The Brewers Association (BA) today released the results of its second member survey on the effect of the coronavirus disease COVID-19 on the craft brewing industry, and the results paint a bleak picture for many small and independent craft brewers.
The survey — taken by 455 respondents from 49 states and Washington, D.C., through April 6 — revealed “a sharp drop in craft category sales, massive furloughs or layoffs, and the high likelihood of large numbers of brewery closings without a swift end to social distance measures — which looks increasingly unlikely — or rapid government support for small brewers and hospitality more broadly,” according to an analysis published today by BA chief economist Bart Watson.
Among the most jarring findings: The majority of respondents do not think their businesses can survive three months under the current conditions, which Watson said suggests thousands of potential closings.
Among those surveyed, 46.4% said their businesses will likely only last between one and three months, while 12.7% of respondents said they could stay afloat for just another one to four weeks.
A quarter of respondents said their businesses could survive between three and six months, while 8.3% said they could hang on between six months and a year. Just 5.1% said they would be able to stay in business a year.
The survey found that 2.5% of respondents said they were planning to close. Watson noted that there are currently around 8,150 active breweries in the U.S.
“If 2.5% of those breweries close, that would mean about 200 closures, 12.7% about 1,035 closures, and 46.4% about 3,785,” he wrote. “Based on recent trends, it was likely that 4-5% of the breweries in the country would have closed in 2020 prior to this shock, so while some percentage of these closures and potential closures reflect business that were already struggling, most are brought on solely by this event.”
As those breweries attempt to stay afloat, many have furloughed or laid off staff. The survey’s respondents employed a collective 13,454 workers prior to COVID-19, with 7,485 full-time and 5,969 part-time workers. The majority of those workers have been laid off, with 65.7% of respondents saying they had laid off staff.
The survey also asked about sales trends, which found that the median respondent’s onsite sales declined 77%, with an average drop of 66% and an adjusted weighted average drop of 68%. According to the survey, most breweries’ onsite sales declined more than 70%, with a smaller number of companies seeing either smaller declines or even positive growth, and “an even smaller number seeing large gains,” which likely came from direct-to-consumer, drive-thru and delivery sales. Those alternatives, Watson cautioned, aren’t feasible for every brewery and are not a replacement for the loss of draft sales.
As Watson has previously noted, 40% of craft breweries’ volume flows through the on-premise channel, while roughly one out of every three beers sold on-premise is a craft offering. Additionally, Watson has estimated that small and independent craft breweries sold 3.6 million barrels of beer directly to consumers at their taprooms and tasting rooms in 2019.
Of course, distributed draft beer sales declined the most with the majority of on-premise retail establishments closed in an effort to stop the spread of COVID-19. The median decline in sales was 100%, with the average drop 91% and a weighted average of down 95%.
As Brewbound has reported, scan data from off-premise retailers tracked by market research firms Nielsen and IRI have shown strong double-digit growth over the last three weeks, with all segments up. Nevertheless, those scans don’t always factor in the experience of small brewers. According to the BA’s survey, packaged distributed volume increased 9.4%, which Watson said was about half of the dollar sales growth (+18.3%) over the four weeks ending March 29 for BA-defined craft in IRI’s multi-outlet and convenience store data set.
“So, while there likely is a bump for the overall category in off-premise, this isn’t helping the smallest micros, taprooms, and brewpubs that much, since much of the bump is concentrated in bigger retailers and larger package sizes,” Watson wrote.
In total, the category appears to be down 29%, with non-packaging breweries down much more, Watson wrote.
The BA also asked its members if the recent stimulus package would lead brewers to rehire staff members; 33.3% said no; 19.8% said no because they had not yet made job cuts; 35.1% said yes; and 11.9% said yes, they would hire everyone back.
So what is helping brewers or which programs will brewers attempt to take advantage of?
- “Forgivable loans [SBA 7(a)] – 84.7%
- Emergency grants up to $10,000 – 55.7%
- Disaster loans [SBA EIDL] – 50.4%
- Increased unemployment provisions – 47.5%
- Delayed payroll tax payments – 46.5%
- Increased interest expense deduction – 26.4%
- Facility write off provisions – 23.0%
- Excise tax waiver for alcohol used to make hand sanitizer – 11.9%”
According to Watson, these responses showed that the CARES Act did have “value for small brewers, but simply didn’t go far enough to counterbalance the economic challenges” they’re facing while closed.
So what do brewers want in the next relief package?
- 80% said they want more direct grants for breweries and the hospitality industry.
- 70.8% said they want permanent excise tax relief that was achieved in recent years with the Craft Beverage Modernization and Tax Reform Act.
- 67.4% said they’d like a spoiled beer tax credit.
- Half of respondents would like additional market access such as greater privileges to sell beer to-go, delivery and direct-to-consumer sales.
- And nearly half said they’d like excise tax delays.
Another example of how damaging the COVID-19 crisis has been on craft breweries came from the Texas Craft Brewers Guild, which conducted its own survey and found that in-state breweries’ revenue has declined an average of 71% and 63% of the state’s breweries have laid off or furloughed workers.
On average, Texas breweries cut 65% of their staff, while 14% of Texas breweries have temporarily closed their doors and 27% have temporarily stopped production.
The Texas guild is petitioning Gov. Greg Abbott to issue an emergency order to temporarily suspend the state’s excise tax collection, offer an excise tax credit for surplus beer that is disposed of due to COVID-19, allow breweries to temporarily deliver and ship beer to consumers. So far, more than 16,600 people have signed the petition.
Read about the BA’s first survey: 99% of Craft Brewery Businesses Being Impacted by COVID-19, Brewers Association Survey Finds