Dear Client:

Could this be craft’s quasi-extinction event? 

Ok, quasi-extinction isn’t really a thing. But over the next few months, we’re in real danger of potentially losing thousands of craft brewers, largely due to shutterings from the pandemic. 

Brewers Association chief economist Bart Watson said as much, upon releasing the findings of their most recent COVID-19 craft brewer survey, covering furloughs/firings, closings, and more. (*Methodology below.)  

Bart’s sobering headline: “A majority of breweries do not think their business can last three months given current conditions, suggesting thousands of closings.”

The question that wrought this conclusion? Bart asked survey respondents,  “How long do you project you can sustain your current business if social distance measures stay where they are now?” given their current costs and revenues, offset by existing state and federal aid.

The answer? “Many brewers indicate that their business has a matter of weeks, and a majority say that they can only last a few months based on current trends.”

Here’s how that breaks down: 

MORE THAN HALF BELIEVE THEY HAVE A WEEK TO THREE MONTHS MAX TO CONTINUE OPERATING IN THIS CLIMATE. Almost 60% of respondents believe they have between a week to three months to stay open in the current scenario (with almost 13% of that number believing they only have between 1-4 weeks);

Another 25% believes they can weather this for another 3-6 months; 

A bit more than 8% believes they can stay open for another 6 months to a year; 

And a bit over 5% believes they can stay open longer than a year.  

Then, 2.5% already say they plan to close. Note that 2.5% would equate to around 200 of the 8,150 craft breweries in existence. “12.7% [is] about 1,035 closures, and 46.4% about 3,785,” says Bart. 

For those who thought craft was due for a correction already, that base is nowhere near what we could see in the COVID-19 era.

“Based on recent trends, it was likely that 4-5% of the breweries in the country would have closed in 2020 prior to this shock,” said Bart. “So while some percentage of these closures and potential closures reflect businesses that were already struggling, most are brought on solely by this event.”

But will they stay closed? We asked Bart if there was any indication of permanent vs. temporary closures. 

“It’s possible that some of the respondents could have interpreted those ‘closures’ as temporary, but that’s not the way the question was intended,” Bart said. Moreover, this survey is largely in line with what the National Restaurant Association has reported on permanent closure trends. 

ALMOST 70% OF PRE-COVID CRAFT WORKFORCE LAID OFF. Before you close, however, you lay off. And we’re seeing that: Some 65.7% of the responding breweries workforce — which totaled about 13,454 employees prior to COVID-19 — has either been laid off or furloughed, per this week’s survey. 

At this point, about 80.6% of responding breweries have made layoffs and/or furloughs, Bart told CBD. 

SALES TRENDS WAY DOWN, MOSTLY IN DISTRIBUTED DRAFT. Breweries were also asked to report sales trends (mostly decreases) by channel. 

No surprise, the own premise and on premise have been hit hardest. Onsite sales saw a weighted average drop of close to 70% — though some actually have reported an uptick, with takeaway sales still permissible.

And since regular bar and restaurant on-premise business has been mostly shut down, it follows logically that craft’s “sharpest declines are in distributed draught,” with a weighted average drop of 95%, accounting for both sample weights and volume. 

As for the off-premise, the BA survey has revealed only about half the trend bump craft is seeing in scandata, which skews toward the larger brewers and outlets.

“The weighted average (probably the most appropriate to use in this case), shows packaged distributed volume up 9.4%. That’s about half the growth seen the last four weeks in scan. Brewers Association craft in IRI Group data (total U.S., MULO+C) is up 18.3% by volume in the four weeks ending March 29, 2020,” per survey summary. 

RELIEF? Part of the point of these findings is to show how important intervention is to save large swaths of the industry.

The survey also asked brewers what relief has helped most, and what would. Among the top 3 measured that “have helped”: 

• Almost 85% said forgivable loans [SBA 7(a)];  
• Almost 56% said emergency grants up to $10,000;
• And about 50% credited disaster loans [SBA EIDL].

On the most-wished list: 

• About 80% want more direct grants for breweries and other hospitality businesses;
• Almost 71% want permanent excise tax recalibration (make current rates permanent);
• And another 67% want a spoiled beer tax credit.

METHODOLOGY. “The analysis above covers 455 responses (through the morning of Monday, April 6) , across 49 states plus the District of Columbia,” Bart said. We asked if, based on their sheer numbers, the survey might be overrepresentative of smaller brewers. 

“As a percentage of respondents, regionals are actually over-represented in our survey – about 7% of the responses are from regionals (so more than 30 responses from regionals),” he told CBD. “When you weight for production size, regionals make up 64% of volume in the survey sample, versus 67% in the full craft data set. So I wouldn’t say it skews too much to smaller breweries.”

Truly, this is everyone’s problem. 

RHINEGEIST SHARES REIMBURSEMENT PLAN FOR DRAFT INVENTORY

Over the past week or two, we’ve seen a handful of craft’s top players announce a plan to give distributor/retailer partners some relief on expired or expiring, untapped kegs, including Boston Beer, Sierra Nevada, New Belgium, and Summit Brewing.

Now, we can add Rhinegeist Brewing to the list.

The Cincinnati-based brewer informed their distributor partners yesterday of the actions they will take to reimburse draft inventory.  Here’s the deal: 

60% REIMBURSEMENT FOR SOME KEGS. For distribs who received kegs — of Rhinegeist’s Beta Guppy, Business Ferret, Cloud Harvest 01, Hustle, Juicy Truth, Knowledge, and Truth — during the dates of Feb 10th, 2020 through March, 8th 2020, Rhinegeist will reimburse 60% of FOB [freight on board].

AND 50% FOR ANOTHER BUNCH. For draft inventory purchased before February 10 – this would include brands like Andromeda, Saber Tooth Tiger, Dad, Experimental IPA #001 and #002 – Rhinegeist says it “will reimburse the standard 50% FOB.”

WORKING TO “REVISE DATE CODES” FOR OTHERS. Then for any brand not noted above – this would include brands like Cheetah, Fruited Ales, Van Hunks, Luck, Moose, Nitro Penguin, and Uncle — Rhinegeist said it’s “looking to revise code dates, and will confirm any changes to code standards or additions to this list in two weeks.”

Rhinegeist is asking distribs to validate their inventory received from Rhinegeist from 2/10/20-3/8/20 with their Territory Manager, and submit their claims for credit by Friday, April 10th. They add that it could take them up to “8 weeks’ time to credit and return these kegs” and distribs “will be reimbursed at the date of return.”

The brewer instructed distributors to return the kegs to where they receive them, so if you get the kegs from the brewery, take them there; if Rhinegeist drops them off at your warehouse, then leave them there and the brewer will pick them up; and if you grab them from a holding warehouse, then they’ll need to be sent back to that holding warehouse. 

They require that all returns be “properly palletized, wrapped with like package types and noted on each individual pallet what wholesaler the product is being returned from.”  

ALL DAY IPA CONTRACTED BY AVERY BREWING, SET TO ROLL THIS MONTH

At the tail-end of 2018, Founders Brewing announced it would begin contract brewing All Day IPA at Avery Brewing in Boulder, Colorado. 

Recall the connection between Founders and Avery is Mahou San Miguel. The Spanish brewer holds majority stakes in each.

Well, Founders just shared word that “after a lot of brewing, tasting and exhaustive quality checks,” shipments of All Day are ready to roll out of Boulder later this month. 

The goal with this contract brewing arrangement is of course to lighten the load on the Michigan brewer supplying All Day to the West Coast. “This effort will allow us to do that in a way that is much more manageable from a shipping perspective,” said Founders.

“Rest assured, anything with the Founders name on it will have the same flavor, quality and consistency you’ve come to expect… The only difference will be that the cans shipped from Avery will say ‘brewed in Boulder, CO.,’” per announcement.

Until tomorrow,

Jenn, Jordan, and Harry 

“If you have knowledge, let others light their candles at it.”

– Margaret Fuller

———- Sell Day Calendar ———-

Today’s Sell Day: 5

Sell days this month: 22

Sell days this month last year: 22

This month ends on a: Thurs.

This month last year ended on a: Tues.

YTD sell days Over/Under:  +1