USA TODAY International Edition
COVID- 19 threatens future of craft breweries
Shutdowns pour on misery for the industry
Beer lovers may soon find themselves crying in their beer – or at least what’s left of it. And you can blame it on the coronavirus.
After a decade of ever- expanding beer choices – hazy, citrusy IPAs, crisp lower- alcohol lagers, mouth- puckering sour beers – the beer list could rapidly become shorter.
The lockdowns to prevent the spread of COVID- 19 has shuttered brewpubs and closed taprooms across the country. As local and state officials began instituting stay- at- home orders for much of the nation over the last month, the typical brewery experienced on- site beer sale declines of 65% with draft sales falling about 95%, according to a survey by the Brewers Association.
Should official edicts preventing customers from consuming beer in a taproom or brewpub continue for a total of three months, many breweries may be forced to close. About six in 10 breweries said that could drive them out of business, according to the survey of 525 brewers earlier this month by the association, a trade group representing thousands of independent and small brewers.
“We are struggling very hard right now,” said Greg Engert, beer director for the Neighborhood Restaurant Group, an Alexandria, Virginia, company that owns Bluejacket brewery in Washington, D. C. “A lot of breweries are probably going to be making very difficult decisions over the next few weeks.”
Beer lovers have been treated to an abundance of choice as the U. S. added more than 5,000 new breweries over the last five years, bringing the nation’s total breweries to an all- time high of nearly 8,150.
But as many as 4,800 could go out of business if the shutdown continues through mid- June, the survey results suggest. Even with just one month of consumers staying at home, about 14%, or 1,120 breweries could face closure, survey respondents said.
Many breweries have adapted by taking beer and food orders online or by phone and hand- delivering to customers at the curbside. Some are delivering to customers. At many locations, customers can still walk up and purchase beer to go, as long as businesses practice physical distancing on site.
These strategic shifts have, so far, helped breweries keep some employees working – and have prevented beer from being thrown away – but likely won’t help all survive.
“I think a lot of breweries are at a crossroads right now,” Bluejacket’s Engert said.
That’s because, about one month into the lockdowns, breweries may need to decide whether to invest in their next batches of beer, he says. “Most breweries have gone through the stock that they had, and they have to make a decision: Do we spend money on malt and hops and packaging materials and brew some new batches, or can we not afford to do that?” Engert said.
Taprooms and brewpubs typically make most of their money through beer that’s purchased and consumed onsite. At Bluejacket, that accounted for 95% of beer sales. The brewpub now sells carry- out food and beer in cans, bringing orders to curbside, as well as delivering orders. Sales of canned beer have grown, but overall revenue has still fallen 50%, Engert says. From beer boom to bust?
In 2019, sales of craft beer – produced by small, independent breweries ( not
massive brewers such as AnheuserBusch or MolsonCoors) – rose 6% to $ 29.3 billion. That accounts for more than 25% of the total U. S. beer market, which overall saw a 2% decline in volume, the association says.
Despite the continued beer boom, competition would likely have resulted in 400 to 500 breweries closing in 2020, even without the challenges brought by the coronavirus pandemic, says Bart Watson, chief economist for the Brewers Association.
“We are seeing lost revenue and cost structures are pretty similar for breweries,” Watson said during an online presentation last week. “I do think we’re going to see an elevated closing rate perhaps as long as 12 to 18 months or as long as we are seeing societal effects from this pandemic.”
In South Carolina, eight in 10 breweries have had sales declines of 60% or more, according to a South Carolina Brewers Guild survey released last week.
COVID- 19 is a “gut punch” to the industry, said J. Wilson, the minister of Iowa beer for the Iowa Brewers Guild. The Brewers Association survey translates “pretty well to what we’re seeing in Iowa.”
Breweries that responded to the association’s survey had already laid off or furloughed two- thirds of their employees. Many locations including Bluejacket, have applied for Small Business Administration loans as part of the SBA’s Payroll Protection Program ( PPP). The program, part of the Coronavirus Aid, Relief and Economic Security Act signed by President Trump in late March, offers small businesses loans that can be forgiven if the funds were used to meet payrolls and employees were kept or rehired.
At The Blind Tiger Brewery and Restaurant in Topeka, Kansas, majority owner and president Jay Ives expects to get funds this week from an SBA loan. The restaurant currently has a skeleton crew of employees working in the kitchen and bar, and handling call- in orders for carryout or curbside food and beer in growlers.
When the loan arrives, “we’ll be calling back more of our employees,” Ives
“Devastating doesn’t even begin to explain what this had done to us. Everybody’s revenue stream just dried up overnight.”
Greg Engert, beer director for the Neighborhood Restaurant Group
said. The Blind Tiger has seen its business fall 60% or more, he said. But Ives is optimistic and took the shutdown as an opportunity to replace the carpeting in the restaurant and remodel its restrooms. Kansas Gov. Laura Kelly has extended the state’s stay- at- home order until May 3.
The ‘ new normal’ for beer
Before the governor’s order, the restaurant had already removed half of the restaurant’s tables and two- thirds of seats at the bar to meet the county’s “Safer at Home” order, issued a week ahead of the governor’s action. So when the state’s restrictions lift, Ives expects the restaurant to be ready.
“I suspect even when we’re allowed to open there might be a little bit of a surge, because of cabin fever,” Ives said. “But I suspect that it will come back gradually over a period of time.”
But beer lovers may find a less stimulating beer landscape in the wake of the pandemic’s effects, Engert says.
“We have just gotten so used to having breweries on every corner and great bottles in every bottle shop and every grocery store,” he said.
“Devastating doesn’t even begin to explain what this had done to us. Everybody’s revenue stream just dried up overnight,” he said.
“It’s going to be hard for even the most followed and lauded breweries in the world to survive if things don’t get better or assistance doesn’t come through.
“The industry will bounce back. But no doubt there’s going to be a massive sea change to brewing, and also to restaurants and everything that has to do with hospitality.”