Virus upends brewers
Bars, restaurants and tap rooms closed
Sales of wine, spirits and other alcoholic beverages have risen during the coronavirus pandemic like foam in a freshly poured glass of beer.
Just not for some craft brewers.
Craft beer, particularly brews made by small, artisan producers, is often consumed in bars, restaurants, tap rooms and brew pubs — all of which have closed in many communities across the United States. While those brewers may sell some packaged brews or kegs, they rely on such venues to get by.
As a result, small, independent craft brewers have been forced to lay off workers and, in some cases, dump large quantities of their prized beverage. They’ve tried turning to curbside pickup and delivery of their product, but even those measures won’t make up for the losses.
“COVID-19 has been devastating for small and independent craft brewers around the country,” said Bob Pease, president and CEO of the Brewers Association, which, he said, has heard of dozens of breweries that have gone out of business. Roughly half the brewers questioned in an association survey said they would have to close if the quarantine lasts more than three months, according to Pease.
Adam Keck’s Modern Methods Brewing Company in downtown Warren has weathered the outbreak by offering curbside service since closing March 15.
“I would say 70 percent of our business, the majority, is wholesale,” Keck said. “The other 30 percent is to other bars and restaurants buying kegs off of us, so all that business was gone, too.”
The support, he said, has been remarkable. He offers a sales portal on the brewery’s website and walk-up service also is available. He mixed in a loan from the Paycheck Protection Program to help stay afloat.
“That kind of gave us the confidence that we could bring people back, start making beer again,” Keck said. “But I’ve done some projections. We’ll be able to skate by on much thinner margins at a lower volume. It becomes a volume game then.”
Modern Methods has been immune to the dumping of product; rather it’s the larger craft breweries that have been forced to do that. Beer he had stored in kegs, he said, he was able to put into cans and crowlers.
“The people who are really dumping, those are the bigger players that have massive warehouses full of beer,” Keck said. “They could sell crowlers all day, that tap could just keep running and they wouldn’t even scratch the surface of that.”
Some of the larger independent brewers whose beer is distributed to grocery and liquor stores have seen a bump in such “off-premise” sales during the pandemic, but they’re still losing ground without their tap rooms in use and bars and restaurants open.
Off-premise sales of independent craft beer are up 17 percent in the nine-week period that ended May 2 compared to the same time last year, but larger, commercial brands are growing at a faster pace, Danelle Kosmal, vice president of beverage alcohol for the Nielsen Company, said. Total beer sales — which include flavored malt beverages, hard seltzer and cider — rose 20 percent. That compares to wine sales, which are up 30 percent and spirits, which jumped by 34 percent in that time frame, according to Nielsen.
Many of the roughly 8,100 small independent breweries, which account for a 14 percent market share of all domestic beer by volume and 25 percent market share by dollars, rely on their own tap rooms or brew pubs to sell beer “on-premise” to customers. They are not equipped to produce beer for off-premise sales, according to Pease.
Along with cuts, small independent breweries have retooled their business models to better reach customers stuck at home and to comply with social distancing requirements. Many are offering curbside pickup and, in some states, deliveries.
“Customers are getting a kick out of it,” Collin Castore, co-founder of Seventh Son Brewing in Columbus, Ohio, said of the deliveries. “We’ve gotten some good social media out of it and some positive response.”
In the case of Modern Methods, Keck said, because the business model has shifted, he’s exploring the idea of buying more equipment to make more beer, “to make this model more profitable and expand our sales footprint.”
Seventh Son had to close its two tap rooms and lay off half its 60 employees. The brewery was able to bring back some of the employees after receiving a loan under the Payroll Protection Program, but it’s losing thousands of dollars each week, he said. The brewery doesn’t want to close, lest it lose its grocery distribution or put people out of work, said Castore, who is president of the Ohio Craft Brewers Association.
“It’s at the point where when the PPP runs out it’s not a very sustainable point where we’re at. We just weren’t built for this. We weren’t built to be a production-only brewery,” he said.
Breweries are now at the tipping point two months into the shutdown of bars and taprooms, though Pease noted that states are starting to reopen.
In Ohio, for example, restaurant and bar patios will be allowed to opened on May 15 and full dining rooms open on Thursday, with social distancing required.
Pease thinks by the end of May most states will allow some level of on-premise patronage.
“How successful that’s going to be I don’t think anybody knows,” he said. “Yet.”
Keck said he is waiting to reopen his taproom at least till June. Occupancy there is 49, so 6-feet of social distancing means 15 people can be inside at once. He could install dividers, but that would take away from the taproom experience.
“We’re making the calculation that it’s not delivering the taproom experience that we want for people at this point, so we’re going to stay doing what we are doing until June 1 and then re-evaluate at that point,” Keck said.
Plus, he said, he’s also not convinced there won’t be a spike in virus cases, so he’s not overly confident asking people to return to work and risk getting sick.
The Associated Press contributed to this report