Coronavirus Could Kill Craft Beer. Will Any Brands Survive?
Thousands of craft breweries in America may go out of business, our columnist examines what’s going on and tries to forecast the future.
I’ve been watching the craft beer industry collapse over the past few months.
After 20 years of writing about how upstart craft brewers have steadily taken customers from mainstream brands, it’s a shock to see this whole world shatter under the hammer of the coronavirus pandemic.
Given that everything is now upside down maybe I shouldn’t be shocked, but overall, things are pretty grim. The disease has broken the long growth curve of craft beer, which had outperformed the overall category for more than a decade—and it only took a month.
In April, according to the latest numbers from industry watcher Beer Business Daily, hard seltzer and “flavored malt beverages,” like hard lemonades and teas, grabbed an additional 2 percent of total beer volume, while craft lost almost 2.5 percent. Months ago, I predicted hard seltzer’s rapid ascension and while I like being right as much as the next guy, I don’t really want to be quite that right about hard seltzer.
The news from inside the craft category is as shocking.
Tiny taproom brewers, with their constantly shifting experimental batches of hazy IPA, pastry stouts, guava sours, cereal pop-tart beers, and Vietnamese coffee porters, had become the favorite of fickle drinkers. Now, in our COVIDsphere, those taprooms, brewpubs and specialty bars are striving to keep the lights on until the lockdown is over with a trickle of takeout business. But that leaves literally millions of gallons of draft beer that’s rapidly approaching its best by date.
Mark Edelson, co-founder of Iron Hill Brewery, the East Coast chain of 20 brewpubs, has been scrambling to sell his draft beer, and it all has to go out the door as takeout. The common package is the half-gallon growler, an amber glass jug that gets filled and re-filled. But the jumbo bottle’s re-use and sanitation is an issue that only gets more pressing during a pandemic.
“We don’t trust anyone’s ability to clean them properly—never did,” Edelson said. “They’d bring in an Iron Hill labeled growler, we’d fill a fresh one, and take their’s. But a lot of people just roll in without growlers! Our total sales were usually 600 a week. The first week [of the lockdown], we sold 4,000! There were only 500 in the warehouse. We just bought a lot of blank amber growlers. Forget the label, we’re slapping takeout labels on them.”
Everyone is grabbing so-called crowlers, too. These are 32-ounce cans that are filled and sealed right at the bar for a single use, and are just recycled when they’re empty. I recently stopped by Victory Brewing in Parkesburg, Pennsylvania, for a contactless curbside purchase of a dozen of these oversized cans, including pilsners, IPAs, and two heavyweight triples, all at clearance prices.
I am not the only one buying crowlers. For weeks, empty crowler cans and the crowler sealing machines were in short supply, as breweries and bars hurried to convert their kegs for takeout orders. Dennis Grumm is the CEO and co-founder of Oktober Can Seamers, a Michigan-based company that makes a highly-regarded crowler system, and, as you can imagine, he’s been running like crazy to meet demand.
“Our sales were mostly normal until March 16,” he told me by email. “That Monday we saw a huge jump in orders. We’ve been keeping up, but it’s been a lot of long hours. Between hearing from our local breweries when they stop by to pick up cans, and the non-stop calls and emails from customers, it’s clear that keeping up the supply of cans and seamers is critical for a lot of craft beverage businesses. For us, it’s been a genuine all-hands-on-deck scenario.”
Michigan government inspectors worked with Grumm to find a way to safely get the machines made while protecting workers from coronavirus. That solution includes going back to the old days of cottage industry piecework. “We came up with a plan involving a lot of work from home, multiple shifts, and separated working areas,” he said. “We have cargo vans that drop off tools and parts to employees’ houses for small assembly work from home where possible.”
The supply of the machines and the empty crowlers is finally catching up to demand. But drinkers are also finding their way back to the large regional craft brewers. Sales are up for cans and bottles from these brands as people rediscover old favorites, and look to fill their pantry...and then refill it. These beers are just as good as they always were, they’re dependable, and they’re in supply at the supermarket for one-stop, one-mask shopping.
But the real issue isn’t what’s selling. It’s also not how to find a way to sell hundreds of thousands of kegs, either. The fact is that many of them won’t get sold. They’re already being taken back, repackaged and distilled for hand sanitizer or whiskey, or just dumped, and all of that is at a loss for the brewer.
The problem is much bigger.
Breweries are already starting to close, for good, and the rest are looking at their runways trying to decide if they can make it to re-opening, and whether re-opening will mean survival. Like other businesses, it’s largely out of their hands, but small breweries may be worse off than most because of the highly regulated nature of their industry.
So how many breweries will we lose? The Brewers Association recently surveyed its members and came up with an estimate that 3,600 of the nearly 8,000 breweries in America may go out of business. (The Association itself just laid off a quarter of its employees, which is itself a terrible sign.) When I think about how many of these businesses are small, less than four years old, and largely dependent on draft, on-premise sales, without even a kitchen for a takeout food business, I wonder if 3,600 might not be a low number.
There’s also a lot of speculation about what things will look like on the other side of the lockdown—mostly focusing on whether we’ll want to go out and if we’ll trust that it’s safe. Given that literally millions of people want to go out right now, social distancing or not, I’m pretty sure that the predictions of mass agoraphobia are overblown.
I remember 9/11, and how for three months afterwards no one cracked a smile and no one went to movies. But we returned to normal. This is like that in slow-motion, and we’re ready to go back to normal now. We may have to wear masks, we may have to wait to enter taprooms with lower occupancy rates, and there may not be hot and sweaty nightclubs for a while, but we’re going to go out.
But if 3,000 breweries close, what happens to all that business and all that demand for drinks? I can assure you it doesn’t go away, but I do worry about a Demolition Man-like prospect, the oddly prophetic 1993 Sylvester Stallone vehicle, where in the future all restaurants are Taco Bells. Will we have a choice of ten different chain brewpubs? Will it be like Wetherspoon’s in the UK, a huge chain of taprooms, that are all just slightly different?
Maybe. But I’m not really a film buff. I’m an historian by education, so what really makes me wonder is the comparison to the Great Depression, fueled by an historically similar strong uptick in interest in socialist ideas we’re seeing in politics today. Specifically, I’m thinking about the so-called End Poverty in California (EPIC) scheme dreamed up by writer/politician Upton Sinclair.
Sinclair saw abandoned factories and thought, there’s nothing wrong with the machinery, people still need these products. Why are the factories closed? He proposed that local governments take over the factories, put people to work in them, sell the goods and then pay the workers. The Depression would solve itself, and the only people hurt would be the banks who held the loans on the properties. He almost won election as governor, and I have to wonder what things would look like now if EPIC had gotten a chance.
Now, think of all the small brewery origin stories that include something about the brewery being in a 110-year-old building that was originally used for something else and then sat vacant for 30 years. I’ve heard that same song over and over; why would we want to reprise it? The buildings are there: why not buy some malt, turn on the power, and make beer? People still want to buy it. This requires some creative thinking. But the revival of the entire economy will require creative thinking, maybe a reconsideration of the entire business model. Why not start with brewers?
Which is how we’ll end this. Not with EPIC, but in California. There’s a brewer I know, Peter Hoey, who founded Urban Roots Brewing & Smokehouse in Sacramento. For a while they were riding high, doing one-off can releases and making money hand over fist. Then the coronavirus hit. They had to adapt, and the way they did sounds like a good way forward for the industry.
“Our business goals changed from gaining market share, keeping the pub busy and brewery expansion,” Hoey explained, “to focusing on how we can take care of our remaining employees and how we can serve the community. We keep asking ourselves: how can we be a solution during this time of social distancing and shelter in place? How can we continue to operate and keep our staff and guests safe?”
Urban Roots has been able to work with its creditors to defer payments and renegotiate terms, but that can’t last forever. “While vendors, lenders and business partners are being flexible with bills and payments, most are not being forgiven. Those bills are going to come due sometime in the future,” Hoey said. “This is going to impact growth dramatically.”
The days of sacks of cash for stacks of cans may be over, and that’s maybe not all bad. It reminds me of something a brewer told me back in the ’90s. “I don’t want to make a mint of money,” he told me. “I just want to make my mortgage payment.”
Brewers will be tightening their belts like the rest of us. It’s a scary future, but a little more community feel is going to help get us all through it. If everyone gives a little, fewer people will have to give a lot. After all, it just might save your favorite beers.