“Short term, the industry has hit the iceberg at midnight,” says Stephen Zagor, an adjunct professor in restaurants and food at Columbia University Business School, about the current state of the hospitality business.
Zagor estimates that 30% of the restaurants open before the novel coronavirus pandemic will go out of business, and early reports suggest that the situation might be even more dire for the craft beer industry.
Last month, a Daily Beast story quoted Brewers Association statistics suggesting that 3,600 of the U.S.’s 8,000 breweries may go out of business. In the story, headlined “Coronavirus Could Kill Craft Beer: Will Any Brands Survive?” writer Lew Bryson wondered if the estimate was too optimistic.
Bart Watson, Chief Economist of the Brewers Association, acknowledges things have “improved a bit” since those figures were published, citing PPP loans and the speed at which brewers replaced taproom revenue with other streams of income.
Brand equity is key for brewery survival, Watson says. “If you’re asking your consumer to buy your beer in new ways, breweries with the strongest brands and connection to their fans will have the best ability to pivot.”
Following the shutdown of bars and restaurants, breweries could no longer sell kegs to those establishments, eliminating lynchpin revenue. On-premise taproom sales also disappeared. And so, some breweries sought creative ways to stay afloat.
Tara Hankinson and LeeAnn Darland are the founders of Talea, a Brooklyn operation that had been contract brewing as they built their brewery and taproom. They suspended beer production on March 15 and maintained their brand via social media and Zoom happy hours.
Lauren Grimm, who co-founded NYC’s Grimm Ales with her husband Joe, is facing the new, constantly evolving landscape head on. “Because experimentation is ingrained in the character of our brewery, it’s easy for us to quickly adapt to new situations,” she says.
The Grimms, like several other owners of New York City-area breweries, closed their taproom in mid-March, except as a retail outlet for their beers. Via their online presence and delivery services, they began shipping their beer to customers throughout New York State.
According to Joshua Stylman, cofounder and CEO of Brooklyn’s Threes Brewing, the brewery had to furlough the vast majority of its more than 60 employees. “The small crew who was still working went into overdrive building Threes to You, a web-based service for safe, no-touch pickup at the brewery, delivery in parts of NYC and shipping throughout NY State and Washington D.C.”
That aspect of the business has been a success, as Stylman says about half of those furloughed have been hired back.
Densely populated New York City was the epicenter of the pandemic with astonishing morbidity rates, but the crisis is national, and it’s forced brewers across the country to find new ways to produce and deliver beer.
Drew Fox founded Indiana-based 18th Street Brewery in 2010, and it’s grown to include taprooms in Hammond, Gary and Indianapolis. Like many breweries, 18th Street had to shift the focus of its sales from wholesaling kegs to direct taproom purchases of cans as a result of the pandemic.
Outdoor patio spaces have now returned to full service, and the Hammond taproom runs at 50% capacity. Going forward, Fox says, “we will plan for worst case, be smart about how we spend money and look for ways to continue to be creative.”
Craft brewing is a small-batch business even for Mikkeller, a brand exported to 53 countries, with taprooms in 15. According to National Sales Director Jennifer Dickey, when the pandemic hit, the domestic breweries in San Diego and New York were able to pivot to package beer in the tanks and cease production on others. The California facilities are now open, while New York has shifted to delivery models.
“We want to make beer that moves people, that makes them smile,” she says. “We think that this period of unrest and uncertainty is a great time to bring some joy to the world in whatever small way we can.”
In Decorah, Iowa, Clark and Barbara Lewey’s Toppling Goliath is adapting quickly, shifting its focus to cans of its highly regarded IPAs and Pale Ales. Iowa reopened bars and restaurants in May, so current protocols at the Toppling Goliath taproom include capacity limited to 50% and all surfaces and stations disinfected every 30 minutes. “We had to come up with a plan as the situation developed,” says Creative Director Sarah Hedlund.
As cities across the U.S. begin reopening at partial capacities, Zagor says the hospitality businesses best positioned to succeed are those with the ability to be flexible with readily deliverable products. Thus far, craft breweries seem to be meeting that criteria.
“We are finding that craft beer sales continue to grow as people adjust from shopping just for essentials to living their lives as best they can under the ‘new normal’,” says Stylman. “There’s still room for New Yorkers to enjoy summer, albeit in a different way.”
Grimm said that delivery and on-premise sales of cans, bottles and growlers have replaced the income from draft beer sold there and the brewery is adding a rooftop bar with the downtime.
“The brewing industry is never static,” she says. “As culture and drinking habits change, we adapt and develop. The pandemic is just one example of a cultural shift that has changed the brewing industry. Although some might see uncertainty and instability as frustrating or stressful, we see it as an opportunity to be creative.”