Feature written by Brian Trivitt
To say things are different now than they were when I wrote my last blog on Friday, March 13th titled “Covid 19 Impact on Craft Beer,” is, without a doubt a huge understatement.
On that Friday the 13th (should have known), I had the pleasure of meeting with the Owner of Craft Beer Austin, Ms. Pam Catoe at Austin Beerworks. We enjoyed some of their world-class beers and had a good brainstorming session on some ideas for future blog posts. At that time, the bartenders were all wearing gloves, and I remember thinking to myself and discussing with Pam how crazy COVID 19 is and how hopefully things will get better soon and not get too extreme, as the Austin Rodeo had already been canceled.
The next day (Saturday, March 14th), I woke up early for a volunteer event at my daughter’s school. We had an excellent workday and discussed plans for future volunteer workday events. Later that day, I proceeded to start writing the blog I referenced above, and sent the final copy to Pam on Monday, March 16th, the day breweries and restaurants were restricted to only being able to sell food and beverages to go, and, needless to say, all schools and volunteer events at them have been closed ever since.
My purpose in providing this day by day recap of events is to just give a reminder as to how much things have changed in such a short period of time and consequently, the exorbitant impact these current circumstances are having on craft breweries. Incidentally, on my last post in mid-March, there was little to no data yet available about the impact COVID19 was having on craft breweries. Since then, The Brewer’s Association Chief Economist, Bart Watson, has released a summary of predictions as to the devastation COVID 19 has had on small breweries and paints a picture as to how much of a survival mode many breweries have been forced into:
As of the end of 2019, craft beer holds 13.6% market share by volume and is over 25% overall dollar sales. To put that growth into perspective, in 2010, craft was approximately 5% of market share and less than 10% of all dollar sales.
That said, the biggest statistic that stood out to me was how much faster sales are growing at recent startups compared to larger, regional, legacy craft operations.
I have been saying for years that while the growth in the number of breweries is indeed, wonderful for the beer lover; the extreme growth in the number of breweries has resulted in some people getting into the business for the wrong reasons. Consequently, you have some breweries out there brewing some poor quality beer and/or have some serious quality control issues. My prediction was that the self-correction would be much more of a result of supply and demand combined with too many people starting a brewery not understanding how challenging it is to brew quality, consistent beer. Sadly, this pandemic will result in not only some of those breweries closing but also high-quality breweries that simply don’t have the funds to make it through this. And make no mistake about it, even for folks who gave the brewery industry a shot only to discover that they lack the skills and/or passion to brew quality beer, I wish them the very best in their next endeavor and hope they come out of this okay. For breweries that are brewing great beer and passionate about continuing to do so, I wish I had a better answer as to what their best options are for keeping things going during this crisis. But from what it looks like, even the breweries that are offering beer to go AND brewing quality beer may be in trouble. While I hate to continue sounding so negative on this topic, the latest data released by the Mr. Watson, among other writings paint a very tough road ahead, especially for small taproom operations:
- If social distancing restrictions continue through the end of this month (April) and likely well into May, it’s estimated that anywhere from 1.3 to 1.5 million less barrels will be sold, which is a 25% to 30% decline.
- A Brewers Association Second Impact survey that came out on 04/14 said 40% of respondents said they could be forced to shut down by July. An updated story, just five days later (04/19) from Colorado Springs news stations said 15% of breweries could close by May while around 60% of craft breweries could close nationwide by July “if these revenue trends continue.” Something to note about this survey is that roughly 500 breweries responded, so, that means that roughly just over 6% of breweries in the U.S. were factored into this. Of course, hopefully, those who responded turn out to be wrong with their assumptions, but only time will tell.
Below are my predictions of what the craft beer world will be like for the foreseeable future:
- Notice how I didn’t say “when COVID 19 is over” or when “things get back to normal.” In my opinion, the uncertainty of all this is one of the toughest elements of this pandemic people and businesses are dealing with. Human beings can mentally deal with very tough times in a much different manner when there is a light at the end of the tunnel and they have at least some reassurance that once a certain milestone is met, circumstances will return to being familiar, AKA “back to normal.” In the case of a virus that new information and statistics are being released almost daily and the timeline for a vaccination is still a big question mark, the mental anguish, especially when you have bills to pay for an operation with high overhead (such as, a small craft brewery) and produces a beverage that for thousands of years has been consumed in social settings,
- Several recent articles have said that the new normal at on-premise will be vastly different than what we were used to pre-COVID 19. I’ve seen everything from the possibility of everybody serving any type of food or beverage having to wear masks and gloves at all times to establishments being forced to reduce tables and seating by as much as 50% to keep more distance. Beyond this, there is even discussion of doing temperature screenings before patrons are allowed to enter. Needless to say, if all of even some of this is true, it’s going to be a big adjustment from just a short time ago, when we would walk into a taproom, shake hands with a bartender and/or owner(s), grab a pint, and sit fairly close by somebody who is a total stranger and strike up a conversation about what beers everybody is enjoying. When you consider how the infection and death milestone numbers released almost daily, until a vaccine is available, several of these restrictions once taprooms, bars, and restaurants are allowed to reopen could be in place for many months or perhaps longer.
- The jury is still out on what is going to the momentum flagships will be able to maintain. Like I touched on in my previous bullet point, the new normal at on-premise is still going to be a big question mark, and consequently, people still just may feel more comfortable with enjoying beers they are more familiar with plus some people may still be reluctant to visit on-premise establishments and taprooms. As I have discussed in multiple previous postings I have put out, I have a tremendous amount of respect for a brewery that focuses on brewing quality consistent beer and puts a lot of energy towards maintaining quality with basic, flagship offerings. I’m hoping that this renewed interest in go to beers continues.
- Craft beer sales at on-premise will likely take a long while to see consistent growth. Part of this is because of what I mentioned above about the reduction in the number of patrons that will be allowed but also because of how much the entire economy has taken a hit and restaurant and bar owners are going to have to be more cautious about kegs they purchase.
As an aspiring entrepreneur myself and married to a wonderful woman who is a small business owner, I want to rehash that I absolutely wish everybody the best. I wish I could provide more advice on what breweries could do for financial assistance, but because this epidemic has impacted so many industries and businesses, financial aid from the federal government is proving to be challenging to obtain.
Below is a brief summary of resources that myself, Pam Catoe and Bart Watson have put together:
- Virtual Brewtalks https://www.brewbound.com/events/brewtalksvirtual20
- Although this podcast occurred in early April, it is an excellent panel of industry leaders that gives a great perspective on how COVID 19 is impacting various facets of the beer business overall. It is over two hours long and while watching it obviously delivers some bad news, it offers some insight into the comradery of craft beer and is a good reminder that we everybody is facing a tough battle, with panelists including Matt Bardill, Director of Beer at Total Wine, John Lane, Owner of the Winking Lizard Tavern, Sam Caligone, Founder of Dogfish Head, Julie Verratti, Co-Founder of Denizens Brewing Company
- Brewers Association Resource Hub https://www.brewersassociation.org/resource-hub/covid-19/
- An excellent one-stop-shop that offers a collection of resources at no charge that includes information on everything from assessing cash flow needs to how to properly dispose of beer, various types of business loans, and multiple other well-written articles. Mr. Watson pointed out the following for this time:
- Brewbound: https://www.brewbound.com/covid19/: Similar to the Brewer’s Association, a great list of resources along with a place to submit updates about your brewery amid the crisis.