- Thousands of craft breweries could be in jeopardy as coronavirus-relates closures of restaurants and taprooms continue across the US.
- 45.8% of respondents to a recent Brewers Association survey said that their current business could last between one and three months if social distancing measures continue as they are now.
- Analysts say that legacy brands like Sam Adams could benefit if small breweries are forced to close their doors for good.
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The coronavirus outbreak could prove particularly painful for craft breweries, many of which aren’t confident their business could survive state-mandated shutdowns of restaurants and taprooms much longer.
A survey published April 7 by the Brewers Association asked the question: “Given current costs, revenues, and the current level of state and federal aid, how long do you project you can sustain your current business if social distance measures stay where they are now?”
The most popular response was one to three months, with 45.8% of respondents. 24.8% of respondents answered three to six months, while 11.8% said one to four weeks. There were 525 responses to the survey from 49 states and the District of Columbia.
There are currently 8,150 breweries operating in the US, according to the Brewers Association, meaning that roughly 4,000 breweries could close within three months if social distancing measures continue.
The survey also asked breweries to share how much their sales have declined since the beginning of the coronavirus-related shutdowns. Taking self-reported drops in on-site, distributed, and packaged distributed sales into account, the Brewers Association estimated that the craft beer category is down about 29% overall.
The closure of dining rooms and bars in states across the country has been a major headwind for breweries that typically rely on distribution to restaurants and bars to sustain their business. This is where breweries are reporting the steepest declines in sales, according to the Brewers Association.
Breweries have also largely been forced to close their taprooms, which typically make up a smaller portion of sales.
Many breweries have attempted to make up for losses and reach customers by turning to delivery, curbside, and direct-to-consumer sales. However, experts warn these efforts might not be enough to keep things going for everyone.
“A review of their strategy suggests that some breweries have been able to ramp up direct-to-consumer (DTC), drive-up, and delivery sales to a point those exceed their previous onsite sales. This should not be viewed as feasible for all brewers, nor should it be seen as a total replacement for draught sales,” Brewers Association economist Bart Watson wrote in a post summarizing the survey results.
Big beer makers could benefit
Goldman Sachs analysts wrote in a note about consumer habits post-coronavirus on Wednesday that craft breweries’ struggles could provide an opportunity for big beer makers like the Boston Beer Company, maker of Sam Adams.
“We see SAM as a key potential beneficiary in the event of widespread craft brewery closures … which could result in greater shelf/cooler space at retail for SAM,” the Goldman Sachs analysts wrote.
Legacy brands like the Boston Beer Company are likely to be better equipped to handle business disruptions like those caused by the coronavirus. They also have better distribution opportunities than a craft brewery would have.
“The big brands are at an advantage here,” David Henkes, a senior principal at Technomic covering food and beverage, told Business Insider’s Kate Taylor this week. “I suspect you’ll see some of the bigger brands come out of this even a little bit further ahead, a little bit of … a loss of share of some of the more craft or specialty brands or products.”
And, the Brewers Association’s Watson said, it’s worth noting that most of America’s breweries are producing and distributing on a small scale.
“Approximately 75% of the breweries in the country make 1,000 barrels or less a year and the median craft brewer makes about 400 barrels. Consequently, the breweries indicating they may need to close are by and large very small,” Watson wrote.
“For many small brewers, the current situation is not sustainable. Being a responsible business owner means scenario planning, but few if any build plans for a near complete drop in revenue with no insurance protection and continued bills to pay.”
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