Those tales of record beer sales? There’s another side to the story
Strong retail sales have not been able to overcome losses from restaurants, bars
WATERLOO REGION — There’s more to the story than “skyrocketing” beer sales during the COVID-19 pandemic.
Most Ontario breweries have two main revenue streams to bring in a profit: retail sales and restaurant and bar sales.
Only one of them has increased since the outbreak of COVID-19. The other has been in a race to the bottom.
“In March and April, we started to see media reports that beer sales were skyrocketing,” said Luke Chapman, interim president of Beer Canada. “That’s not quite the reality.”
Ontario beer sales in retail stores have not been able to fill the void left by restaurant and bar closures, according to data released by Beer Canada.
In total, Ontario saw a 4.3 per cent uptick in beer sales through the LCBO, The Beer Store and grocery stores in March. But with a 53 per cent decline in restaurant and bar sales, the industry saw a total decline of 5.3 per cent for beer sales in March compared to 2019.
Total volume sold dropped from 573,606 hectoliters (hL) in 2019 to 543,387 hL in 2020.
“And that’s the month when everyone was apparently stockpiling,” said Chapman. “Yes, there may have been a slight uptick in retail sales, but it was not nearly enough to offset the huge decline that brewers saw in (bar and restaurant) sales.”
Nationally, total beer sales are down 3.2 per cent in March compared to 2019.
Beer Canada, a national association that represents more than 90 per cent of the beer brewed in Canada, predicts the numbers have dropped even further in April.
A statement sent from the LCBO said its total sales — and the number of sales per transaction — grew most significantly between March 12 and 24.
However, the statement said “sales have since returned to normal volumes.”
And with restaurants and bars continuing to remain closed in the province, Chapman said rough waters lay ahead for the industry.
Some breweries have implemented a direct-to-consumer delivery option, pivoting their business model on the fly to stay afloat. A few instances have proven to be successful, said Chapman, but the new direction includes several new expenses around packaging, distribution and drivers.
“As a result, some are recording selling similar amounts of beer as they did prior to this crisis,” said Chapman. “But their expenses have also jumped, and as a result, they are no longer making any money and are just there to keep their staff employed.”
March, April and May is generally the time when brewers ramp up production to meet the demands of summer.
Instead, breweries are slowing down production, moving to bare bones staff sizes, and are focusing more on the delivery aspect of the business.
Waterloo Brewing is one of the outliers in the industry, diversifying its portfolio so that restaurant and bar sales make up about two per cent of their yearly profits.
President and chief executive officer George Croft said its management team started having
early discussions about possible COVID-19 impacts when the first reports were coming out of China. One of their major “risk points” was the province’s returnable bottles system.
Acting quickly, he said they were able to secure more bottles so that the brewery could withstand a period of time when it wasn’t getting bottles from the industry. Many others weren’t as fortunate and have been forced to limit production.
Inside the brewery, Croft instituted swift protocols to ensure production could continue without sacrificing worker safety. The tap house and retail store were closed before provincial regulations mandated it, and the brewery moved to a home delivery model, implemented screening, hired 24hour security and have even implemented shift segregation to limit employee interaction by 75 per cent.
“We have four distinctive shifts with a one-hour break between shifts where nobody interacts,” he said. “And we have outside cleaning crews that come in and clean during that time.”
He said they feel “lucky and blessed” they haven’t had an incident — and that feeling stretches to the business side as well.
“I do think we could lose close to a third of the breweries in the country, and it’s a shame,” he said. “Like most industries, there are a lot of people where this is their livelihood, and it is disappointing.”
A recent Canadian Craft Brewers Association survey of 317 Canadian craft brewers found that close to half were reporting revenue under 50 per cent of what it was in March 2019. Chapman agreed it’s a realistic number that as many as a third might not be able to survive the COVID-19 pandemic.
“The longer this goes on, and the more weeks that pass with tap rooms being empty, festivals being shut down, restaurants and bars being closed and social gathering being prohibited — the more it’s going to hurt the beer industry in Canada,” he said.
Steve Innocente, owner of Waterloo’s Innocente Brewing Company, said they lost close to 75 per cent of sales with the closure of restaurants, bars and their tap room.
“To be honest, I didn’t think we were going to survive,” he said. “So I thought that if I’m going to go down, I’m going to go out doing something for the community.”
That’s when he started producing hand sanitizer for frontline staff, thinking he would be shut down by the end of the month.
“It kind of went viral and it may have saved the business,” he said, with sales climbing back up by the end of the month.
In total, they were only down 16 per cent by the end of March, moving back to the realm of sustainability.
Now, they’re transitioning to larger scale canning and delivery services, clawing their way back to life, and awaiting the moment they can reopen the taproom and start serving bars and restaurants again.
“It sounds corny to say this, but I just miss seeing everyone and having a chat. That’s what I’m looking forward to.”