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E-Malt.com News article: USA, CA: California’s craft brewers see an average 43% decrease in sales since shelter-in-place orders began
Brewery news

Since shelter-in-place orders began, reports have circulated that Americans are drinking significantly more alcohol than usual, with retail beer sales up 41% year-over-year during the week of March 15, according to Nielsen.

Those figures might make it sound like breweries, especially in craft beer-loving California, should be seeing strong sales numbers right now. But the opposite is true, according to a new survey released by the California Craft Brewers Association, the San Francisco Chronicle reported on April 14.

California’s nearly 1,040 craft breweries, which represented $3.3 billion worth of sales in 2018, have seen an average 43% decrease in overall sales since shelter-in-place orders began, the survey says. That’s because the average craft brewery does not sell most of its beer in grocery stores or even liquor stores: On average, a California brewery sells 50% of its beer through its own taproom, and 20% through bars or restaurants, which are currently closed.

“The reality is that grocery store (beer) sales are not making up for the loss of sporting events, bars, restaurants,” said Tom McCormick, executive director of the California Craft Brewers Association. “The notion that people are drinking more at home — I doubt it. People aren’t going out and playing pool at a bar, or sitting outside and ordering pitchers, or watching a basketball game.”

The coronavirus crisis exacerbates a landscape for craft beer that was already challenging: U.S. beer sales dropped by 2.3% last year, the fourth consecutive year of negative growth, according to industry analyst IWSR.

The new reality has put breweries, like many other small businesses, in precarious positions. So far, 29% of California’s craft brewery workforce has been laid off, with 31% furloughed, according to the survey. And survey results published last week by the Brewers Association, which represents craft breweries across the U.S., revealed that 46% of breweries believe their business could last only one to three months more. One Bay Area brewery, Cleophus Quealy, has already permanently closed.

“I’ve had to go from preparing to have our busiest few months of the year to thinking about how I might have to close up this business,” said Regan Long, owner of Local Brewing Co. in San Francisco. Long said 80% of her sales typically come from the taproom, and its proximity to Oracle Park means that she depends heavily on baseball season, which is currently suspended, to drive traffic.

Long has worked quickly over the last month to keep her business alive. She began offering takeout food and beer, which allowed her to continue to provide hours for her nine employees, and started offering beer sales through her website for the first time. “We’re just trying to keep the lights on,” she said, “but it’s mentally exhausting.”

A brewery can only sell its beer online if it is packaged in bottles or cans, which many small breweries do not do. Ferment Drink Repeat, one of the smallest breweries in San Francisco, only puts its beer in kegs, which has left owners Kevin and Shae Inglin with limited options right now. “Our whole model is taproom sales,” said Kevin Inglin. In addition to their original taproom in the Portola District, the Inglins had just secured a space for a second taproom downtown. “So now we have double the expenses,” said Shae Inglin.

The Inglins have been able to sell some growlers of beer to go and homebrew equipment, “but it’s not close to what we would do normally with our doors open,” said Kevin Inglin. They’re going to start getting their beer canned to make to-go sales easier, but Inglin said that will eat away at their razor-thin margins.

Even breweries that sell most of their beer in wholesale distribution expect to see a decrease in sales, McCormick said. He cited Sierra Nevada, California’s largest craft brewery, whose bottles and cans are in grocery stores throughout the country. “They are expecting to be down in volume for the year,” he said. “That’s a big impact.”

Petaluma’s HenHouse Brewing Co. is somewhere in the middle, bigger than Ferment Drink Repeat, smaller than Sierra Nevada. Pre-coronavirus, said CEO Collin McDonnell, “about a third of our income and more than half the volume of the brewery was in kegs” — in other words, sold through either the HenHouse taprooms or bars and restaurants. “We’re large enough that we have beer in Safeway and Whole Foods, but the increase in grocery store sales doesn’t make up for the loss of draft.”

Natalie Cilurzo, president of Russian River Brewing Co. in Sonoma County, said her company’s gross revenue was down 78% year-over-year during the last two weeks of March. While they’re selling 21% more beer by volume through stores, they take a smaller profit margin from wholesale beer than beer sold through their own brewpubs and gift shops. Cilurzo said the company has had to furlough 160 employees.

Like Local Brewing, Russian River and HenHouse have quickly introduced online beer sales, which is cushioning the blow. But “can we sustain what we’re doing right now?” Cilurzo asked. “The answer is no.”

Cilurzo has been approved for a Paycheck Protection Program loan, but other breweries were wary of applying for loans. “Unless the brewery owner is willing to take out a significant amount of debt,” said Long of Local Brewing, “there’s not a lot of options that will get you past about two or three months.”

Existential questions linger for craft breweries. Once shelter-in-place orders lift, will they be required to decrease the capacity of their taprooms? Will people still want to come out to bars, restaurants and breweries to drink beer if it means they’ll be clustered closely with strangers?

Kevin Inglin of Ferment Drink Repeat hopes that this crisis will remind people to support their neighborhood breweries and other local businesses, instead of just buying industrial beer brands at the grocery store. “If people haven’t ever given their neighborhood brewery a fair shake, maybe this is a good time to get to know their local businesses,” he said.

But there’s little question that the coronavirus will leave the craft beer industry permanently changed, said McCormick. “We were already absolutely headed for a shakeout in the industry,” he said. “This is a wake-up call. You have to run a good business, make good beer, diversify your model, to be prepared for downturns in the economy.

“Whatever it looks like, I think we’re going to come out at the other end with fewer breweries but a much stronger industry.”


16 April, 2020

   
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