How Well Is The Curbside Economy Doing?
By Tony Forder, firstname.lastname@example.org
As it normally does this time of year, the Brewers Association released craft beer production stats for the previous year. Instead of the popular annual joint presentation on the state of craft beer by the tag team of BA Director Paul Gatza and Chief Economist Bart Watson which was scheduled for the Craft Brewers Conference in San Antonio this week, Watson flew solo from his virtual shelter-in-place.
(Running through May 15, the BA has launched a daily schedule of live on-line presentations that were scheduled for this year’s CBC https://www.craftbrewersconference.com/).
His presentation on industry stats and trends ended, as it has at virtually every conference I have attended back to the 1990s, with the pronunciation “Craft Beer sales are at an all-time high.”
And they were – in 2019; more craft beer was brewed than ever before, and that’s even with the BA’s ranks being whittled away by takeovers, and mergers. (Stats from non-independent craft breweries are not included*). But even as the figures were presented, the focus of those listening and of questions presented were far from 2019. It sure looks like a long way in the rearview mirror.
Who knows what production statistics will look like for 2020? Watson stated that most of the growth in craft beer (4% overall) was represented by small tasting room breweries. In what he coined the “At the Brewery” decade, Watson noted that half of the US’ 8,200 operating breweries opened in the past five years and most are of the taproom variety. Indeed, this is the first year the BA has collected full data and created a separate category for Taproom Breweries, which were responsible for nearly 40% of all craft beer growth. In the current climate Watson acknowledged that he might have to start tracking curbside sales.
Not surprisingly, the Taproom Breweries are the hardest hit by the Covid-19 epidemic. While some have a certain retail presence, most are heavily dependent on Tasting Room traffic for their survival. With social distancing in place, tasting rooms are of course out of bounds, and while most of these breweries have pivoted to curbside pickup and/or deliveries, this can only replace a portion of previous business.
In a recent survey among Tasting Room Brewery owners, Watson said that 60% of them said they could only endure about three months of the “Curbside Economy” before going out of business.
He said that he had already estimated 400-500 closures this year as competition increases – there were almost 300 closures last year. And with another nearly 1,000 new breweries opening in 2019, Watson said some areas have reached a saturation point similar to restaurants where the one out, one in scenario is the norm.
Under the current conditions, who knows what the level of carnage for the nation’s 3,000 Taproom Breweries will be for 2020? Some estimates for restaurants put pandemic-related failures at 75%. Survival depends on a lot of factors – obviously the duration of social distancing rules; breweries with a heavy debt level are more challenged; how long will relaxed rules for delivery stay in effect, and while it is currently a survival tactic, how profitable is it in the long run? Also, it remains to be seen, if and when social distancing is lifted, how willing are consumers going to be to circulate in public again?
Most small breweries have significantly scaled down production but have offset draft and keg sales by more canning which brings a significantly higher markup. For larger breweries that are embedded in the retail chain, off premise sales my well have increased. Watson reported that craft beer packaged goods sales are up 8% for March. A preference for larger units, 12- and 15-packs or even 30-packs was also reported.
* BA Craft Brewery Definition: An American craft brewer is a small and independent brewer. Small: Annual production of 6 million barrels of beer or less (approximately 3% of U.S. annual sales). Beer production is attributed to the rules of alternating proprietorships. Independent: Less than 25% of the craft brewery is owned or controlled (or equivalent economic interest) by an alcoholic beverage industry member that is not itself a craft brewer.