In the last three years, Virginia has landed new multi-million dollar facilities for West Coast craft brewing giants Stone, Deschutes, Green Flash and Ballast Point breweries. We find out what lured them here, and why Virginia may be the new East Coast center of the craft beer universe.
Beers on tap at Stone Brewing in Richmond.
Deschutes Brewery in Bend, Oregon.
A customer at Ballast Point in San Diego.
Ballast Point brewhouse.
Deschutes tasting room in Bend, Oregon.
Stone Brewing owners Greg Koch and Steve Wagner.
In a movie, the story might be played for slapstick: a frantic last-minute phone call; a mad-cap drive with a full keg of beer bouncing along in the back; a business deal signed to a soundtrack of the Grateful Dead’s greatest hits. But in the early morning of Dec. 16, 2015, when Gov. Terry McAuliffe called Virginia Secretary of Agriculture Todd Haymore, it was serious business: “Todd, I need a keg of Deschutes beer in the executive mansion by dinner tonight.” When Haymore expressed doubt that such a relatively rare brew in Virginia could be found on such short notice, McAuliffe responded, “Todd, if the keg isn’t there tonight, don’t bother coming in tomorrow.” Haymore is still unsure if the threat was genuine.
At the time, beer from Deschutes—a prominent craft brewer based in Bend, Oregon—was hard to come by in Virginia. But after a series of frantic calls, Haymore located a single keg of Mirror Pond Pale Ale at a tiny specialty beer shop in Sterling. Luckily, a representative from his office traveling in D.C. was able to retrieve the keg and hustle it back to the executive mansion kegerator in time for dinner.
Why the last minute beer run? The keg was the crowning touch in a four-year campaign to woo Deschutes into building its new East Coast facility just outside of Roanoke. “Anyone can get a six pack,” says Haymore. “But a full keg, here? Now that’s impressive.” Indeed, with the Grateful Dead setting the mood (research showed the band was a favorite of company president Michael LaLonde), McAuliffe sealed the deal: A new $85 million brewing facility creating more than 100 new jobs.
It turns out Deschutes is just one of four large craft brewers from the West Coast that have
chosen Virginia for new East Coast operations in the last three years. Escondido, California-based Stone Brewing has recently shipped the first barrels produced in its new $74 million, 200,000-square-foot Richmond facility. Ballast Point, from San Diego, is investing $48 million into transforming a 259,000-square-foot building into a brewery in Roanoke. And on Nov. 13, 2016, Green Flash—also from San Diego—opened its $20 million, 58,000-square foot brewery and beer garden in Virginia Beach.
All four brewers list similar reasons for selecting Virginia as the home of their East Coast headquarters—strong food and outdoor culture, friendly business environment, central location perfect for widespread shipping, and, for some, the over-the-top campaigns waged by local and state government officials to get them here.
The Business of Craft
For the past decade craft brewers—that is, companies that produce fewer than 6 million barrels a year, are less than 25 percent corporate-owned and adhere to strict ingredient standards—have been capturing more and more “throat share” from bigger national corporations. Once a miniscule fraction of the market, according to the Brewers Association (an industry group that tracks beer sales), in 2015 craft accounted for about 13 percent of all beer sold by volume in the U.S. When calculated by percentage of retail dollars, that number rises to about 21 percent. Overall, the beer market in the U.S. was worth just shy of $106 billion last year—and $22.3 billion of that belonged to craft. (Even larger companies are getting in on the action: Spirits company Constellation Brands purchased Ballast Point in late 2015 for $1 billion.)
With six-packs running upward of $15, the discrepancy has to do with the fact drinkers are willing to pay extra for craft. “It’s a question of quality,” says Ballast Point vice president of marketing Hilary Cocalis.
In 2015, the Commonwealth counted 124 craft breweries in the state, with more opening every month. Brewers Association chief economist Bart Watson says the market isn’t even close to the saturation point, claiming there’s lots of room for growth before we hit “peak craft.” And attracting well-known national craft brewers can have a network effect that boosts tourism to smaller breweries as well. “One big brewery can act as an anchor for tourism,” explains Watson. If you brew it in Virginia, they will drink it in Virginia.
The Path to Success
Ann Blair Miller, the director of business investment at the Roanoke Regional Partnership who worked with both Deschutes and Ballast Point, says Roanoke learned valuable lessons when it missed out on landing Sierra Nevada—a Chico, California-based brewer that, in 2014, considered the city as a finalist for its new $110 million East Coast facility before ultimately choosing to build in Asheville, North Carolina.
From Sierra Nevada, Miller learned that West Coast brewers were particularly attracted to the region’s outdoor culture, so she cold-called both Deschutes and Ballast Point in the early summer of 2012 to solicit their business, leading with a description of the area’s active lifestyle and surrounding natural splendor. At first, she says, the breweries “weren’t really familiar with us, Roanoke wasn’t on their radar at all.”
Working in the city’s favor were important demographic and logistical considerations: The I-64, I-95 and I-81 corridors placed Virginia-made beer within a short truck ride of most major East Coast metropolitan areas. As beer is heavy and expensive to ship, and tastes better when fresh, location was important to brewers.
But there was one big obstacle. At the time, patrons couldn’t consume beer at a brewery unless it came from an attached full-service restaurant. Previously, West Coast brewers like New Belgium Brewing and Oskar Blues had passed on Virginia due to this limitation, opting to build their multi-million-dollar expansions in North Carolina where on-site brewery beer sales were legal.
The game changed in early 2012 when Virginia Senate Bill 604 (SB 604) was passed, allowing breweries to sell beer in on-site taprooms. “Brewpub laws are a fundamental component of selecting a location,” says Deschutes’ founder and CEO, Gary Fish. “They play an extremely important role in the growth of craft beer and local breweries, and growth in the Southeast won’t happen without those laws. You need to connect with consumers directly.”
“Virginia was eliminated mainly because of the inability to have a tasting room at the brewery,” says chief operating officer at Green Flash, Chris Ross, qualifying the company’s initial decision to build its new facility in Wilmington, North Carolina. “We had settled on Wilmington, then everything changed after SB 604.” Green Flash reversed its decision in 2013, designating Virginia Beach as the perfect cultural fit to mirror the vibe at its San Diego headquarters. The new facility opened to the public last November.
Getting to Know You
When Miller cold-called Deschutes in May of 2012, the brewery wasn’t even officially looking for a new location. “But we wanted them to know us,” she says. “We wanted them to know Roanoke was ready when the time was right.”
Soon Deschutes heard the city’s name again, this time from Stone Brewing. The latter’s corporate operations officer, Patrick Tiernan, had a cordial relationship with his counterparts at Deschutes, and, with Stone considering Roanoke as a possible new location, Tiernan offered them a tip: “I walked off the site in Roanoke, called Deschutes and said, ‘You’re such an outdoor-oriented company, you should check this out.’”
And check it out they did. From a list of more than 100 possible locations, Deschutes selected Roanoke, citing available infrastructure, transportation savings and the “high-impact” outdoor lifestyle of the area as deciding factors. “The Southeast used to be considered a craft beer wasteland,” says Fish. “But we fundamentally believe there is plenty of room here to grow.” (Construction is set to begin in 2019.)
Similarly, Miller reached out to Ballast Point in March 2015. After an hour-long phone call, she had the company considering Roanoke as a viable location. Less than a year later, at the 2016 Craft Brewer’s Convention in Philadelphia, the Ballast Point expansion team sat down with McAuliffe, Miller, Haymore and a representative from the Virginia Economic Development Partnership to talk details. Two months later, the company officially named a Roanoke-area industrial park the site of its new facility. (Construction has begun and the facility is expected to be operational by summer 2017.)
To land Stone Brewing, McAuliffe—whom Haymore calls “Virginia’s marketer-in-chief”—brought the same showmanship to the process he’d used with Deschutes. To help make his case at the brewer’s offices in Escondido, the governor brought along a Thomas Jefferson impersonator (in full period garb) to extoll the virtues of the Commonwealth, and gifted Stone executives with a custom bottle opener adorned with the Stone company gargoyle and the goddess Virtue, who stands on the Virginia state seal.
The brewer was impressed by the governor’s level of commitment. “The hand-holding throughout the process was second to none,” says Tiernan. Virginia is home to three of the final five locations considered by Stone: Roanoke, Richmond and Norfolk (the others were Columbus, Ohio, and Asheville, North Carolina). When city officials brought them to the eventual location in the Fulton neighborhood, Greg Koch, Stone’s founder, was smitten: “Greg walked around the facility and you could just see it in his eyes.”
Stone began construction in early 2015; work in the facility is ongoing, but the tasting room has been open since February 2016. Last June, the company rolled out the first kegs brewed in Richmond. And a Stone restaurant is expected to open in the nearby old Intermediate Terminal building within the next two years.
Public Debate
One element of the Stone deal that has been hotly debated is the public funding allocated to Stone by city and state governments. Richmond provided the brewer with $28 – $31 million worth of funding from local city bonds, plus an additional $7 million in state money. Proponents argue that over the next 25 years, those bonds will be repaid with Stone’s taxes.
But some owners of local restaurants and small breweries see public funding for Stone as a way of tilting the playing field against smaller Richmond businesses. Eric McKay, a co-founder of Hardywood Craft Park Brewing in Richmond, told the Richmond City Council that “the disparity in the city’s financial support for Stone versus its homegrown breweries and restaurants is vast.”
All four of the new Virginia breweries received public funds as part of incentive packages. This practice is common, but most of the brewers generally agree that this money, while valuable, is less of a deal breaker than the public might think. “Grants are important,” concedes Deschutes’ Fish, “but they’re not really the deciding factor at the end of day. Most places had some kind of incentive package that spoke to our economic needs. We put that aside and picked the place we need to be.”
On a recent Saturday afternoon at the Stone tasting room in Richmond, every table was full, a glass of tawny amber or pale straw brew in every hand. No one was thinking about the showmanship, logistics, or time spent agonizing over supply chains and refrigerated trucking that went into bringing the brewer to River City.
Drinkers stacked five deep at the two bars gazed upward at a handwritten chalkboard menu listing tasting notes for the beers available on tap. Shadows lengthened and the sun waned over the James River, but the party showed no signs of stopping. BallastPoint.com, DeschutesBrewery.com, GreenFlashBrew.com, StoneBrewing.com
This article originally appeared in our February 2017 issue.
