|An ongoing series of reports about
the beer world froma variety of
award winning writers.
|The Brewers Association recently launched two surveys designed to gauge the impact the current COVID-19
pandemic and subsequent social distance public health measures are having on small brewers. The results
show a sharp drop in craft category sales, massive furloughs or layoffs, and the high likelihood of large
numbers of brewery closings without a swift end to social distance measures—which looks increasingly
unlikely—or rapid government support for small brewers and hospitality more broadly.
Respondents were asked to provide their decrease in sales by channel. For distributed channels, this was
broken into draught and packaged. Those results have been weighted by brewery size to give a sense of total
category impact. First, let’s look at onsite sales. The median respondent has seen their sales drop 75%, with
an average drop of 65%, and an adjusted weighted average drop also of 65% (see note at end on
adjustments). Most breweries are experiencing drops in excess of 70%, with a limited number of breweries
seeing smaller drops or positive growth, and an even smaller number seeing large gains.
Most of those breweries reported sharply negative draught and packaged sales, and a review of their strategy
suggests that some breweries have been able to ramp up direct-to-consumer, drive-up, and delivery sales to
a point those exceed their previous onsite sales. This should not be viewed as feasible for all brewers, nor
should it be seen as a total replacement for draught sales. One hundred percent growth in taproom sales via
drive-up only helps so much when your taproom was 5% of sales and distributed draught 75%.
The sharpest declines are in obviously in distributed draught. With on-premise largely closed for business,
there are few to no outlets for distributed draught in most states. These results are the most consistent,
regardless of the statistic used: median drop in sales is 100%, average drop is 91%, and weighted average
(accounting for both sample weights and volume) show a drop of 95%.
You may have read in the trade press how in scan data, beer is seeing huge gains in recent weeks as
people stocked up and as some of the volume lost in the on-premise shifted into off-premise. However,
scan data isn’t always representative of the experience of many small brewers, even in the off-premise.
So what did our data show?
The weighted average (probably the most appropriate to use in this case), shows packaged distributed
volume up 7.9%. That’s about half the growth seen the last four weeks in scan. Brewers Association craft is
up 18.3% by volume in the four weeks ending April 26, 2020. The disparity likely reflects drops in smaller off-
premise retailers who aren’t measured by scan, generally those where the smallest brewers begin in off-
premise. Indeed, the median growth from the respondents was 0%, and an unweighted average was -11.7%.
So, while there likely is a bump for the overall category in off-premise, this isn’t helping the smallest micros,
taprooms, and brewpubs that much, since much of the bump is concentrated in bigger retailers.
For many small brewers, the current situation is not sustainable. Being a responsible business owner means
scenario planning, but few if any build plans for a near complete drop in revenue with no insurance protection
and continued bills to pay.Consequently, in response to the question, “Given current costs, revenues, and the
current level of state and federal aid, how long do you project you can sustain your current business if social
distance measures stay where they are now?” many brewers indicate that their business has a matter of
weeks, and a majority say that they can only last a few months based on current trends.
There are about 8,150 active breweries in the country. If 2.3% of those breweries close, that would mean
about 190 closures, 11.8% about 930 closures, and 45.8% about 3,735. Based on recent trends, it was likely
that 4-5% of the breweries in the country would have closed in 2020 prior to this shock, so while some
percentage of these closures and potential closures reflect business that were already struggling, most are
brought on solely by this event.
Remember that most small breweries are really small. Approximately 75% of the breweries in the country
make 1,000 barrels or less a year and the median craft brewer makes about 400 barrels. Consequently, the
breweries indicating they may need to close are by and large very small. The 14.1% of breweries who say
they may a month or less represent 2.2% of the volume in this sample. More service-oriented brewers
(brewpubs and taprooms) have higher percentages for the responses up to 3 months, whereas packaging
brewers (micro and regional) have a majority of their responses in the 3 month+ categories and 10% of that
group is in the “longer than one year category.”
Faced with little to no revenue, brewers are furloughing and/or laying off staff. The brewers who responded to
our survey stated they employed a collective 15,190 workers prior to COVID-19, with 8,433 full-time and 6,757
part-time workers. The brewers surveyed have already laid off a majority of those workers
Brewers need more direct relief, and failing that, they need help in the form of excise tax certainty and
credits to offset the hundreds of millions of dollars that was already in the trade or sitting in tanks when
the on-premise ground to a virtual standstill. This is a period of extreme urgency for small breweries.
Government is the only entity big enough to forestall the closures of thousands of these small businesses
and the loss of jobs of tens of thousands of workers.
|The End of Craft Beer?
bu William Goldberg
|Based on an article by
Bart Watson of the BA