Beer sales start to dry up as public venues keep doors closed

Beer sales start to dry up as public venues keep doors closed
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Breweries of all sizes are seeing a jump in retail sales during the coronavirus pandemic, but they haven’t been enough to offset major losses from the extended closures of bars, stadiums and other venues.

With most Americans still under stay-at-home orders, and liquor stores deemed essential businesses, demand is brisk for six-packs and cases. That revenue stream, however, has failed to make up for the large-volume purchases that are part of the business model for big and small brewers.

Large brewers are missing out on sales at bars, sports stadiums, clubs and concert venues. Small brewers have also been hit by the lack of events such as March Madness and St. Patrick’s day — two events that usually bring customers into tap rooms.

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“Draft sales across the board, big brewers and small brewers, have been hit really hard,” said Bob Pease, CEO of the Brewers Association.

The small brewery industry has seen sales drop 65 percent. Pease said that 40 percent of sales for craft breweries are typically in what are known as on-premise drafts, so bars or tap rooms. With draft sales currently on hold, those breweries have to rely on pickup or delivery.

“That’s not even enough to keep the lights on. It keeps a few people employed and trying to just hang on until we get to the other side,” Pease said, noting that dozens of companies have already gone out of business.

Legacy beer companies have fared better due to the nature of the beer consumer, according to Lester Jones, chief economist at the National Beer Wholesalers Association.

“Right now, having an established brand, whether you’re an Anheuser-Busch or a Port City, is really important because when people go into the grocery store and see that brand that they trust, they’re going to grab it,” Jones said.

The tough times mean many small brewers have had to turn to the federal government for assistance. 

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Members of the Brewers Association have been applying for Paycheck Protection Program (PPP) loans, which is poised to receive an injection of $310 billion after the initial $349 billion was disbursed in less than two weeks.

But not every applicant has secured the much-needed loan. 

“It’s been a mixed bag. We know of some success stories of breweries getting PPP loans approved. We’re hearing good stories and bad stories from our members,” Pease said.

One member, Denizens Brewing Company in Silver Spring, Md., was approved and received the funds on Monday.

Founder Julie Verratti, who previously worked as a Small Business Administration policy adviser, said she is preparing to reopen in a safe way, whether that means having fewer tables so people can practice social distancing or bar-service only so that there are fewer person-to-person interactions. 

“We know that business is going to be down,” she said.

Denizens’s revenue is down 80 percent. Verratti and her team have relied on delivering alcohol to customers. 

“The volume of beer that we’re moving right now is actually higher than it was prior to [COVID-19], but the margins and revenue are totally different,” she said. “Even though we’re moving more volume, the revenue and the margins are really far down.”

Laura Bruns, co-owner of Factotum Brewhouse in Denver, also was able to get a PPP loan. She said it will help for two months. 

“We are able to pay everybody for the work that we need right now,” she said. “Come June 30, I don’t know what it’s going to look like.”

Eighty percent of Factotum’s sales are typically from big events in the tap room, which she has had to turn down, including one wedding reception.

Some of the bigger companies, which have more access to capital and are better positioned to weather the downturn, have used the pandemic to highlight their corporate responsibility.

For example, Anheuser-Busch, which owns Budweiser, has been making hand sanitizer at its breweries, as well as donating to various charities, to help during the pandemic. 

But the growing fear for breweries of all sizes is that customers might not want to resume their regular beer consumption at public venues once the economy reopens.

“When we open our hospitality industry back up, it’s not going to be like flipping a light switch. It’s not going to be like what it was on March 1 of this year,” Pease said. “A brew pub or a tap room brewery is much like a restaurant. If you have to cut back your seating capacity by 50 percent, I don’t think a lot of those businesses can be sustainable at that level.” 

Other experts said the long-term effects of the coronavirus pandemic could drastically alter consumer behavior.

“I think the [COVID-19] crisis will fundamentally change everything. How do we interact with people? I think places are going to have to be creative. Can you socially distance? In the summertime, can you have an outdoor patio?” said Jacqueline Geoghegan, a professor of economics at Clark University who studies the craft beer industry.

“Craft breweries have figured out that curbside pick-up and home delivery is the way they’re going to survive now. Could they incorporate that in their business model once they get through this?” asked Neil Reid, professor of geography and planning at The University of Toledo. “There may be an opportunity here, we just don’t know.”

Updated at 11:04 a.m.