COVID-19 Update: Stone Brewing Cuts Workforce; States Try to Extend Business Interruption Insurance Coverage Claims

Stone Brewing Cuts 30% of Workforce

Stone Brewing Company laid off employees of its restaurants, taprooms and distributions sales force, which amounted about 306 workers, or about 30% of its workforce, according to The San Diego Union-Tribune.

“We have made the decision to lay off some of Team Stone as a result of COVID-19. This includes the majority of our Bistro and Tap Room employees,” Stone CEO Dominic Engels said in a statement. “We continue to employ a small crew to operate our Bistros and Tap Rooms with delivery and curb-side pickup. We have also laid off a small group of Stone Distributing Co. on-premise (bar and restaurant) sales reps. Thankfully, we have retained more than half of this on-premise team by shifting them to off-premise (markets & grocery stores) to help with high demand in the grocery channel.

“This is an extremely challenging time for everyone, and we wish this amazing group of people the best in this difficult time,” he continued. “We are further thankful that the United States government has stepped in to support workers who have laid off or otherwise have lost their jobs. It is our sincere hope that when we make it through this pandemic, and as the economy and demand warms back up, we’ll be able to look forward to welcoming folks back to their jobs. We continue to operate our Bistros and Tap Rooms with delivery and curb-side pickup.”

Stone is the latest beer company to shed staff due to the effects of COVID-19, which has shuttered on-premise establishments across the U.S. In California, multiple breweries have either laid off or furloughed workers, including Russian River, Green Flash, The Lost Abbey, Coronado Brewing, Karl Strauss, Societe, and Four Sons Brewing, among many others.

Craft breweries across the country have also cut workers, including Deschutes Brewery, McMenamins, FIFCO USA, 3 Floyds, Night Shift, Great Lakes, Harpoon, Uinta, Jester King, and Monday Night Brewing, among others. A recent Brewers Association survey found that 65.7% of respondents had cut staff.

Boston Beer Company, which lost 90% of its on-premise business in a matter of three weeks, has furloughed about a dozen workers at its Cincinnati taproom, the Cincinnati Business Courier reported.

States Propose Legislation to Extend Business Interruption Insurance Coverage to COVID-19 Claims

State lawmakers in New Jersey, New York, Ohio and Massachusetts have proposed bills that would extend business interruption insurance clauses to cover losses sustained from closures due to the COVID-19 pandemic.

“These bills allow policyholders to avoid costly and unnecessary disputes with their insurers over the meaning and scope of insurer-drafted provisions relating to physical loss and damage requirements and so-called virus exclusions,” a report from a team of attorneys at McCarter & English said.

Business interruption insurance, if included in a policy, is paid out when a business cannot operate normally due to physical damage, such as a fire or flood. Closures due to pandemic are often specifically excluded from coverage, according to Insurance Journal.

However, some state governments are working to change that.

New Jersey’s and New York’s versions of the bill would apply the coverage extension only to businesses with fewer than 100 employees working at least 25 hours per week.

In Massachusetts, the bill would prohibit insurance companies from denying claims for the loss of use or occupancy of property or business interruption due to the novel coronavirus. Businesses with fewer than 150 employees would receive the coverage extension.

Ohio’s bill would require insurance companies to cover “losses attributable to viruses and pandemics” under business interruption clauses for companies with 100 or fewer employees.

The New York State Brewers Association sent members a template for a letter to legislators asking them to require insurers to extend coverage, among other things.

Constellation Brands Reduces Production at Mexico Brewery

Constellation Brands, which sells Mexican import offerings Corona, Modelo and Pacifico in the U.S., is scaling back production at its facility in Nava, Mexico.

The move is a reversal of course from last week’s earnings call in which the company said it would continue production, despite a decree from the Mexican government that deemed breweries non-essential businesses and ordered them to close until the end of April.

“We are taking these additional steps after gaining more clarity related to the Mexican government’s response to this health and economic crisis,” Constellation CEO Bill Newlands said in a press release. “These most recent actions are in addition to aggressive steps the company had already implemented to keep our team members and visitors to our facilities safe.”

Before the decision to curtail operations, the company was taking employees’ temperatures upon arrival and staggering shifts to promote social distancing.

Newlands estimated on the earnings call that Constellation had 70 days of inventory stocked up at warehouses and wholesalers, with 80% of the stock in the U.S.

Other global brewers with Mexican operations announced that they would cease production and comply with the order.

BA: Potential CO2 Shortage Caused by COVID-19

Beer makers have another headwind facing them caused by the novel coronavirus disease COVID-19: a potential shortage of CO2.

The Brewers Association reported Wednesday that several industrial manufacturers have idled plants due to decreased demand, which has also led to a decrease in CO2 access for industrial gas suppliers and some industrial gas companies have begun rationing available CO2 products to businesses, including food and beverage manufacturers.

“Preliminary data show that production of CO2 has decreased by approximately 20%, and experts predict that CO2 production may be reduced by 50% by mid-April,” the BA said. “A shortage in CO2 would impact the U.S. availability of fresh food, preserved food and beverages, including beer production.”

The BA is working with a coalition of other CO2 dependent industries led by the Compressed Gas Association in an effort to get “temporary, emergency federal assistance necessary to prevent shortages in CO2 by providing federal incentives to industrial manufacturers to put manufacturing plants that result in CO2 production back into service.”

The BA is suggesting members contact their local CO2 supplier to get information about the supply in their area.

Massachusetts Allows Home Delivery; Bars, Restaurants to Sell Beer, Wine To-Go

Massachusetts Gov. Charlie Baker signed into law on April 3 the ability for bars and restaurants to sell beer and wine to-go with food orders, and for breweries to deliver their products to consumers’ homes during COVID-19 state of emergency.

“It’s absolutely a positive step,” Massachusetts Brewers Guild president Sam Hendler said. “Delivery adds something that these places can do, including brewers.”

The law requires that alcoholic beverages to-go must be sold in sealed containers, but draft beer at restaurants can be sold in sealed growlers. Wine, however, must be sold in its original packaging.

“Obviously, that’s not going to run through everybody’s draft problem right now, but anything is going to help,” Hendler said.

Bay State craft breweries vary in the way they offer home delivery. Some, such as Trillium Brewing, designate large territories that get delivery service once day per week. Others, such as Night Shift Brewing, have kept their delivery service closer to their home markets.

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