Business is brewing in Rockbridge
By Gus Cross, Katrina Lewis and Maggie Seybold
Three craft breweries plan to open in Rockbridge County in the next year at a time when the craft brewing industry’s closure rate is the highest it’s ever been.
In Virginia, people are continuing to jump into the business because they believe it’s easy, exciting and profitable.
“People romanticize it, and it's cool to drink beer [and] hang out with your buddies,” said Jasper Akerboom, co-owner of Jasper Yeast in Dulles, Virginia. “But, you know, it needs to be a viable business, and if it’s not a viable business, it’s not going to work.”
The challenges facing veteran and novice brewers include a small and hard-to-please consumer base, deceptively long hours and complex Virginia regulations. In Salem, Ober Brewing Co., lasted 10 months. Blue Lab Brewing Co. opened in Lexington in 2010 and closed in 2017.
The Rockbridge area has more breweries per capita than the Richmond metropolitan area, which is considered the state’s brewing industry hub.
If the three breweries open as planned, the Rockbridge area would have 7,225 people per brewery. Heliotrope Brewery, Rockbridge Vineyard and potentially Salerno Pizzeria, Bar and Bistro would enter an already saturated market.
Nationally, 1,049 craft breweries opened in 2018. In the same year, 219 craft breweries closed, according to the Brewers Association, a leading trade organization.
The industry’s growth also has been slowing down since 2015, a sign that may have been missed by brewers who got into the game too late.
“I do think the competitive landscape is getting much, much, much more cutthroat,” said Jeff Bloem, founder of Murphy & Rude Malting Co. in Charlottesville.
*The Rockbridge area includes Buena Vista, Lexington and Rockbridge County,
Source: U.S. Census Bureau; Brewers Association; Greater Richmond Partnership; Richmond Beer Trail
Hopping into the industry
There already are two breweries in Rockbridge County: Devils Backbone Outpost Tap Room & Kitchen, which opened in 2012; and Great Valley Farm Brewery, which joined the industry in 2016.
The three potential new businesses would be craft breweries. A brewery is not a craft brewery if it is owned by a large brewing company, such as Anheuser-Busch InBev, or if it produces more than 6 million barrels annually. Any other brewery that is independent and produces less beer can be defined as a craft brewery.
Note: Brewers Association Chief Economist Bart Watson defined "taproom." He said it is a new term that will be used in the future.
Source: Brewers Association
Heliotrope Brewery plans to open on South Main Street in Lexington. Its owners Erik Jones and Jenefer Davies won a start-up business competition, called Launch Lex, last year. So far, they have missed two potential opening dates and could miss another because they struggled to meet the city’s fire code regulations.
In Raphine, Rockbridge Vineyard is opening a brewery. Parke Rouse, the owners’ son, said the vineyard is diversifying its offerings to attract more people to its remote location. It is more than 20 miles from both Lexington and Staunton.
Jason Harris, owner of Salerno, said he is “heavily leaning towards” replacing the restaurant’s arcade with a brewery.
Buena Vista, Lexington and Rockbridge County have a combined population of about 36,000 people. Harris said that means his business relies on college students from Washington and Lee University, Virginia Military Institute and Southern Virginia University.
“The academic cycle drives business in Lexington,” said Bill Hamilton, former co-owner of Blue Lab.
When Blue Lab opened, it was the 40th brewery in Virginia, he said. Now there are over 250 breweries across the state, according to the Brewers Association.
Hamilton said the Lexington brewery drew local residents but thrived during event weekends for Washington and Lee and VMI.
Nathan Bailey moved to Rockbridge County from Charlotte, North Carolina, in 2012 and opened Great Valley Farm Brewery in Natural Bridge four years later. He said 75 percent of Great Valley’s customers are locals and about 25 percent are tourists.
Nathan Bailey, owner of Great Valley Farm Brewery, describes the challenges of running a brewery in a rural area.
In the summer, tourism becomes more important as students and university employees leave.
An alliance of area tourism groups created the Shenandoah Beerwerks Trail to attract tourists to the 15 breweries located between Rockbridge County and Harrisonburg in Rockingham County. The trail includes a passport program that entices customers by awarding them a t-shirt for visiting multiple breweries.
Since its launch at the end of 2017, more than 3,000 people visited six or more of the trail’s breweries.
Time is money
Competing for customers in a rural area is hard. But pleasing demanding customers is harder, especially when they want new beers on a regular basis.
“People like that they’re able to taste different types of beer,” said Debbie Thompson, a Great Valley customer who is from Michigan. “What is that old saying? Variety is the spice of life? There you go.”
Josh Harold, the taproom manager at Brothers Craft Brewing, said the demand for new and unique beer puts pressure on breweries to offer different products every few weeks. Otherwise, customers may take their business elsewhere.
“I like to drink craft beer because it's different and it allows me sort of the chance to explore and try creative things,” said Randy Karlson, a 25-year-old Lexington resident who frequents the local breweries. “If there's a weird beer on the menu, I'll probably opt for that rather than the safe beer.”
Rouse, who works at Rockbridge Vineyard, said he already knows it takes time to fine-tune potential beers, and it’s expensive because “that all takes money to make batches of beer that you aren’t selling.”
Josh Harold, taproom manager at Brothers Craft Brewing in Harrisonburg, talks about the necessity of variety in a brewery's beer offerings.
Blue Lab Brewing Co. was on South Randolph Street from 2010 until it closed in 2017. Photo courtesy of Tom Lovell, former co-owner of Blue Lab.
When Hamilton first opened Blue Lab, he ran the operation with Lovell, their wives and their kids. He and his family spent so much time running the brewery that years later, he said, his son joked that the smell of beer reminded him of his childhood.
“Making beer is a 24/7 job,” Hamilton said. “From production, fermentation and maintaining quality you always have to keep an eye on things.”
Hamilton said brewing took six to eight hours per batch. His batches were three to five barrels. Fermentation took about 21 days. He said he couldn’t save time automating the brewing process because he used old dairy equipment to save money.
Jeffrey Moon is the only full-time worker at his Harrisonburg brewery, Restless Moons Brewing Co. He said he wakes up at 4 a.m. once or twice a week to brew all day. Moon said he needs to update his equipment to save time.
It's all in the details
Virginia brewery owners also need to stay on top of the state’s complex regulations, which they say seem to change constantly.
Steve Davidson opened his brewery, Roanoke Railhouse Brewing Co., in 2009, before a state law changed in 2012 that said breweries did not need to sell food for customers to drink at the locations. After 2012, people could stay and drink their beer, even if food was not sold. He said his location and layout at an old Dr. Pepper bottling plant was perfect for brewing beer but bad for retail business.
Davidson had to move his business, which meant he had to update his federal and state brewing licenses. The federal license was easy, he said.
“With the state, it was like starting over to get a license,” he said.
Hamilton said he was also caught off-guard when the law change allowed brewers to sell their beer without also selling food.
Before 2012, Blue Lab only sold beer to go. When the law changed, Hamilton started selling Blue Lab beer to customers who could drink it there.
Arne Glaeser, Lexington’s director of planning and development, said if a business changes how it uses a building, it must be inspected by the city fire marshal to ensure it complies with the fire code.
Steve Davidson, former owner of Roanoke Railhouse Brewing Co., talks about how a law change affected his business.
Glaeser said Hamilton and Lovell would have needed to increase the amount of fire separation between their brewery and the apartments above to serve customers beer on-site. Fire separation includes additional wall and ceiling lining to slow the spread of fire.
Hamilton said updating the building to meet the additional fire code requirements would have been too expensive.
Heliotrope has run into similar issues since it is also located in an older mixed-use building with the brewery downstairs and apartments upstairs.
Meeting the requirements delayed Heliotrope’s planned opening. Jones, one of the co-owners, said it took five months of working with the city to figure out how to meet the fire code requirements before he and his wife could start construction.
‘Go big or stay home’
The Virginia Alcoholic Beverage Control Authority poses one of the biggest obstacles to brewers with its system that regulates distribution, brewers say.
Every state has a system that governs brewing, distribution and retail. But it’s up to individual states to determine how it works.
In Virginia, breweries, distributors—also called wholesalers—and retailers are required to be independent of each other. Beer has to go from the brewery to a distributor to a retailer unless the brewery sells it at its location.
Virginia’s Beer Franchise Act regulates the relationship between breweries and their distributors. The Virginia ABC regulates the act, which requires breweries to prove “good cause” to end their relationships with their distributors. Breweries can end up locked into contracts with distributors who aren’t meeting their expectations.
Laws separating brewing and distributing beer developed at the end of Prohibition, which lasted from 1920 to 1933. Davidson said the laws were established to protect small distributors in a period when almost all breweries were large, national organizations.
The post-Prohibition protections for distributors can give them an edge.
Large distributors like Virginia Eagle Distributing Co. have contracts with multiple breweries. Small brewers can feel like their product is not being pushed as hard on retailers, said Alexander McGlothlin, a Ph.D candidate in economics at the University of Kentucky who is conducting research on the craft beer industry.
The small breweries don’t attract distributors’ attention because they don’t generate enough volume to stand out in warehouses crowded with millions of bottles of beer. When that happens, McGlothlin said, small breweries’ products don’t get promoted.
Virginia Eagle distributes for Brothers Craft Brewing.
Virginia Eagle is a top 50 distributor in the nation, said Scott Heinz, its chief operating officer. The company distributes beer for breweries large and small, from Anheuser-Busch and Guinness & Co. to Brothers Craft Brewing and Pale Fire Brewing Co., both in Harrisonburg.
The distributor doesn’t “necessarily prioritize any product ahead of the other,” Heinz said. “Ultimately the retailers and then the consumers drive the demand for a product.”
Heinz said Virginia Eagle has purchased seven small distributors in the state since 2006. With fewer distributor options in Virginia, breweries are limited in their choices for distribution.
Davidson had several distributors throughout Virginia selling his beer to different cities and counties. He said eventually three of them, were bought up by Virginia Eagle and slowly stopped selling his beer.
“They bled me to death,” he said.
Heinz said Virginia Eagle stopped selling Roanoke Railhouse’s beer because the brewery had “quality control issues” and Davidson “wasn’t making the products that the retailers wanted to have.”
Without distribution, Davidson couldn’t compete with the growing brewing industry in Roanoke and went out of business in 2015.
To avoid dealing with large distributors, small breweries have tried to take advantage of a loophole in the distribution requirements. Owners can’t for their breweries, but their family members can.
Hamilton said his wife and Lovell’s wife set up a distribution company. By doing so, they sold Blue Lab beer to Lexington restaurants, which offered it on tap.
Moon said he is trying something similar for his brewery, Restless Moons.
He said his distribution company will deliver beer by the keg to local Harrisonburg restaurants.
Steve Davidson, former owner of Roanoke Railhouse Brewing Co., explains the challenges of distributing in Virginia.
“So, we'll take the lower revenue on the keg just so that we can get our name out there and get more people interested in coming here,” Moon said.
How beer is made
Beer has four main ingredients: water, malt, hops and yeast. There aren't many parts to it, but brewing takes weeks. Nathan Bailey explains the process of brewing beer at Great Valley Farm Brewery.
Standing out in the crowd
The three potential new breweries have to figure out what separates them from the rest of the pack.
Jones of Heliotrope said he thinks the brewery’s local focus will bring customers through its doors. The brewery is tentatively set to open July 4, but he said it could be delayed depending on when the building’s renovations are completed.
Courtney Craner, who was one of the judges for Launch Lex, said Heliotrope’s business plan showed that the brewery would open by the competition's deadline. Launch Lex rules identified September 2018 as the required opening date.
Davies said she then thought Heliotrope could open within the first few months of 2019. Jones said they couldn’t open in early 2019 because it took longer to meet the city’s fire code requirements than they expected.
Jones said Heliotrope will make a mix of IPAs, pilsners and light lagers.
Rouse said Rockbridge Vineyard is opening its brewery in Raphine in March 2020. He said he’s wanted to open a brewery because no other business in the area is making and serving both beer and wine.
Blue markers represent open breweries. Red markers represent breweries that have closed since 2017. Yellow markers represent the three potential new Rockbridge County breweries.
Source: RateBeer and Google Maps
Bailey at Great Valley had the same idea. He said his brewery in Natural Bridge will begin selling wine in spring 2020.
If they succeed, there will be two businesses making and selling beer and wine within 30 miles of each other.
Rouse said the brewery at Rockbridge Vineyard will start with selling about five types of beers, including a lighter IPA, a porter, a couple of lagers and a rotating seasonal selection. He said he expects to produce about 500 barrels of beer in the first year.
Rockbridge Vineyard expects to start brewing beer in January, said Head Brewer Parke Rouse. Great Valley Farm Brewery Owner Nathan Bailey said the brewery is preparing to make wine this summer.
Salerno usually offers about 20 Virginia craft beers on its “beer wall,” a self-serve series of taps. But Harris said he might add his own beers to the rotation. He said Salerno is partnering with Three Notch’d Brewing Co. in Charlottesville over the summer to create a “Salerno” beer.
“We’re doing this as kind of a test,” he said.
Harris said he wants to double the brewing area as an event space. He said he still has some logistics to figure out, but he is interested in brewing IPAs and lagers. He estimated that the earliest the brewery would open would be spring 2020.
Word on the street
Tommy Mays, a 63-year-old Rockbridge County resident, said he doesn’t see a need for three more breweries in Rockbridge County.
“I mean all three may open, but I see maybe two staying,” he said. “I don't know why you'd want to open up another brewery here.”
Local college students said price and proximity determine where and what they drink.
Graham Allison, a senior at VMI, said he likes that the county has breweries, “but it's another thing to be actually affordable.”
He said he and friends mostly drink Miller Lite and Bud Light. He said they often go to Macado’s for a beer because the Lexington restaurant is cheap and within walking distance of the school.
Allison said they don’t usually go to The Palms, another downtown restaurant, because its drinks are too expensive.
At Macado's, a 12-ounce Bud Light on draft is $2.75. A popular craft beer on draft, Kolsch from Skipping Rock Beer Co., is $3.75.
At The Palms, a 12-ounce Bud Light on draft is $3.75. A popular IPA on draft, Northern Lights IPA from Starr Hill Brewery, is $5.50.
Elisa Martinez, a bartender at The Palms, said the restaurant has seven beers on tap. She said Devils Backbone Vienna Lager and Bud Light are the most popular draft beers.
Martinez said The Palms sees fewer customers during parents' and alumni weekends because there is more competition in the area, such as Brew Ridge Taps, which opened in 2015 and serves craft beer, and Salerno, which was renovated in 2017 and 2018.
Craft beers can be more expensive because they tend to use local ingredients, which can cost significantly more because they’re not mass produced and the climate in Virginia is not conducive to growing hops and barley.
C.J. Hall, co-owner of Adair Hill Hops farm in Rockbridge Baths, said while he charges $15 a pound for hops, growers in the Pacific Northwest can charge as little as $6 a pound because they are mass producers.
C.J. Hall, left, and Cliff Hall, right, set-up a new row of hops.
Moon said he doesn’t use local ingredients at Restless Moons as much as he would like.
“I'm also running a business so I can't, you know, go ahead and spend a lot more money for something local,” he said. “I think that people around here are definitely price sensitive and if they can get a cheaper beer elsewhere, they probably will.”
Parker Catlett, a junior at Washington and Lee, said he enjoys the atmosphere of breweries but will only drive so far for craft beer.
“Devils Backbone is well known [and] relatively close, whereas Great Valley–I don’t even know where it is,” he said.
Bailey said he knows Great Valley is a drive from Lexington but thinks it has an advantage.
“I think people like to come out here and enjoy nature and enjoy the views,” he said.
It’s why customer Martha Irvin brought her sister, who was visiting Lexington, to Great Valley, situated on a hilltop overlooking a valley.
“I think it is unique just for the setting,” said Irvin, a Lexington resident. “It’s like being in heaven.”
Catlett said he and his friends also go to Brew Ridge Taps to get their craft beer fix because it’s in town. He said he doesn’t care if it’s a brewery. He just wants good beer and a variety of choices.
Other consumers aren’t interested in the craft beer scene. Thomas Bane, a 70-year-old Rockbridge County resident, said he knows what he likes to order.
“I'd have to have bottled Michelob Light,” he said. “Bottled, iced down for two days in advance.”
Running out of gas
According to the Brewers Association, craft beer production has been slowing down.
In 2013 to 2014, production of craft beer increased by about 6.2 million barrels, or 39 percent. Its growth started to slow down in 2015, when production went up by only about 2.2 million barrels, or 10 percent. Production dropped again between 2015 and 2016, when growth increased by about 97,000 barrels, or 0.3 percent. In 2017, production increased slightly by about 900,000 barrels, or 4 percent. The next year was similar. Barrel production increased by just under 1 million barrels, or 3.9 percent.
Source: Brewers Association
Source: Brewers Association
Beer economy researcher McGlothlin said the craft beer industry is slowing down because the majority of drinking age consumers who would drink craft beer already are.
McGlothlin compared the slowing growth to car industry trends. He said sales skyrocketed in the early 1900s because the automobile was new and people wanted cars.
Car sales go up mainly when young adults buy cars for the first time. The same is true for craft beer, he said.
For the near future, McGlothlin said, the craft beer industry’s success will depend on consumers as they turn 21.