Craft Brew News # 74 - COVID-19 - A "Shock to the System" for Craft Breweries

Craft Brew News
4/17/20
(Courtesy of www.Brewbound.com)

BA’s Bart Watson: COVID-19 ‘A Shock to the System’ for Craft Breweries

By most metrics, small and independent craft brewing companies posted solid volume growth in 2019. However, the disruption caused by the COVID-19 pandemic, which has forced many craft brewers into “survival mode,” is overshadowing 2019’s growth.

In 2019, BA-defined craft brewing companies held 13.6% of the beer industry’s market share by volume, and accounted for more than a quarter of the industry’s dollar sales.

Nevertheless, craft breweries have lost a considerable amount of sales in 2020 as on-premise and own-premise sales were cut off in mid-March 2020.

That’s left many craft breweries struggling to survive. According to the BA’s second impact survey, 46% of respondents said they may be forced to close their doors within the next three months if the shutdown continues.

Asked which breweries might be most at-risk of closing, Watson said the smallest breweries are the most at-risk due to relying on onsite sales and draft production.

Responding to a question of how the current downturn compares to the recession that began in late 2007, Watson said beer and other alcoholic beverages are “recession-resistant, but not recession-proof.” Consumers are likely to continue buying beer, wine and spirits, even after they cut spending elsewhere. Since 2009, beer prices have increased, while wine and spirit prices have decreased.

Watson also addressed the number of breweries in planning. The BA counted 8,275 in operation in the U.S. in 2019. Citing Alcohol and Tobacco Tax and Trade Bureau (TTB) numbers, he said there are now 11,800 active brewing permits in the U.S., of which he estimated there are around 2,000 breweries in the planning stages.

Watson added the industry was already moving in a direction similar to the restaurant and bar industries, in which locations close and new ones open in their place.

“We were already seeing 25% to 30% of breweries that close get a new brewery going in,” he said. “And that rate may rise over the next few years as people look to get in at a lower price point than they couldn’t before.”

The way those breweries operate once they open may also change. A flaw in the taproom brewery model, which has been hailed as possibly the best way to build a brand and cash flow a brewery by selling beer directly to consumers with little to no distribution, was exposed by COVID-19. Watson said in a post-COVID-19 world, businesses will be forced to consider other revenue streams, such as beer to-go sales and direct-to-consumer sales with limited distribution, either self-distribution or through a wholesaler, where legal, “as a hedge against future shutdowns.”

A common thread in off-premise data reporting since the pandemic began is a resurgence of the nation’s largest craft brewers’ long-declining flagship offerings, which haven’t grown in months or even years. Though it may be easy to assume that troubling times inspire consumers to turn to trusted brands, Watson pointed out that these brands have much wider distribution than their smaller craft counterparts.

Since March 9, off-premise dollar sales in retailers such as grocery stores, where shelves are typically stocked with products from major domestic and regional craft brewers, topped $3.4 billion, according to market research firm Nielsen.

Social Standards Examines Possible Loss of Summer Drinking Occasions, Increase in Virtual Happy Hours

With summer drinking occasions at risk of being lost due to the coronavirus disease COVID-19 shutting down gatherings at beaches and pools, consumer insights firm Social Standards looked at the potential effects of that loss on beverage alcohol products.

The firm ana