Dear Client:

If you follow Deschutes on social media, you may have noticed they went “black” on the channel about a week and a half ago, amid all the COVID-19 closings. 

Deschutes sales and marketing chief Neal Stewart told CBD that when states and localities started shutting down the on-premise, “we didn’t want to act like the world wasn’t changing all around us.” 

“We just wanted to take a little bit of a passive approach while things were changing – mostly out of respect for what’s happening in the hospitality industry: breweries having to change the way they sell beer; bars being closed,” he said. “We didn’t want to be posting content as if it was business as usual, and promoting things that maybe aren’t sensitive to the situation.” 

But by now, “I think culture and society is adapting to the new way of life, quickly.” So they’re ready to come back online.

NEW MESSAGING: BEER OFFERS A MOMENT OF ZEN. Their message upon return? Even in these times of isolation and uncertainty, beer can offer a “moment of zen.”

“Even though we’re stuck in our own houses, you can still have that ‘moment of zen’: sit in your backyard when the sun is shining, with a beer in your hand. That’s a great feeling.”

He stresses that the industry needs to figure out ways to celebrate and leverage the fact that people are still buying beer, with off-premise beer trending up due to stock-up shopping (BBD reported yesterday via Bump Williams that beer was up almost 18% in the latest one-week IRI reading, to March 15). 

“Right now, our social media needs to be more about others. Others within the craft beer industry, in the hospitality industry. And consumers. So we’re kind of making it more about them,” he said. 

COVID CLOSURES HIT DESCHUTES HARD, WITH 45% OF REVENUES COMING FROM ON/OWN PREMISE.  But despite Deschutes’ focus on the plight of others, the brewery itself has been hit hard by COVID-19 changes, which have affected almost half of their revenue stream. So they’ve had to make some cuts – hopefully, temporarily.  

“We own and operate two pubs, and have a partnership with a group that licenses our brand for the Portland airport pub,” Neal said. “At this point, all those are closed, and have been for over a week now. So when you take that food and beverage business, and add our own premise channel, we’re talking about 45% of our business, our revenue. 

“It’s substantial for us.” 

HAVING TO MAKE CUTS. So they’ve had to make cuts that are somewhat commensurate with that loss of revenue. “When you take away the significant portion of our draft beer … it’s creating some pain points for sure,” Neal said.

“Our hope is [that] a good number of [those employees] can return. That’s all going to be decided when the on-premise channel opens back up again. None of us know when that will happen.”

“We think on premise will be a challenge for quite some time. Lots of on-premise operators may not make it through this. We’re going to try and support them as best we can.”

More tomorrow on how they’re planning to navigate the rest of the year.

WHAT SHOULD BREWERS BE PRODUCING RIGHT NOW, AND HOW?

Ross Ackermann is the CEO of GP Analytics, an analytics company founded to help craft brewers optimize their brewing forecasting and logistics. Before founding his current company, he operated a 7 million case distributor in the PAC Northwest. He’s currently helping his craft clients navigate what and how to produce in these times of uncertainty.

To that end, we asked Ross how craft brewers can forecast these days, and also work with distributors in this time of tumult. 

DEALING WITH DISTRIBUTORS. Above anything else, Ross stressed: don’t wait for your wholesaler to tell you what they need. “Watch their inventory and sales, and be responsible for your own business,” said Ross. If you don’t have inventory and STR data, ask for it.

“Don’t wait for them to order; their inventory is your inventory too. You may only have seven days of package at the brewery, but wholesalers have 25-35 … don’t wait for them to scream, ‘I need more.’ Watch what’s happening.”

Because your products are less than 1% of their business, and 100% of yours. “And a distributor has a lot of other things to worry about right now — rerouted trucks, emergency hot shots at chain stores; sales reps that might be segmented for the on premise –they’re not thinking about your business. They’ll panic order when they need it, and you’ll be caught off guard.”

WHAT TO PRODUCE? OPTIONALITY IS KEY. But what about production concerns? What to brew — and what to do with beer going bad? 

For now, “draft is essentially dead,” says Ross. “I think the first question you have to ask is, what do you do with all the draft you already have packaged. I’ll leave that to people way smarter than me – whether that can be pushed back into brite, new packages, or destroyed,” depending on the tax implications.  

But in this environment, Ross stresses the need to put off making any drastic decisions about moving beer too quickly until a brewer is informed with the very latest data in these irregular times.

“I tell my clients, optionality is key. Even if you lost 30%-50% of your [demand for] volume, you have those tanks that you can use to hold the liquid. So giving yourself time to see what happens is important, and not over react.

“You can always let the beer sit for a week or two … that gives you time to see how sales are going to play out.”

If you have data, you’re not going to get a full view of what happened until today or tomorrow at this point, he said. Every bit of forecasting you were using before is now worthless.

After you see some reliable data that’s relevant to the situation at retail today, “crank your forecasting sensitivity through the roof.”

THE FOUR HORSEMEN OF THE APOCALYPSE

We started a video podcast 14 years ago, and let it go.  

Today that changes.  We are adding a free video podcast series on YouTube to give additional perspective during this dire time of COVID-19 

For the first one today, we have Kaumil Gajrawala of Credit Suisse, JB Shireman of Arlington Capital, and Bump Williams of Bump Williams Consulting, to talk about the extraordinary week we’ve experienced in the beer industry, and what we can expect in the next two weeks.  “We’ve lost so much… there’s a new normal we’re going to have to deal with.” -JB Shireman

Listen and watch here>>

Until tomorrow,

Jenn, Jordan, and Harry 

“Be alert to give service. What counts a great deal in life is what we do for others.” – Anonymous

———- Sell Day Calendar ———-

Today’s Sell Day: 17

Sell days this month: 22

Sell days this month last year: 21

This month ends on a: Tues.

This month last year ended on a: Fri.

YTD sell days Over/Under:  +1