Breweries and bars in Chicago opened their doors to customers on Wednesday, June 17, exactly three months after orders from the city officially shut them down. Conditions for reopening included outdoor seating. Dovetail Brewing does not have that — yet.
“Reopening was our latest adventure,” Dovetail’s brewmaster, Hagen Dost, explains. Restaurants with patios and outdoor space had the green light to open in early June, but Dost and many of his fellow brewers didn’t get the same opportunity, as the city’s phase three only allowed establishments serving food to reopen. After Dost and his neighboring bar and brewery owners lobbied for a revision of the orders, the city lifted the restrictions, giving businesses like Dovetail a path to applying for sidewalk seating — which Dost did promptly on Friday, June 19.
Stories similar to Dovetail’s are being told all over the country, as breweries are finally having opportunities to reopen their doors. But for smaller operations like these to survive the next several months, many are seeking support to catapult them through the rest of the year — and whether they’ll get it remains unclear.
Smaller and locally distributed brewers that lack the resources to distribute or market to a large audience missed out on an early boost in off-premise sales, which could have fueled them through the summer. Many of them rely on draft and other on-site sales to make a profit.
A recent survey by the Brewers Association dropped jaws in early April when it showed that nearly 46 percent of small breweries faced permanent closure. A more recent survey, in late May, showed a slightly more positive outlook for 2020. But reports of permanent closings are trickling on across the country, from Gorilla Alchemy Brewery in Colorado and North by Northwest Brewing Co. in Texas, to The Herkimer, a 20-year-old brewpub in Minnesota.
Now that the National Bureau of Economic Research confirms that the United States has entered a recession, it’s understandable that breweries are still uncertain about whether they will be able to keep the lights on.
Already Playing Catch-Up
Beer as a category saw a 2.3 percent decline in 2019, with craft experiencing only single-digit growth before Covid-19 hit its stride. An uptick in off-premise sales for craft beer was registered by IWSR data during the early weeks of the pandemic. The boost in sales resulted in an 18.3 percent increase for craft beer in March. This was attributed to canned and bottled beer purchased through off-premise retailers. Consumers flocked to familiar brands with hefty marketing budgets and an established audience.
“Given off-premise trends indicate most consumers are shopping in the grocery or convenience channel and purchasing familiar brands, both distribution and brand awareness are factors,” says Brandy Rand, COO of the Americas at IWSR Drinks Market Analysis. “Visibility on ecommerce marketplace sites like Drizly, which connect consumers with local retailers for purchase, is also a factor.”
Draft beer sales came to a near standstill while bars, restaurants, and taprooms were closed across the country. In early April, breweries reported a dramatic drop in draft sales — to the tune of 91 percent on average.
“[Small brewers] are the ones with the highest percentage of their sales coming from onsite at-the-brewery sales as well as distributed draft sales,” says Bart Watson, chief economist of the Brewers Association.
Pivoting Away From Draft
A few draft-focused breweries managed to shift production to fill cans and bottles. Oregon City Brewing, a locally distributed brand just south of Portland, Ore., shuffled affairs immediately after bars, restaurants, and taprooms were ordered shut in mid-March.
“We shifted to a crowler program,” says Oregon City Brewing general manager Rosalie Morrow. “Basically we had to shift everything online. … We had to completely redo everything to be on this different online platform.”
Morrow and her team sold crowlers online that customers then picked up at the brewery during one of the two days it remained open. The program worked well for them until the crowlers started running out. “Every other brewery was doing the same thing,” says Morrow. “Every single brewery was going to crowlers so all of the sudden we have these supply chain issues.”
Unable to get crowlers in a timely manner, the brewery ultimately chose to bring in a mobile canning line and package 12 of its beers, all of which were sold from the brewery and through its partner, Olympia Provisions, which runs a restaurant on site.
Meanwhile, Other Half Brewing had been thriving on a “line culture” of customers arriving at the brewery on the day of the release and queueing up to buy freshly canned beer. “Right off the bat, we were like, ‘we’re gonna have to do curbside pickup,’” says owner Andrew Burman.
Within three weeks, Other Half added delivery as an option for customers around both its Brooklyn and Rochester locations. Burman notes that the temporary statutes allowing them to offer curbside pickup and delivery will expire in a few weeks, but he anticipates that customers will want these services for the long term.
Modern Times Beer, with taprooms throughout California and one in Portland, Ore., experimented with delivery as well. The brewery slowed down brewing anything that was meant for draft-only as soon as the taprooms shut down. Additionally, the brewery adopted a few unique practices to keep beer moving out the door.
“We did in-house screen printing of labels for special beers,” says Commissioner of Flavor Andrew Schwartz. “These were barrel-aged beers and we’d take them directly out of the barrel, put them into a package, with a really nice in-house screen printed label on them.”
Dovetail refocused in a different way. After being forced to lay off 14 people from its taproom, Dost says, Dovetail chose to keep on its brand new sales team to increase its presence on shelves at regional off-premise accounts.
In many ways, the shutdown accelerated Dovetail’s expansion into off-premise. “We were just step by step growing and then all of the sudden, boom, we had to shift gears and really get serious about off-premise,” says Dost.
Many newly packaged beers from brewers pivoting quickly were distributed to retailers like Belmont Station, a bottle shop and beer bar in Portland, Ore. Owner and operator Lisa Morrison could barely keep them in stock. Cans and bottles of Boneyard Brewing, Barley Brown’s Beer, and Montavilla Brew Works flew off shelves. “Those are all recognizable draft brands, so they are getting a lot of attention,” says Morrison.
The pivots from draft to package helped get beer out the door for many smaller breweries but that may not be the only thing keeping them afloat. According to the recent Brewers Association survey, more than 80 percent of brewers also received Paycheck Protection loans through the CARES Act. Even with the loans, many breweries still reported concerns about the months ahead.
For several weeks, recession has been the word on the tip of every economist’s tongue. Now that the experts have confirmed it’s here, it’s hard to predict what additional challenges will face these breweries. In previous periods of recession, data from the Beer Institute shows that beer consumption still grew overall but at a much slower rate. Growth in shipments of beer was on average around 0.2 to 0.3 percentage points lower than the average during the years of the Great Recession (late 2007 through mid-2009).
The recession we face now strikes a very different chord from previous ones. No one knows what a recession caused by global pandemic means but details are coming into focus. In April, the Congressional Budget Office suggested that unemployment could climb to 16 percent sometime between October and the end of the year. Recent unemployment reports may dispute that but only time will tell if rates continue to trend downward. Either way, nearly 20 million people are still out of work and as expanded benefits, rent freezes, and other emergency assistance programs end throughout the summer, consumers will find themselves with a lot of bills and not a lot of income.
Watson insists that the survival of small-production beers depends on consumers’ willingness to spend: “The higher the price point, the more critical it will be to have a strong brand connection with customers to survive,” he says.
Consumers Return Slowly & With Conditions
Aside from the recession, breweries, bars, and restaurants now face challenges they’ve never navigated before. Datassential asked 1,000 respondents how their habits will change once they’re allowed outside; only 20 percent said they would return to dining out immediately. (Even that came with conditions: Respondents indicated that restaurants would need to prove following strict guidelines around cleanliness and social distancing before they would feel comfortable returning.)
With all 50 states now in some process of reopening, it remains to be seen how well small breweries will bounce back. Most phased reopenings that allow for on-premise consumption require bars and restaurants to limit capacity to 25 percent. For breweries that rely on on-premise sales to keep the lights on, only being able to welcome back 25 percent of their customers may not be worth the investment to open the doors at all.
New on-premise measures, as required by local or state governments, will likely change brewery taprooms as we know them. “While yes, we’re open and we have people coming in and there’s revenue coming in, we have to staff every shift with twice as many employees,” says Morrow. “So we don’t actually know yet if we’re even covering costs.”
Burman expects that consumers will want services like online ordering, pickup, and delivery to continue to be available. “We are kind of under the assumption that we’re gonna change our business model forever,” he says.
Even if a second wave doesn’t materialize, consumers have become accustomed to a different experience with breweries and may demand that going forward.
Published: July 8, 2020