US craft brewers: it will get worse before it gets better
USA | Doomsayers are having a field day with predicting that covid-19 is going to have a long-term and dramatic effect on the craft brewing industry. Yet, it all depends on how long the public must/wants to stay at home.
The Denver website westword.com on 14 April 2020 painted a gloomy picture for an industry that as much defines Colorado as do skiing, outdoor recreation and cannabis.
The Brewers Association (BA) conducted a survey in early April and it revealed that 12 percent of respondents believe they aren’t going to make it another month unless they can reopen, whereas 46 percent said they won’t last three months. Another 2.3 percent said they were going to close anyway.
For whom the bell tolls
This suggests that out of the 8,150 active breweries in the country, about 930 breweries could close by May, taking the rate up to about 3,740 closures by July. Most of the breweries expecting to close are really small. The median US craft brewer makes about 400 barrels beer, says the BA.
At the time of writing, it is impossible to know how long Coloradoans will remain under lockdown. Currently, people are compelled to stay at home until 26 April for Colorado and 30 April for Denver.
Besides, no one knows when bars, restaurants and breweries will be allowed to re-open. Colorado’s governor ordered businesses to close on 17 March, which was ten days before he ordered the public to stay at home. In Denver, restaurants and bars are closed until at least 11 May.
Even when the restrictions are lifted, there will be social-distancing requirements, under which businesses can only allow a certain number of people onto the premises, based on the square footage of the bar, brewery or restaurant.
Taprooms most affected
While it will be nice for breweries to welcome customers back inside, westword.com says that the brewery taproom model, espoused by nearly 3,000 craft breweries, could still face its demise. “It relies on selling as much draft beer over the bar as possible. The margins are higher, the volume is more reliable and the tips help keep employees on the job. Under social distancing rules, the numbers would no longer add up.”
Based on the BA’s survey, 60 to 70 out of Colorado's 420 or so breweries could close in April, while a total of 250 could close by the end of June.
An early casualty is the Craftworks group of restaurants, which also owns brewpub chains like Rock Bottom, Chop House and Gordon Biersch. In March it filed for bankruptcy. It subsequently shuttered 261 locations and laid off most of its 18,000 employees. Rock Bottom was founded in Denver in 1991 and Craftworks has at least eight restaurants and breweries in Colorado.
Will patrons return?
In the medium-term, two factors may threaten the survival of small local breweries, says westword.com. “One is customer fatigue; the public, which so far has been turning out en masse to help their favourite watering holes, may tire of donning masks and gloves so that they can pick up growlers and six-packs. The second is data that shows that people are resorting to known brands, cheaper beer and larger formats, like 24-packs of beer.”
Therefore, June will be a crucial month. “If small breweries are allowed to open by then – and if beer makers are able to take advantage of loans and grants – many may survive. If not, this is the time when their reserves will run out and they will begin to close their doors in much higher numbers,” westword.com forecasts.
However, if the pandemic’s anticipated second wave drags on until the autumn, some larger craft breweries, that have been able to weather the storm with supermarket sales, may feel the pain too. Given that a large number of bars and restaurants won’t make it through the crisis – 20 percent by some estimates – the bigger breweries could lose hundreds of tap handles in Colorado and in other states.
Plenty of observers believe that it is going to get worse before it gets better.
