Craft brewers upended by COVID-19 closure of tap rooms, bars

Business

In this Friday, May 8, 2020, photo, Jack’s Abby craft brewery employee Andrew Kelley carries an order to a customer in a line of cars waiting curbside in Framingham, Mass. Sales of wine, spirits and other alcoholic beverages have risen during the coronavirus pandemic. (AP Photo/Michael Dwyer)

MARSHFIELD, Vt. (AP) — 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 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.

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% in the nine-week period that ended on May 2 compared to the same time last year, but larger, commercial brands are growing at a faster pace, said Danelle Kosmal, vice president of beverage alcohol for the Nielsen Company. Total beer sales, which include flavored malt beverages, hard seltzer, and cider, rose 20%. That compares to wine sales, which are up 30% and spirits which jumped by 34% in that time frame, according to Nielsen.

At Jack’s Abby in Framingham, Massachusetts, known for its lagers, co-owner Sam Hendler said the company may have to dump 100,000 gallons of beer — even though it’s among the craft breweries who sell to groceries and liquor stores. It also has laid off about half of its staff of 150 with sales down well over 50% for April compared to that month last year.

“It will be a challenge to survive as one of the brewers that does distribution,” said Hendler, who is president of the Massachusetts Brewers Guild. And for “the brewers that don’t do distribution, it’s just a time game. When does business come back? And do they run out of cash before that happens?”

Many of the roughly 8,100 small independent breweries, which account for a 14% market share of all domestic beer by volume and 25% 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.”

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.

In Vermont, Lawson’s Finest Liquids in Waitsfield converted its retail store into a curbside drive-thru operation with online ordering.

“We have had to dispose of a significant quantity of beer in kegs, since bars and restaurants across our nine-state territory have been closed for the past eight weeks,” owner Sean Lawson said in an email.

Night Shift Brewing in Massachusetts announced Wednesday that it would not go through with its planned expansion in Philadelphia.

“The COVID-19 pandemic shook our business to the core, and obviously almost everything outside of it. We’re lucky that we’re still in operation and able to see ourselves coming out of this crisis intact,” the co-founders said on the brewery’s website. “But pushing forward on our Philly project has become too dangerous, threatening a potential collapse of NSB if we don’t pull the plug now.”

Co-founder Michael Oxton added: “We were looking at probably a 12 plus million dollar build-out down there and we just didn’t want to take on that kind of financial risk given all the uncertainty right now.”

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 open on Friday and full dining rooms on May 21, 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.”

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