Contract brewing can be a great way for a beer brand owner to either start selling its own brand of beer before it has the capital to secure its own brewery space, obtain brewing equipment, pay a brewer, and start its own brewery, or increase production of its existing beer brands. Virginia is relatively new to this type of beer production, having just passed legislation allowing contract brewing arrangements in December 2013.

Pursuant to 3VAC5-60-110, a licensed brewery may manufacture beer for a third party if (1) the brand owner is a licensed brewery or wholesaler; (2) there is a written agreement between the brewery and the brand owner (i.e., a “production agreement”); and (3) the brewery and brand owner both keep complete records of beer produced under this agreement.

Requirements for qualification will vary depending on whether the brand owner is a brewery or a wholesaler. Read more on each below:

Contract Production for a Brewery

In this situation, an existing brand owner brewery will expand its production by hiring a contract brewer to produce their beer. The brand owner will sign a production agreement with a contract brewer, allowing the contract brewery to produce beer on behalf of the brand owner using its recipes and brewing methods. Production agreements typically include confidentiality clauses protecting the recipes and brewing methods. Note: Virginia does not currently allow alternating proprietorships.

Example: Adroit Theory Brewing Company, a brewery with its own brewing facility in Purcellville, VA, contracts with Beltway Brewing Company to make several of its beers and expand its production.

Read more about the Federal and State Requirements for becoming a brewery here.

Contract Production for a Wholesaler

In order to qualify as a wholesaler on a federal level, it is first necessary to obtain a federal basic permit for wholesaling from TTB. TTB’s average processing time to obtain a federal wholesaler permit is currently listed by TTB as 73 days (see the current estimate here). There is no federal fee for obtaining a wholesaler permit.

On the state side, the process for getting registered as a wholesaler varies widely depending on which state you reside in.

In order to obtain a wholesale permit in Virginia, a company must establish a place of business within Virginia to receive and distribute out alcoholic beverages, Virginia Code § 4.1-223(2). Under this arrangement, the brand owner will often contract with distributors to take possession of the beer directly from the contract producer, for ultimate delivery to retailers.