The effects of the COVID-19 pandemic on craft breweries are beginning to be revealed as the Brewers Association (BA) today reported that craft beer volumes have declined around 10% through the first half of 2020.
Those stats come with several asterisks, BA chief economist Bart Watson cautioned, due to “increased variation in brewer performance, greater challenges in aggregating sources such as scan data, and a lack of accurate tax data to fill in the gaps.”
“Simply put, in normal years, when I use various methods to triangulate on midyear growth, they generally end up fairly close,” he wrote. “This year they are all over the place.”
On Twitter, Watson noted that for the first 2.5 months of 2020, pre-COVID, craft beer volume growth was on its usual 3% to 4% trajectory.
“So the decline is stronger after that,” he wrote.
Also, off-premise is up 12-15% and is 60% of craft. So even at zero at-the-brewery and distributed draught sales, craft as a whole would only be down 30%.
Another way to think about -10% is craft lost 1/3 of its on premise volume, even with 2.5 normal months out of 6.
— Bart Watson (@BrewersStats) July 29, 2020
So how did Watson arrive at around -10% volume growth? Well, it’s somewhere in the middle of the available data.
First, “”average growth weighted only by the size of breweries that participated shows a decline of 13% year-over-year.” Weighted by category — regional, mico, brewpub, and taproom — the result is a decline of 12%. Figure in scan data for regional craft breweries that didn’t take the survey, and the estimate improves to a decline of 6%. Still, Watson noted that he is wary of over-weighting scan data, due to it being “a weaker predictor” of regional craft performance than in past years.
Watson added that the survey sample size wasn’t representative, as the companies that took the survey grew 8% in 2019, twice the category volume growth figure of around 4% in recent years.
In scan data, Brewers Association-defined craft is up 12% in the first half of 2020 — up from 3% in the same six-month period in 2019. Next, Watson tried to figure in the state of on-premise sales. Citing Accomodation and Food spending service data from Affinity, he found that spending declined 31% from January levels and declined 48% after March 15.
“It seems safe to assume that draft beer sales will look much worse due to seasonality, more locations being closed, and less ability to be sold to go,” he wrote. “Down 50% for the first half of the year seems conservative. At-the-brewery sales are likely to look a bit better given that more breweries have been allowed to operate and breweries have greater ability to sell via to-go and now even delivery.”
Google Trends data points to declined traffic to breweries, as searches for “brewery near me” declined 18% showed year-over year and a 48% decline since March 15.
The BA also took a look at the brewery count. As of June 30, there were 8,217 active craft breweries in operation, up from 7,480 craft breweries at the halfway point of 2019. Figuring in large manufacturers and non-BA craft breweries, the total U.S. brewery count stood at 8,341 through June.
Watson attributed the decline in the number of new breweries mostly to a slowdown in openings rather than an increase in closures. Through June, the BA counted 112 closings, which is a 4% increase compared to the same six-month period in 2019. The number of openings stands at 301, about 20% lower than last year. The BA’s brewery-in-planning membership is about 14% below its level at the same time last year.
“There are still likely more than a thousand, if not thousands of breweries in planning in the United States, but it is clear that this pandemic has reduced the number of entrants clamoring to join the market, at least temporarily,” Watson wrote, adding that a clearer picture of these trends should come in October when the Alcohol and Tobacco Tax and Trade Bureau shares its third quarter permit number.
Finally, the BA asked survey respondents to predict their second half of 2020. The aggregate of those responses averaged 4% growth compared to the same time in 2019. Smaller breweries, he added, are the most optimistic, predicting 12% volume growth, while regional craft brewers predicted just below 4% growth for the remainder of 2020.
Watson called that bit of optimism “encouraging, and either suggests that the changes to the business models have worked, and brewers are more optimistic giving forward than they were a few months ago, or that these respondents are simply wearing rose colored glasses.”
Finally, a reminder that the average growth means little for individual breweries – who might be seeing much stronger or weaker performance based on location, business model, and individual business decisions. There were great numbers and terrible numbers mixed into this average.
— Bart Watson (@BrewersStats) July 29, 2020