Numlock Sunday: Dave Infante on a controversial brewing company at the center of a polarizing fight in Virginia
By Walt Hickey
Welcome to the Numlock Sunday edition.
This week, I spoke to Dave Infante, who covers the beer industry in the United States and who has been working on a really fascinating investigation over the course of the year into the state money and incentives that are being plowed into a controversial brewing company in Virginia.is a delight — the alcohol business lies at this intersection of government regulation, massive industry, relentless branding, plucky startups and entrenched capital, and that makes it just captivating reading time after time — and today going in on this topic we had all sorts to explore in the space, from the secrets of contract brewing to the perils of mail-order alcohol. is worth a subscription, give it a look.
This interview has been condensed and edited.
You have been covering a really fascinating story that touches on a couple of topics that I think I am very, very interested in. Stuff about private companies trying to get their share of public resources, kind of swashbuckling investors coming in to try to swipe all sorts of different state money, and also the alcohol industry, which you cover and is one of my favorite and most interesting and compelling industries out there. You've been covering the story about Armed Forces Brewing Company for quite some time now. Do you want to kind of back out a little bit about what this hustle is?
A hustle is a good way to put it.
Armed Forces Brewing Company is sort of like a Black Rifle Coffee, but for beer, is probably the easiest way to shorthand what they're trying to do. It's a firm that sort of splashed onto the scene in 2021 with a viral video featuring the former Navy SEAL Robert O'Neill, who is the guy that has claimed to be the one who fired the shots that killed Osama bin Laden. We'll come back to Rob O'Neill. He's central to this story at a couple different points, but the brewery, it's kind of trying to cater to people who, for lack of a better way of putting it, are very jingoistic and very into the military as a culture, as a lifestyle, as a social paradigm.
There are a bunch of brands that do this in different sectors. I mentioned Black Rifle Coffee; there’s also Nine Line and Grunt Style, which make apparel that pander to that lifestyle, very oriented along the fault lines of American contemporary conservatism.
Sure. These are companies that saw that there was always an inherent interest in military gear, but then saw that this was not just a niche, but a fairly large addressable market.
Big time. So Armed Forces comes along. Like I said, they really hit the scene in 2021, although they existed in sort of different variations for a few years before that, and for the intervening years between 2021 and 2023 they've been doing what's called contract brewing, which is pretty standard in the industry.
It's much more common, even, in the craft brewing industry than it used to be. The idea is basically like you develop a recipe and you then hire out available capacity at an existing brewery, that you do not own, to actually go produce those beers and then you go out and market them.
This is a common business model, but Armed Forces has been talking for years about opening up a brick-and-mortar brewery of its own. They've been talking about it not just in the context of social media posts, but they've also been fundraising pretty aggressively to get that capital they need in order to actually go out and do it. They're doing what's known as equity crowdfunding. It's a Regulation A, how the SEC terms it; the gist of the law is that small companies should be able to sell shares to unaccredited investors in order to give small capital, retail capital, a shot at the lucrative markets that are typically dominated by the venture capital and other forms of private capital.
They're not the only brewery that's taken advantage of Regulation A. BrewDog, which I've covered in the past, has as well, but Armed Forces has looked to this capital market as a way to raise money in order to fund a brick-and-mortar expansion. And my reporting shows that the company's raised $7.5 million from investors, but has operated $1.5 million in the red over the past two years, so we're talking about a fair amount of money here. And with that money and a brand that they're trying to grow, they went out looking for a brick-and-mortar building.
That doesn't sound like enough to totally get a whole brewery. What other money are they getting coming in?
When they went out going to look for a place to land the brick-and-mortar building, they started looking for opportunities to engage with economic development programs in specific states. They were looking in Maryland, where they had previously had an operation called Sea Wolf Brewery that failed.
They looked in Florida as well, and then they looked here in Virginia. You know this because you've spoken to our mutual colleague and friend, Pat Garofalo, who runs, but this is a pretty common move for corporations, for firms of big size. Amazon probably most infamously has done this. Tesla. These are big firms, but it's also something that's very available to smaller firms, too.
Armed Forces Brewing Company was savvy enough to try to take advantage of that, and they were able to. In discussion with the state of the Commonwealth of Virginia, someone at the Virginia Economic Development Partnership, which is the state authority, decided this was a good project to try to roll out the red carpet for. Eventually the Commonwealth put together a package of about $308,000 in potential incentives — tax breaks, job incentives, enterprise zone incentives — that Armed Forces Brewery could potentially unlock if they moved to Norfolk, Virginia. So in July of 2023, the governor of Virginia, Glenn Youngkin, sent out a press release announcing that Armed Forces Brewing Company indeed had selected Norfolk, Virginia, as the future location of its brick-and-mortar brewery.
Getting back to some of the boondoggle elements of this, it is a peculiar move. They're offering over $300,000, but as you wrote, Virginia isn't exactly hurting for a craft brew scene. It's got over 340-some-odd breweries already.
And so it's somewhat questionable of just being like, why is the state basically paying for another one?
I think that's right. And I think it's a question with merit, or at least I'm of the opinion that it has merit. Because Jim Morrison, a reporter in Norfolk, followed up on Fingers' initial reporting, which reported that figure of $308,000 in potential incentives. Morrison followed up on that in the Virginia Mercury in early December. He had done a little bit more digging in their SEC filings and he notes that the company has not made any money for the past couple years. Here's Morrison: "The latest stock offering shows the company operated at a loss in both 2021 and 2022." It paid no income taxes in 2022 because it had no taxable income.
The question, I think, gets only more valid when you start saying, hang on a second. We're engaging resources at the state level to court a company. We're offering them potential incentives. You're not handing them a bag of cash, but you're putting together a compelling package and going through the legwork of offering up, "Hey, if you do these things, you can unlock these benefits." That's special treatment, right? That's a judgment call. It's being done at the Virginia Economic Development Partnership's discretion, and they're doing it in this case, in Armed Forces Brewing Company's case, for a firm that is not generating profit by its own records.
So I think you have to look for other reasons that this might be an appealing firm to court. And I think one — and this is based on speculation, not on reporting from any specific source, but I don't think you have to strain too hard to make the connection between Armed Forces Brewing Company's bellicose brand of culture-war-as-beer-company and the political posture of Glenn Youngkin, as a politician who came to power in Virginia through his savvy embrace of the culture war flashpoint du jour in 2021, which was critical race theory.
I mean, aligning himself with Armed Forces Brewing Company for the photo op, for the press release, in the hope that they make money in the future seems politically expedient for someone like Glenn Youngkin. And he's certainly savvy enough to see that. So that's one alternative explanation for why VEDP might've decided, “Hey, let's get this done.” Armed Forces Brewing Company CEO Alan Beal claims that Youngkin called him in order to court him to come to Virginia with the company. And if that is indeed the case, Youngkin's office has not confirmed that, but that course of events is outlined in Youngkin's own press release. I tend to take it at face value that if this is indeed the case, I think that strengthens the possibility that this was done for political reasons as much as any economic development benefits in the future.
I kind of want to back out a little bit because there's a really fascinating element of the story that isn't just unique to brewing. I want you to tell me a little bit more about contract brewing, because I think a thing that fascinates me about this is that despite what their name is, Armed Forces Brewing Company isn't actually a brewing company. The thing that they do, the value that they add, the point in the supply chain that they are, is not brewing anything at scale. Can you speak a little bit to some of this and maybe even back out a little bit to the broader market? This is a fascinating element of the industry that I've only kind of recently become familiar with.
Sure. Like I mentioned before, the concept of contract brewing has been around for years and years and years, and it has gone from being just a normal sort of fact of industrial operation, to something that was sort of a four-letter word at the height of the craft brewing boom last decade, and then back to just more of a normal operational thing.
So there are different moral judgments that different people will make depending on their position in the marketplace about contract brewing, but it's not unique to what Armed Forces is doing. What's interesting about it is in the case of a brand like Armed Forces, it really does position the people operating that firm and on their payroll basically as middle-man marketers.
Not as brewers, right? So I think coming out of the direct-to-consumer craze of the late 2010s and maybe the very beginning part of this decade, we've started to, as a culture or as a zeitgeist, wrap our heads around the idea that companies that are kind of riding that lightning are basically just doing arbitrage.
They're buying cheap stuff, or even if it's not cheap, they're buying stuff from a manufacturer. They say, “Hey, we can add value in terms of storytelling or in terms of access to markets,” or whatever. And then they sell it for a higher price, and there are a bunch of examples. Great Jones comes to mind.
Anyway, whatever. Brewing is a little different because you can't really go direct-to-consumer in many states. There's a three-tier system to sell alcohol. It's a little bit more complex than that, but the general dynamic is similar, which is that Armed Forces Brewing Company, right up until the point that it gets a brick-and-mortar brewery, is basically just operating as a pass-through marketing engine, not as a beer company. Again, some people pass moral judgment on that. In the industry, you have less control over your product. It's not made locally, which, if that's something you're marketing yourself on, people may feel deceived and that wouldn't be appropriate and you'd be wrong to do that.
But many, many brands contract for additional capacity when they're starting up, or when they're trying to expand their own brick-and-mortar facility and they have to make more volume faster than they're able to build additional capacity at their own facility. So that's how contract brewing works. Contract distilling is its own thing. There's even less stigma around that, but it's the same idea. So this is something that definitely happens in the beverage alcohol industry.
I wanted to raise this because again, these tax incentives are ostensibly to bring a brewery that would not exist in the state of Virginia to the state of Virginia, and you can quibble with the ROI on that, but ostensibly, that is the transaction that is occurring. But this isn't a company that has operated a brewery before. They are not, in fact, a brewing company. They're a branding company that is starting to enter into a new business, which is making their own alcohol. And I just find that very fascinating.
Yeah, I think that's right. These are different disciplines.
Armed Forces Brewing Company does have a brewmaster on their payroll. I'm not familiar with his credentials, but it does exist. But the play that they're making is very much the marketing and branding play, and then they're fighting for scale in all of the obvious places.
I believe they have a concession in Dulles Airport, or they're going to be developing one. They recently got a placement on a cruise line that has some sort of hokey Salute Our Heroes-themed pub that Armed Forces Brewing Company beers will be sold in. So we are not talking about the vanguard of sophistication and taste here, but the fact remains that it's a vast potential addressable market and their money is still green. So that's very much the move that Armed Forces is trying to make here.
I remember you had a story a little while ago. You alluded to the three-tier system and the difficulties of operating a mail operation in brewing, but it is possible in certain states. And there was a company that was attempting to appeal to this right-wing audience, and you alluded to the reality that it's almost a near certainty that their alcohol is being brewed within the confines of the godless city of Chicago, just because that's where so much of this is based.
Yeah, dude, good memory. So what you're referring to is Ultra Right, a 100 percent anti-woke beer.
Oh God. That's the name of it?
Yeah, that's right. No thoughts, just vibes. So Ultra Right was created by your sort of bog-standard issue, right-wing provocateur-slash-talking-head guy. His name is Seth Weathers, and in the early days of the conservative transphobic temper tantrum over Bud Light’s engagement with a trans influencer in April 2023 —
— Seth Weathers was sort of the first guy to get a viral video out there about his new Republican beer brand. And first mover advantage is true in so many businesses, it's true in right-wing grift, too. He had the drop on it. So he has been trying to piece together a beer brand ever since. Initially he was contract brewing. Well, initially I don't think the beer even existed in this case. I think it was just a mock-up of a can and then enough dipshits were interested in buying it that he was like, "Oh shit, I have an opportunity to grift harder here." I don't know that that's true, but that's my hunch.
He lined up a contract brewer that almost certainly was within the city of Chicago, the classic punching bag for the Fox News crowd of the dangerous failing Democrat-run cesspool. It appeared that his product was going to be contract brewed at a Chicago firm. That firm ultimately backed out because people figured out who it was and were like, "Wait, you support this guy?" And they were like, "Oh, we didn't really know what this was. We fucked up. We're not doing it anymore." Who knows whether that's the case or not. Who cares?
He eventually found another contractor in rural Georgia, where I think you're much more likely to find political alignment with that type of product. He did start producing it, I believe, but Walt, even today, early December 2023, so a solid eight months later, if you go on his social media — I was just looking at his feeds the other day; I'm probably going to do a follow-up on this — there are people complaining that they haven't gotten their orders from May to October. From over the summer. So I mean, it just speaks, first of all. This is very funny on its face.
Yes, it is.
Yeah. There's nothing funnier than people volunteering to be taken advantage of and then complaining about being taken advantage of.
Paying $25 for a six-pack and then being like, "Where's my six-pack?"
Dude? It was like $36.
Oh my God.
I mean, for the economics of shipping, beers just really aren't attractive for obvious reasons.
Yeah, yeah, yeah.
I think what this speaks to more clearly is the fact that the business of standing up a beer company around direct-to-consumer is not nearly as easy as it is to stand up any other type of company, like a merchandise company or whatever, direct mail stuff. Basically no product, with the exception of I guess cannabis or another regulated substance, is regulated and has as many limitations on shipping as does beer.
The reason you don't typically see right-wing, direct mail, snake oil campaigns move into the beverage alcohol space is because they rely on casting a very wide net and being able to ship boner pills to 50 states. So that's the challenge that Ultra Right faces. It's also to some extent the challenge that Armed Forces Brewing Company faces. They've been trying to find ways to ship beer to customers, who it seems mostly aren't interested in it because of the exorbitant shipping costs.
Armed Forces Brewing Company also appears to be, well I know that they are distributing to Florida, they're working on distributing to Georgia, and I believe they'll be in North Carolina soon. They are also going a more traditional route, as well, to get to market. But a lot of this stuff just, it smacks of a lack of preparation and a lack of strategic, deliberate planning.
You can't just stumble your way into selling beer based on viral videos. And to some extent, I think certainly in the case of Ultra Right and then it's in the case of Armed Forces Brewing Company, that is certainly what they seem to have done.
You've been so generous with your time, and I clearly love talking about this stuff with you.
I would love your views on this, just because I think that this is a thing that you've kind of written about and around a lot, which is: A lot of people end up in the beer industry, not accidentally, but they're like, "We're just two guys and we decided to start a brewery!" and then immediately they get hit by the buzz saw of 90 years of regulation and ossification and distribution, and it never stops being fascinating. I would love your thoughts on that.
Yeah, I think that's right. I think there are two types of guy that sort of fall into this bucket that you're describing.
One is, yeah, people are like, "I'm going to start a beer company." Sometimes this is for very benign reasons. We just love beer. We like home brewing and we want to be a company. You saw a lot of that in the craft brewing boom of last decade. And then more recently, there are people like this who are like, "Wow, this seems like a great business opportunity. Why don't we just jump in because we know how to do marketing?" It's like, well, it's a different business than that, man.
So Seth Weathers, the guy who did Ultra Right beer, at one point he was posting angrily about having to get fingerprinted, which is a standard operating procedure for alcohol producers in any state. But he was framing it as like, "Can you believe the government demands my fingerprints just to sell alcohol?" So there's just a real demonstrable ignorance and a lack of curiosity in what this business is and entails. I'm a critic of the three-tier system as it exists in this country. There are certainly things about the way this country regulates alcohol that demand scrutiny and demand reform, but these dudes are not coming at it from a perspective of, "We should reform this to make it better for everyone." These dudes are coming at it from, "I just started thinking about this 10 minutes ago, and it's mildly inconvenient to me. I'm going to post about it." Right?
That's one type of guy.
That's the one guy. And then the other guy is the Silicon Valley growth hacker disruptor-type dude who, again, has given it very little thought and is coming at it from, "Wait a second, this system is incredibly inefficient. I can make it better."
I get probably one email a month from a guy like this who's like, “Hey, I'd like to just pick your brain on a company that I'm thinking about or that I'm working on,” or whatever, new software, blah, blah, blah, that's going to make the three-tier system better. I don't really talk to them at this point, but I've spoken to a few in the past, and there's just a fundamental lack of curiosity and a lack of engagement with the state of play as it stands amongst these guys.
They think there's a “move fast and break shit” opportunity in the beer industry, and you referred to it as a buzz saw, which I think is exactly right. They're in for a very serious wake-up call if they think that the TTB and to some extent the FDA is going to allow that, or that the state houses in all 50 states, which is where the lion's share of this legislation actually gets hashed out, because in post-Prohibition, that's how we do it: at the state level. The ground game, just to get it done in one state and get reformed in the one state, is just very significant across all 50.
It's a challenge that has stymied the biggest trade groups and the biggest incumbent beverage alcohol producers basically since Prohibition. There's definitely a population that thinks they know better. And I would be lying if I said I didn't get a kick out of watching them flail a little bit because it's a little insulting for people to come along and think they know best.
Yeah. I think people need to remind themselves that the last time we had a disruptor in the alcohol industry, the FBI was invented, and they sent Al Capone to jail.
Or even more recently, the last big innovation that really hit the beer industry was arguably Four Loko, which was a caffeinated alcoholic beverage, and that ended unceremoniously when the FDA really got involved and heavily started scrutinizing. The FDA never technically banned it, Four Loko volunteered to take it off the market, but the writing was on the wall. The feds had decided the jig was up. So innovation is hard-won in this space. It's not an easy place to do business and it does not truck with Johnny-come-lately types, especially not those who are trying to turn all of the existing regulation into partisan complaints about the deep state.
It's like, just do what everyone else does and sell weird dust that isn't regulated by the FDA. Don't bother with beer.
All right, Dave, you've been so generous with your time. Where can folks find you? Where can they find the work? I am a huge fan of Fingers and enthusiastically recommend it, but where can folks find you?
You're very kind. I've been publishing an independent newsletter about drinking in America called Fingers. It's at Fingers.email. And then I publish a weekly column about the beer industry at VinePair, and I publish a podcast with VinePair called Taplines that you can find on any podcasting platform.