The ongoing economic pain points caused by the COVID-19 pandemic and subsequent shut downs of on-premise retailers have led to severe consequences for the beer industry and adjacent businesses.
The human toll could be the loss of more than 651,000 jobs supported by the industry by the end of the year, according to a report released today by John Dunham and Associates that was commissioned by the Beer Institute (BI), the Brewers Association (BA), the National Beer Wholesalers Association (NBWA) and the American Beverage Licensees.
In terms of sales, the industry is facing a $22 billion shortfall by the end of 2020, the study found.
In 2018, the BI and NBWA commissioned the biannual Beer Serves America study, which found that the beer industry at the time supported 2.1 million jobs and contributed $328 billion to the U.S. economy (the 2020 Beer Serves America report will be released next year).
What’s clear is that despite skyrocketing sales of beer category products in off-premise retailers, the industry cannot offset the loss of sales in bars, restaurants, brewery taprooms and tasting rooms and third spaces such as stadiums and arenas.
“This isn’t an after action report about how the industry suffered through a crisis; this is a continuing crisis,” BI president and CEO Jim McGreevy told Brewbound. “And policymakers have to take note of that.”
The staggering number of direct job losses amounts to 3,600 brewing jobs, 1,800 distributing jobs and 400,000 retail-related jobs, according to the study by John Dunham and Associates, which examined three years of data from the Alcohol and Tobacco Tax and Trade Bureau (TTB) and six months of restaurant data from OpenTable. The total job losses are far greater when factoring in industry adjacent jobs.
McGreevy noted that the report’s findings put to rest the false narrative that the beer industry as a whole is benefitting from the pandemic. The release of the report also serves as a call to action for members of Congress to extend and potentially make permanent the federal excise tax relief within the Craft Beverage Modernization and Tax Reform Act, which is slated to sunset at the end of the year, as well as additional relief, including a tax credit for perishable beer.
Without an extension of the federal excise tax relief that brewers and importers have enjoyed for the last three years, the nation’s beer industry is facing a $154 million annual tax increase on January 1, 2021.
McGreevy also cautioned state lawmakers looking to fill budget shortfalls next year against raising taxes on an industry that has already struggled through the pandemic.
“It’s important for state legislators who are going into their legislative sessions in December and January to remember that this is an industry that has suffered because of the pandemic,” he said. “And this is not a place where they should go looking for increased state excise tax contributions.”
According to McGreevy, the report also shows how powerful the relief already enacted by Congress, such as the Paycheck Protection Program, has been for the industry.
“The losses for beer in terms of jobs and economic contribution could have been a lot worse without Congress taking the action it took in the spring,” he said.
In a press release, BA president and CEO Bob Pease added that small and independent craft brewers, brewpubs and taprooms operate in every congressional district and employ more than 160,000 workers.
“Right now, these small businesses are struggling under severe financial and operational limitations to make payroll, continue production and serve their customers,” he said.
Pease called an increase in the federal excise tax “a second looming crisis” for small brewers, who could be forced “to close their doors permanently … threatening tens of thousands of jobs.”
NBWA president and CEO Craig Purser noted that at least $1 billion of perishable draft beer was stranded in the bars, restaurants, hotels, arenas and other on-premise outlets during the pandemic.
“In addition to this significant financial loss, beer distributors have seen their operating costs skyrocket as they have made substantial investments to keep their workforce and customers safe during this global health crisis,” he added. “The beer industry will continue to face difficult headwinds as we navigate this crisis that is still unfolding.”
The issues for the beer and restaurant and bar industries continue to mount too as the pandemic persists, winter comes, and those businesses able to operate do so at reduced occupancies and razor thin margins.
“You see you see behind these numbers the] announcement of a closure of an iconic restaurant or bar In many places around the country,” he said.
The support for extending federal excise tax relief remains strong. The Craft Beverage Modernization and Tax Reform Act (CBMTRA), S. 362 and H.R. 1175, has been introduced in Congress with bipartisan support in both houses. In the Senate, it has been co-sponsored by 37 Republicans, 36 Democrats and one independent. In the House of Representatives, it has 178 Democratic co-sponsors and 168 Republican co-sponsors.
According to McGreevy, an extension of the federal excise tax relief could be included in an extenders package in the weeks and months ahead.
“I think that’s probably still the case, although the sad death of Justice [Ruth Bader] Ginsburg probably puts a lot of things on Capitol Hill in question right now,” he said. “Maybe we’ll have more clarity as the week goes on or the next two weeks. But I think Justice Ginsburg’s death shook up politics in a very significant way.”
McGreevy said the trade groups are hopeful that Congress will take up another relief package before the end of the year.
“Extension is, at a minimum, necessary, and we really think based on these numbers and so much other evidence that permanency of Craft Beverage is required at this moment,” he said. “We can’t wait any longer for permanence; we need it now.”
A week ago, the BI released a study that found a majority of Americans support an extension of federal excise tax cuts.