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VCBG Managing Record Number of Regulations in Development
The VCBG regularly manages
20 or more bills each legislative session. However, the fastest growing government affairs responsibilities for the VCBG involves regulations impacting breweries and "grass roots" advocacy. Most of the regulations involve the VA ABC, but some have also involved the Virginia Department of Agriculture and Consumer Services (VDACS) and the Virginia Department of Health (VDOH) as well as some occasional local governments. This
Special Issue of The Virginia Craft Newsmaster is dedicated to updating members on major government affairs issues.
To become a member of the VCBG Government Affairs Committee, please
email Betty Arnold, VCBG Member Services Director, for more information.
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During the 2018 General Assembly session, the VCBG negotiated HB422 and SB306 with a delayed effective date of January 1, 2019. The legislation "...provided that not less than 20 percent of the volume of beer sold for on-premises consumption in any calendar year is manufactured on the licensed premises."
Since the passage of the legislation, the VCBG has advocated for an official "ABC Circular" to give breweries assurances of how the law will be applied. The most important clarification was how the ABC would define "manufacture." The good news is that we were successful and have come to an agreement with the VA ABC. They now have proposed a definition of "manufacture" for purposes of this regulation as follows:
"manufacture" includes, but is not limited to, beer brewed, blended, fermented, finished, aged or packaged on the licensed premises. Performing any of these processes will constitute "manufacture" in determining if 20% of the volume of beer sold on the licensed premises is produced on the premises.
Public comments are due on September 18, 2019. The VCBG will consolidate member comments and submit them by the deadline. Members should send their comments on this draft circular to barnold@vacraftbrewersguild.com by 12 pm on September 12, 2019.
Background: This bill was a beer wholesaler bill in the 2018 General Assembly session. It was intended to diminish the opportunity for a macro-brewery to simply open a franchise of "retail outlets with no real brewery on premise" and ship beer from a central brewery to those retail outlets directly, thus, bypassing the distribution tier. The retail/hospitality lobby also advocated to limit the entire expansion brewery model and establish a minimum 50% rule. Ultimately, the VCBG and beer wholesalers negotiated the "20% rule" and defeated the retail/hospitality lobby's efforts.
The VCBG Leadership Council and Government Affairs Committee began working on this proposal in October 2017, prior to the legislative session. They were able to negotiate a limit that would not harm the expansion brewery model, tasting room sales, contract brewing, or brewery-to-brewery transfers. The VCBG estimated that, under the 50%-100% rule proposals, many independent craft breweries would have failed, expansion breweries would have stopped and contract brewing would have been harmed.
Today we estimate that 30+ breweries were saved by the VCBG and its members' aggressive lobbying efforts.
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Brewery License & Fee Reform
VA ABC Completes Draft Legislative Reforms
The Virginia General Assembly directed the
VA ABC to evaluate the reform and consolidation of its licenses and fees in November 2018. Since that date, the VCBG has been participating in a stakeholder process with the VA ABC staff and other alcohol industry representatives. After nearly a year of meetings, the VCBG and VA ABC appear to be in agreement on condensing 35 manufacturer licenses down to 3. The 3 licenses will continue to recognize the current volume tiers, accommodate the existing privileges of farm wineries, and now include shipping, keg
and delivery privileges. The only proposed change is that breweries would have to purchase keg registration sticker books for cost.
- <=500 barrels manufactured = $350.00
- 501-10,000 barrels manufactured = $2,150.00
- ≥ 10,001 barrels manufactured = $4,300.00
The VCBG estimates that its work in this matter will save members $150,000+ over the next five years and will result in another $100,000 in cost avoidance.
The reforms will also consolidate 12 different Banquet Licenses to 5, including the Manufacturers' Banquet License. In the non-manufacturing license reforms, the greatest change was in creating a Marketplace License for establishments that serve, but do not sell, alcoholic beverages and to accommodate other business models for which such privilege would be appropriate, including retail cigar shops and co-working spaces. This new license was recommended and limits the amount of beer and wine served to each customer. This license will cost $2,000 annually. The VCBG did not oppose the beer and wine provision.
There was discussion about increasing license fees based upon on-premises and off-premises sales of manufacturers. The VCBG advocated against those proposals and the VA ABC did not recommend those changes (see page 12,
VA ABC License and Fee Report
, May 31, 2019).
Brett Vassey, VCBG President & CEO; Marc Haalman, VA ABC Special Agent in Charge; and Michael Berman, VA ABC Research and Planning, presented an overview of this plan to the membership at this year's Virginia Craft Beer Conference.
The VCBG will continue to advocate for additional reforms to VA ABC operations, including electronic tax payments and label reforms. This work will continue through the 2020 Virginia General Assembly and the rest of 2020. It will be one of the most important government affairs initiatives of the VCBG due to its impact on every member.
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Tastings
The VA ABC has issued Circular 19-02 clarifying the limitations of wholesalers and manufacturers in tastings at retail licensees. The principal language that affects breweries is as follows:
The licensee may also give samples of wine and beer in designated areas at events held by the licensee for the purpose of featuring and educating the consuming public about the alcoholic beverages being tasted. Additionally, with the consent of the licensee, farm wineries, wineries, breweries, and wholesale licensees may participate in tastings held by licensees authorized to conduct tastings, including the pouring of samples to any person to whom alcoholic beverages may be lawfully sold.
Public comments are due on September 18, 2019. The VCBG will consolidate member comments and submit them by the deadline. Members should send their comments on this draft circular to barnold@vacraftbrewersguild.com by 12 pm on September 12, 2019.
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Happy Hour Promotion
VA ABC Issues New Rules
The VCBG lobbied for
SB1726 in the 2019 General Assembly session to reform the Happy Hour Promotion laws.
The VCBG also participated in the ABC regulatory rules development process to ensure these regulations were extended to breweries. The final Happy Hour Promotion regulations are now posted on the
VA ABC website and are consistent with the agreements made by all parties.
The principal changes are that breweries can now advertise Happy Hour specials that include prices, brands, duration of the special promotion and creative marketing. One cannot violate existing alcohol advertising laws, encourage over-consumption (e.g., BOGOs), or advertise between 9 pm and 2 am the following day.
Click here for the rules. This is one more tool in a brewery's toolbox for increasing tasting room traffic and sales.
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Virginia Wine Distribution Company
VCBG Farm Brewery Committee Evaluates Applicability to Beer
The
Virginia Winery Distribution Company (VWDC) was established by the Virginia Department of Agriculture and Consumer Services (VDACS) to provide wholesale wine distribution services for Virginia farm wineries. It is a "virtual distribution company" that operates within VDACS and is government subsidized. Farm wineries pay $6.00 per transaction and are limited to 3,000 cases of wine per year.
The VCBG Farm Brewery Committee will begin evaluating the VWDC for applicability to farm breweries. The VCBG requested a feasibility analysis a few years but distributing farm brewery beer was not viable at that time. However, a re-evaluation is worthwhile, especially since the current program is already being subsidized by the Virginia General Assembly. Discussions with VDACS will begin in October 2019.
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VA ABC Enforces Arbitration Clauses in Written Beer Distribution Agreements
Loveland Distributing Co., Inc. and Premium of Virginia, LLC v. Bell's Brewery, Inc.
The Virginia Department of Alcoholic Beverage Control (VA ABC) published a decision confirming the enforceability of arbitration clauses in distribution agreements between brewers and beer distributors under Virginia's Beer Franchise Act (BFA).
The National Law Review recently cited that "
The decision will help future parties (likely suppliers) seeking to compel the arbitration of beer and wine distribution disputes in Virginia, and also strengthens the negotiating position of beer and wine suppliers seeking to include an arbitration clause in Virginia distribution agreements."
The VCBG has begun the development of a "VCBG Brewery Handbook" that will include helpful information about how to incorporate provisions like arbitration clauses in distributor agreements or waivers of specific provisions of the VA Beer Franchise Act in temporary distribution agreements. The first draft is expected in June 2020.
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VA Craft Brewer for a Day Program Launched
New VCBG Grass Roots Advocacy Tool
The VCBG "VA Craft Brewer for a Day" program is focused on getting Virginia Congressional and State elected officials to your brewery for an educational experience. The goals of the program are to:
- Facilitate an understanding of the challenges and priorities of small, independent craft brewers
- Clarify our industry's goals, interests and economic impact to the community and Virginia
- Build long-term relationships between craft brewers and a coalition of elected officials
Please request a program guide and invitation today from
barnold@vacraftbrewersguild.com.
The program guide will take you through ALL the steps in hosting a successful "VA Craft Brewer for a Day" event.
The VCBG is committed to educating all Virginia's legislators about the independent craft beer industry.
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TTB Warns Federal Excise Tax Overpaid by 400 Breweries
Check Your Rates Paid
As a result of legislation containing provisions from the BA & VCBG-championed Craft Beverage Modernization and Tax Reform Act being signed into law in the closing days of 2017, a reduced rate became effective for a two-year period extending through 2019. Specifically, the provisions provide for a reduced rate of $3.50/barrel (from $7.00/barrel) on the first 60,000 barrels for domestic brewers producing less than two million barrels annually. TTB has indicated that 400 breweries are still paying at the $7.00/barrel rate.
If you think you are one of the lucky 400, please do the following:
- Confirm your brewery's eligibility for the reduced rate
- Review your past tax records
- Check out the TTB resources on these tax provisions (particularly General Tax Reform Q&A questions TR-G1, 3 and 7 and the Beer Tax Reform Q&A)
- Submit for a refund using TTB Form 5620.8
- Send a personal note and case of your best beer to your favorite person at the VCBG and the BA (optional)
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Virginia Blue Ribbon Craft Beer Fest
2 pm - 7 pm, October 5, 2019
Virginia State Fair Grounds
Mark your c
alendars for the 3rd annual Virginia Blue Ribbon Craft Beer Fest. This event is a partnership between the Virginia Craft Brewers Guild and State Fair of Virginia to celebrate the booming independent craft beer industry, feature Farm Breweries and showcase the "Plow to Pint" connection between craft beer and agricultural products. We will have exhibits, "fair" food, and live music. A special treat this year is that Foghat will be playing at 7 pm at the State Fair amphitheater! Plan on staying around to enjoy a "Slow Ride" with this iconic band.
Email barnold@vacraftbrewersguild.com for sponsorship information or register here today if you want to join the other 21 breweries registered this year.
Tickets for the public are on sale now - click here to purchase. Please feature this signature VCBG event on your website and in your social media.
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