Brewers Association Survey: Beer-to-Go Buoyed Craft Brewers in Q3, But Recovery Still Distant

Craft brewers’ sales improved during the third quarter of 2020, but are still far off from where they were in 2019, according to a new analysis by Brewers Association (BA) chief economist Bart Watson.

Combining several datasets tracking on-premise sales, Watson found that Q3 sales fell 22% below baseline, a marked improvement over Q2’s 45% below baseline. In a survey of BA members, all indicators of on-premise performance were well below last year’s levels, but varied between at-the-brewery sales and distribution.

“Our survey showed onsite results that fall in broadly the same range, with breweries reporting onsite beer sales volume down an average of -25% (median -28%) and brewpubs reporting food volume down -25% as well (median -14%),” Watson wrote. “Distributed draught numbers were a bit weaker, showing -38% for the quarter.”

BeerBoard, which tracks nationwide draft sales across all beer segments at bars and restaurants, found that Q3 draft sales were down 35%.

“This suggests that distributed draught is recovering more slowly than other parts of the on-premise, likely due to its lower ability to be easily sold to-go,” Watson wrote.

Beer-to-go has been a lifeline for craft breweries since the COVID-19 pandemic reached the U.S. in March. Sales of packaged beer at breweries, whether through curbside pickup, home delivery or direct shipping in some states has increased a median of 42% compared to last year, Watson found. On average, packaged beer sales at breweries have increased 120%, but that figure is inflated by a few outliers. Of breweries offering beer-to-go, 10% were selling packaged beer on their own premises for the first time in 2020.

Off-premise sales have remained elevated since the spring, but not all of the nation’s more than 8,000 craft breweries sell their beer in that channel.

“Looking at distributed packaged sales, median growth in our survey was exactly the same as packaged sales from the brewery, 42%, with average growth of 109% (and a weighted average of 34%),” Watson wrote. He noted that most larger regional breweries, which would likely have been outliers, were not included in the sample.

Sales of BA-defined craft beer at off-premise retailers tracked by market research firm IRI increased 11% in the 12 weeks ending October 4, compared to the same time last year.

However, sales of draft and packaged beer are just a slice of a taproom brewery’s revenue. Watson shared a survey respondent’s comment that conveyed just how many revenue streams have been lost due to the pandemic:

“Taproom consumption down. To-go sales way up. Bar and restaurant business way down. Store sales way up. Event business way down. Overall, revenues are up, but profits are down due to the reduction in consumption at the taproom and onsite and offsite events.”

The loss of revenue from events and the capacity limitations on taproom and beer garden service — two higher margin items than packaged beer — mean for one respondent that “the cost of doing business this year is WAY higher.”

Survey respondents said that 64% of their Q3 sales on average came through outdoor service with a median of 70%. Although some states, such as New Jersey, have extended the outdoor service season for licensed establishments, consumers’ willingness to drink beer outside in colder weather can’t be counted on.

“In warmer climates, keeping outdoor space and flexibility in using it will be key for many brewers,” Watson wrote.

Compared to Watson’s April 2020 survey in which only 15.3% of respondents said they expected to remain in business longer than six months, 81.2% of respondents said they felt “very confident” and 9.4% of respondents said they felt “somewhat confident” they would last until the end of 2020. However, when asked to project the likelihood of their businesses staying open into Q3 2021, only 53.8% felt very confident and 23.9% felt somewhat confident.

Just 1.7% felt “very pessimistic” about staying open until the end of 2020; 3.4% felt very pessimistic about still being open a year from now.

“Even though things have been challenging, brewers have adapted and while uncertainty abounds, most brewers are finding their way through,” Watson wrote.

Chris Lohring, founder and owner of Salem, Massachusetts-based Notch Brewing, told Brewbound he felt confident the beer industry would endure, but he predicted a long road to recovery.

“We’ll be digging out of this for years to come,” he said. “All these things that we’ve been deferring — whether it be loans or rent, etc. — that’s going to be on the backside of this for a long time, but it’s at least going to get to the back side.”

An industry veteran with decades of experience, Lohring believes the current situation differs from the shakeout of the late 1990s in a few ways.

“I always thought there was a correction happening — that there’s just too many breweries,” he said. “But at this time, it’s a little bit different because the brewer controlled the margin by having a taproom. And that was gonna allow a lot of people to sustain this great growth and brewery expansion.

“I never thought this crash would come through a pandemic that didn’t allow that brewer then to have that customer they thought they would have the ability to rely on,” he continued.