regulation, written with input from Curtis Coleburn, COO of the Virginia ABC, as well as the Virginia Beer Wholesalers Association, will allow more opportunity for business and growth for small breweries and craft beer wholesalers throughout the Commonwealth.

I, personally, am the founder and president of a soon-to-open a brewery in Sterling, Virginia.  I am painfully aware that starting or expanding a brewing operation can cost from hundreds of thousands of dollars to millions of dollars in equipment and building space.  This new regulation will allow breweries to more easily utilize their unused resources to produce for other licensed breweries to promote growth and steady business.  It is a “win-win” for both established breweries and new breweries, as well as for the economy of the Commonwealth of Virginia.  For example, Virginia brewery, “A,” that has excess brewing capacity will be able to enter into an agreement with small, licensed start-up brewery, “B,” to use that excess capacity to produce beer for them.  This allows brewery “A” to generate revenue with expensive equipment that might otherwise be sitting idle and allows brewery “B” to get product to market without the tremendous initial investment of large-scale equipment.  This bill would also enable Virginia breweries to produce beer for out-of-state breweries looking to enter the Virginia market instead of having to ship their product in from great distances.  This would create more business, more jobs and more tax revenue for Virginia that would otherwise be generated out of state.  Finally, with the growth and addition of new, locally oriented craft breweries, there will be an increase in demand for locally grown Virginia barley and hops.  Craft breweries and their clientele are always interested in locally sourced ingredients promoting a boost in Virginia agriculture business.

Facts from the Brewer's Association:

• 1,753 breweries operated in the U.S. for some or all of 2010, the highest total since the late 1800s
• 1,927 breweries operating in the U.S. for some or all of 2011, as of November 2011
• 2,347 craft breweries operated in the U.S. for some or all of 2012, comprised of 1,132 brewpubs, 1,118 microbreweries and 97 regional craft breweries
• As of October 2011 there are 36 operating breweries in Virginia and 23 breweries in planning
• Craft brewers currently provide an estimated 108,440 jobs in the U.S., including serving staff in brewpubs
• Growth of the craft brewing industry in 2012 was 15% by volume and 17% by dollars compared to growth in 2011 of 13% by volume and 15% by dollars
• Craft brewers sold an estimated 13,235,917 barrels* of beer in 2012, up from 11,467,337 in 2011
• The craft brewing sales share in 2012 was 6.5% by volume and 10.2% by dollars
• Craft brewer retail dollar value in 2012 was an estimated $10.2 billion, up from $8.7 billion in 2011

* 1 barrel = 31 US gallons

In summary, the craft beer industry continues to see tremendous growth despite a down economy and a decrease in overall beer sales in the U.S.  Beer consumers these days are willing to pay more for a craft beer brewed locally.  By adopting this regulation as written, we can reduce the financial barrier to market entry and expansion for brewers in Virginia and increase business, jobs and tax revenue, as well as the demand for local produce throughout the Commonwealth.

Thank you for your consideration.

Sincerely,

Sten Sellier

Beltway Brewing Company