Craft breweries made up an estimated half to two-third of their 2020 volume losses by the midpoint of 2021, Brewers Association (BA) chief economist Bart Watson said today during a presentation on the industry’s mid-year performance.
“If I was to summarize 2021, what we’ve seen is that we have growth versus 2020, but that we’re still below where we were in 2019,” he said.
Unweighted results of Watson’s survey of BA members found an average growth rate of +7% compared to 2020. Weighted to account for brewery size and business type, the average jumped to +13%.
“My gut is it’s somewhere in between those two numbers,” Watson said. “Putting it all together, what that means is I’m estimating that in the first half of the year, craft made up between half and two-thirds of the volume that it lost in the first half of 2020.”
The first half of 2021 is a study in two very different quarters. Compared to sales in the first quarter of 2020 before the pandemic shut down the on-premise channel, Q1 2021 “was certainly worse,” he said. However, in the second quarter of 2021, vaccines began to roll out and many on-premise restrictions were lifted across the country.
“There’s signs when we get to the June numbers that in Q2, we might have even exceeded 2019 numbers for craft brewers and really had fully been on the road to recovery,” Watson said.
Survey respondents estimated that their businesses grew between +3% and +5% in June alone, driven predominantly by packaged products, which increased between +3% and +9% compared to 2019 sales. However, 2021 packaged products were flat to -5% compared to 2020 levels, when the closure of bars and restaurants consolidated consumer spending in the off-premise.
However, respondents reported that kegged beer sales have declined between -2 and -15% compared to 2019.
“This is still not the same market that it was,” Watson cautioned. “When we look at kegs, no matter how you weight, things are still not quite back to where they were.”
Onsite Sales Have Surpassed 2019 Levels
At-the-brewery sales “are back to where they were, if not slightly above where they were” prior to the pandemic, according to data Watson analyzed from Arryved POS. Q2 2021 consumer spending at taprooms has been above 2019 levels and approached 120% of 2019 levels in May.
In all months since March 2020, consumer spending has outpaced consumer traffic at taprooms.
“Spending continues to be much stronger than traffic, suggesting that some of the patterns that we’re seeing now are still very different in taprooms and brewpubs than they were prior to the pandemic,” Watson said.
However, consumers’ elevated spending is beginning to tick downward as the number of monthly visitors increases, with the average check size dropping from nearly $35 with 500 monthly visitors to $20 with 3,500 monthly visitors.
Spend per visit reached its apex of about $37 per visit in April 2020, when pandemic-driven shutdowns were widespread and breweries were rolling out curbside and to-go sales. In June 2021, the average spend declined to about $28. A full year pre-pandemic, average spend per visitor was just above $20 in March 2019.
“We’re halfway in between where we were at the height of the pandemic, and where we were before the start of the pandemic,” Watson said.
Openings Slow But Record High 8,848 Breweries Operating in July 2021
The number of breweries in operation reached a record high in July 2021. At the close of last month, the total number of breweries in operation reached 8,848, “the highest number we’ve ever seen,” Watson said.
The 8,848 breweries in operation represented an increase of 439 breweries compared to the same time in July 2020, when 8,409 breweries were in operation. However, the number of new breweries opening has steadily declined since July 2018. That number has ticked down from 1,187 new breweries opening in July 2018, to 847 new breweries opening in July 2019, to 768 new breweries opening in July 2020.
In 2020, 8,764 craft breweries operated at some point during the year.
Watson called the numbers a “snapshot” in time, with some variation. However, “overall, it shows us that the growth is decelerating,” he said.
Similar trends are popping up in brewery permit numbers filed with the Alcohol and Tobacco Tax and Trade Bureau (TTB), which Watson called “a good forward indicator” due to those permits being one of the first stages of opening a brewery.
“The growth per quarter and the TTB permit number has also slowed over time,” he said.
Driving the deceleration is not increased closings though, but a decrease in openings, Watson said. Some of the slow down can be attributed to the after effects of the pandemic, while some of it is due to a longer-term deceleration of openings, he added.
“The good news is that we haven’t seen a rise in closings,” Watson said.
Watson noted that there were fewer closings in 2020 than expected, although there was a spike when the pandemic took hold in March 2020. For some entrepreneurs, the pandemic was a sign to “move on to something else,” Watson said. However, the closing number rebounded to its previous levels.
“We still don’t have a great explanation for that other than the resilient nature of entrepreneurs in the brewery space, their stubbornness and the government stimulus that we’ve seen the Brewers Association help direct toward towards small brewers for the PPP [Paycheck Protection Program] loans and then, more recently, the RRF [Restaurant Revitalization Fund], which we’re estimating that breweries got about $500 million in that first round of RRF disbursement,” he said. “Hopefully there will be a second; we’re continuing to work on that, on your behalf.”