While building its flagship facility at the IX Art Park this summer, Three Notch’d Brewing Co. got a boost in a total of $100,000 in grant funding from the state and the city of Charlottesville.
In June, Gov. Terry McAuliffe announced that Three Notch’d had been awarded a $50,000 Agriculture and Forestry Industries Development (AFID) Facility Grant, which would be matched by Charlottesville’s Economic Development Authority.
To be eligible for an AFID grant, at least 30 percent of a business’ annual purchases of agricultural or forestal products must come from Virginia. The business also must “add value” to the products by making food or beverages, or modifying them in some other way.
“It’s a type of grant that works very well for what we do,” said Scott Roth, co-founder and president of Three Notch’d Brewing. “We are a business that is focused very heavily on agricultural products, so we can take advantage of it.”
Virginia has awarded $4.7 million through the AFID program to incentivize 52 projects in 35 localities across the commonwealth. Funding from the state is matched dollar for dollar — in cash or in kind — by a municipal subdivision applying on behalf of the business.
Ragged Branch Distillery, a new bourbon distillery and cattle farm in Albemarle County, also was awarded an AFID grant this summer. The county’s Economic Development Authority matched the $17,000 grant.
“We try to encourage investment and job creation in Virginia,” said Cassidy Rasnick, manager of Virginia’s Office of Agriculture and Forestry Development. “We will meet with a company to discuss their plans for the next three years … We want to get a good feel for how much money they will spend, and how many jobs they will create.”
Rasnick said AFID has spurred $402 million in private capital investment, the creation of more than 1,800 jobs and the purchase of $424 million in Virginia-grown agriculture and forestry products.
The Three Notch’d flagship represents nearly $3 million in capital investment in construction and equipment and will allow the company to triple its production capacity.
Along with five new executive team members and 10 to 15 part- and full-time brewery personnel, the 6,800-square-foot taproom and restaurant will create about 50 additional jobs, Roth said.
“The job creation and capital investment by Three Notch’d both benefit the city,” said Chris Engel, Charlottesville’s economic development director. “We hope they will be successful, and we think they will be.”
“It seems like a great value for the city dollar,” said Tara Boyd, chairwoman of the city’s Economic Development Authority. “Three Notch’d is building right here in the city, on a site that was underutilized. We are just covering a small slice of the project’s overall budget.”
In 2014, online grocer Relay Foods became the first Charlottesville business to receive an AFID grant. However, the company had to pay back the $50,000 grant and Charlottesville’s matching funds this year after merging with Colorado-based Door to Door Organics and ceasing operations in Virginia.
“The grant requires a three-year commitment and a serious audit by the state,” Roth said. “As long as you are making your estimates, you get to keep the money. But if you don’t, you have to pay it back.”
AFID Facility Grants are capped at $250,000. Engel and Rasnick said they determined the $50,000 grant award for Three Notch’d after considering the availability of matching funds from the city, and the projected return on investment for the city and state during the three-year grant period.
Roth said the expansion of Three Notch’d was a large enough project to qualify for more funding than it received. In 2016, Port City Brewing Co. in Alexandria secured a $250,000 AFID grant for a $2.7 million expansion project.
“We were gunning for the maximum [of $250,000],” said Roth. “Although there were some limitations on funds, it has been great to work with the city of Charlottesville in getting our project off the ground.”
Rasnick said satisfying AFID’s purchasing requirements for Virginia-grown products can be difficult for breweries.
“We haven’t had a long development of a supply chain for hops and malt in Virginia,” said Rasnick. “But [Three Notch’d founding brewer] Dave Warwick is very good at finding those local producers and highlighting them in their products.”
“Consumers are asking for more locally sourced products,” Rasnick added. “They want to see an ingredient from down the road. Breweries are responding to consumer demand, but it’s helping our farmers and producers, as well.”
Three Notch’d has committed to purchasing $175,616 worth of Virginia-grown products during the grant period, which began in 2015 and runs through 2018. Nearly 70 percent of that total has been budgeted for dried and fresh hops to flavor some of its beers.
Three Notch’d has promoted Virginia hops with its 10* Farmers Pale Ale, which originally used hops from 10 Virginia growers. The asterisk was added to the name when even more hopyards contributed to subsequent batches of the beer.
Stan Driver, founder of Hoot’n Holler Hops and a founding member of the Old Dominion Hops Cooperative, said growing hops in Virginia is just barely a viable pursuit. Only 30 acres were used statewide to cultivate hops in 2016.
“If you don’t value participating in brewing and the brewing industry … and if you don’t value your relationships with other hop growers, you probably shouldn’t be growing hops. Because that may be your only reward,” Driver said.
While pellets of dried hops from the Pacific Northwest cost about $9 per pound in bulk purchases, a pound of Virginia-grown dried hops costs $32 on average, according to Three Notch’d’s AFID application.
“The [AFID] grant money will help breweries feel good about purchasing hops that they may be paying a premium for,” Driver said. “It has created an excitement around a community of growers that really appreciates what [Three Notch’d] does.”
Driver said the grant’s purchasing requirements also encourage brewers to experiment with different kinds of produce and create unique beer varieties.
In its AFID application, Three Notch’d outlined plans to purchase 480 pounds of pumpkins and one ton of other fruits and vegetables in 2018.