Imagine this for a business idea: Let's establish a beach resort along the pristine Victorian coastline, close enough for city slickers and country dwellers to escape for their summer holidays, but with one strict rule — absolutely no beer.

In fact, let's place a legal covenant over the entire town restricting any kind of alcohol being produced or sold within town boundaries.

Sound like an attractive summer holiday destination to you?

Well, that's exactly how the seaside hamlet of Ocean Grove was created 131 years ago.

Local historian Susie Zada said the town, located 90 minutes' drive south of Melbourne on the Bellarine Peninsula, was established as a private development and marketed to members of the Methodist church.

The beach at Ocean Grove looking towards the Barwon Heads bluff. ( Supplied: Travel Victoria )

"No other town in Australia started in the same way as Ocean Grove," she said.

"It's unique in Australia."

The idea for an alcohol-free town in began when two American Methodists — Reverend John Inskip and Reverend William Bramwell Osborn — visited Australia in 1881.

They were both part of the association which had set up an alcohol-free community, known as a temperance town, in New Jersey, which was also called Ocean Grove.

"They came out here and wanted to set up a similar camp meeting association somewhere in Australia," Ms Zada said.

"The whole idea of the camp meeting was somewhere that families could go where they felt safe in a nice environment, religious-type people, no alcohol and not having to put up with riffraff."

The Ocean Grove Methodist Church was built in 1888. This photo was taken around 1930. ( Supplied: Geelong Heritage Centre Collection )

They held a camp meeting in Melbourne, at Royal Park, and a second one at Point Lonsdale, just a few kilometres east of Ocean Grove.

Families arrived in late December 1881 and stayed a couple of weeks, enjoying a riffraff-free New Year's holiday by the sea.

"It was really successful. They had a lot of people turn up," Ms Zada said.

"They had been discussing this idea of having a similar camp meeting to what was in America, so Inskip and Osborn and a few others walked from Point Lonsdale along the coast, hit the Barwon River, took two steps back and thought 'this is the perfect place'."

But after identifying the land they wanted for their alcohol-free community, the pair hit an obstacle in the form of a heavy-drinking bank manager.

The Bank of NSW manager had inherited the land as payment for looking after the business interests of Geelong police magistrate William Henry Bonsey, who had returned to England when his father died and never came back to Australia.

Susie Zada has written extensively about Ocean Grove's history. ( ABC News: Nicole Mills )

Ms Zada said the bank manager refused to sell them the land.

"So there's these ministers wanting to buy this land to turn it into an alcohol-free, family-friendly camp meeting site, and the only problem was the bank manager; his favourite pastimes were going to the races and getting drunk," she said.

"He basically said 'over my dead body', and it was literally over his dead body."

The church leaders had no intention of subdividing the land themselves and so worked with two Melbourne-based developers who themselves belonged to the church.

It took almost six years but the developers finally got their hands on the land that would become Ocean Grove.

There are now bottle shops and multiple licensed cafes and restaurants in Ocean Grove's main shopping strip. ( Supplied: Travel Victoria )

"[The developers] decided that if the church was going to support it, it was going to be a worthwhile exercise financially," Ms Zada said.

"The Methodist congregation tended to have a bit of discretionary income, so they weren't the poorer community.

"They also had a really active journal called the Spectator that came out in Victoria, so they decided that they would advertise all the land sales in the Spectator journal and they sold maybe half [the blocks] in the first month or two."

The land was subdivided into about 2,500 allotments and advertised from £5 to £20 per lot.

The Coffee Palace was the first new building in the town, and tents for the camp meeting were set up around it each summer.

It had 60 rooms, a dining hall, lounge areas, tennis courts and bowling greens and stood on the site until it was demolished in 1969.

The Ocean Grove Coffee Palace, pictured circa 1888, was the social hub of the alcohol-free community. ( Supplied: Geelong Heritage Centre Collection )

Unlike other Australian towns, which were surveyed and provided with government services such as a water supply in return for rate payments, Ocean Grove was a private subdivision from the beginning.

In order to ensure it remained alcohol free, the developers placed a covenant on the land forbidding the manufacture or sale of liquor.

While most people supported the covenant — it was the reason they came to Ocean Grove in the first place — there is evidence of some people smuggling alcohol into the teetotal town, even in the very early days.

"There's some postcards that I've got, late 1890s through to the first couple of decades [of the 1900s], and you'd get things like a lady was sending a postcard back to her family and she was saying, 'Thank God Dolly brought a bottle of scotch in her bag'," Ms Zada said.

"So they'd be cupboard drinkers, but you couldn't drink in the open.

"There was a lovely write-up in the paper where a maid at the Coffee Palace got the sack ... because she had endangered one of their patrons.

"She'd been cleaning out one of the rooms and happened to find a bottle of alcohol in the wardrobe, and so incensed that anybody would bring alcohol on the premise, she threw it out the window but she didn't look and clocked someone on the head as they walked past."

Eventually people started looking for more obvious ways to get around the covenant and pubs started popping up just outside town boundaries.

The Ocean Grove Hotel was built just outside the town boundaries. ( Supplied: The Ocean Grove Hotel )

"The boundaries for the covenant were Bonnyvale Road, which is why there's a hotel on the other side of Bonnyvale Road; Shell Road, which is why there's a hotel on the other side of Shell Road ... and the river, which is why there's a hotel in Barwon Heads," Ms Zada said.

"It totally dictated how this town developed."

The covenant made life difficult for traders seeking a liquor licence in Ocean Grove, with some fighting expensive legal battles in the Supreme Court as recently as this decade.

But in 2014 a Victorian Civil Administration Tribunal (VCAT) ruling effectively quashed the covenant, determining it could no longer be enforced.

"There are now lots of places with a licence and we've got a couple of bottle shops, but most locals would never let you put a hotel up in town in a fit," Ms Zada said.

"It's how the town developed and they don't want it to go backwards."