As the COVID-19 pandemic continues to surge nationwide and additional federal financial relief remains in question, brewery and taproom closings — both permanent and temporary — are beginning to build.
Indefinite and Permanent Closures: Last week, Austin, Texas-based Hops and Grain Brewing announced it had closed its taproom indefinitely to focus on distribution sales.
“For the foreseeable future, we’ll be focusing all of our energy and resources on the production and distribution of our beers,” Hops and Grain co-founder Josh Hare wrote on the company’s website. “Since May, our taproom has struggled to get by.”
Hops and Grain isn’t alone in opting to close on-site service to preserve its business.
This month, Massachusetts-based Wormtown Brewing shuttered on-premise service at its Worcester taproom for the winter.
“With the loss of outdoor seating in the winter months our space is just too small to offer a socially safe space,” the brewery wrote on social media.
In the last week, Anheuser-Busch InBev’s Brewers Collective has permanently shuttered satellite taprooms for two of its craft brands — Bend, Oregon-headquartered 10 Barrel Brewing’s San Diego taproom and Chicago-headquartered Goose Island’s Philadelphia Brewhouse. Both locations were hundreds of miles from each brewery’s home city.
The Situation at Craft Breweries: At-the-brewery sales in the third quarter of 2020 declined 25% compared to the same period last year, and Q4 is “looking a bit more negative,” Brewers Association (BA) chief economist Bart Watson told Brewbound.
Watson’s sense is that the nation’s more than 8,300 craft breweries are taking three different approaches to operating under restrictions:
- Some larger breweries that don’t rely on own-premise sales as a large revenue driver are going into hibernation, as Sierra Nevada and New Glarus announced in late summer;
- Taprooms and brewpubs embracing outdoor service in cold weather climates, as Excelsior, Minnesota-based Excelsior Brewing and Portland, Maine-based Rising Tide Brewing have done with outdoor tents and domes, and focusing on to-go sales in states and cities that have shut down on-site service;
- And other breweries closing permanently, which Watson said he expects to see an uptick in as breweries sell through inventory.
On-Premise Sales: The open rate for draft pouring establishments has reached its lowest point in almost six months, according to BeerBoard, which tracks draft sales.
Nationwide, 84% of beer-selling bars and restaurants were open and pouring over the December 4-6 weekend, a number BeerBoard has not recorded since its June 19-21 survey period.
Meanwhile, sales velocity at bars and restaurants in California (-12%), Illinois (-18%) and New York (-15%) declined double-digits week-over-week in mid-November, according to Nielsen CGA, market research firm Nielsen’s on-premise arm. Since the on-premise channel began reopening in early summer, Nielsen CGA has tracked metrics in the aforementioned states, as well as Texas and Florida. Of those focus markets, only Florida’s sales velocity had increased (+4%) in the November 21 survey.
In Texas, week-over-week sales declined 7% between November 14 and November 21. More than 10,000 Lone Star state restaurants have closed and 30% of restaurateurs told the Texas Restaurant Association (TRA) it is unlikely they’ll remain in business without relief from the federal government. More of them — 62% — said they expect sales to decline further over the winter.
Is Help on the Way?: Craft brewers have called the U.S. Small Business Administration’s Paycheck Protection Program (PPP) a lifeline, but Congress has not passed additional support for small businesses since the spring.
“An eight-week Band-Aid on a nine month pandemic is not nearly enough,” National Restaurant Association VP of federal government affairs Dan Roehl said during a post-election webinar. “We are hearing that loud and clear from you at the grassroots level.”
The PPP has not been without its faults — it saved fewer jobs than expected and excluded many smaller businesses without tight connections to banks, Axios reported. Half of the $522 billion earmarked for small businesses went to just 5% of borrowers.
To have their PPP loans forgiven, recipients must have spent it on payroll, rent, utilities and mortgage interest, only a fraction of operating expenses for many small craft breweries.
For a second round of PPP funding to go through, “the rules will matter,” Watson told Brewbound. He pointed to a potential specification that businesses must have lost at least 25% of their revenue to qualify that is being pushed by the National Restaurant Association (NRA).
During an economic round table last week, President-elect Joe Biden said he favored distributing grants, not loans, to the restaurant industry, which many brewpubs and taprooms are considered part of.
“Size of revenue/size of drop will increase or decrease the number of breweries that are eligible,” he wrote in an email. “Direct stimulus to consumers (i.e. checks) would also likely help breweries some, though those types of broad stimulus are going to go [to] a ton of places in the economy, so the benefit will be smaller.”
The Restaurants Act, which was introduced in the House of Representatives and Senate in June, would create a $120 billion fund “to provide structured relief to food service or drinking establishments.” The bill excludes publicly traded companies and chains with more than 20 locations. So far, 204 Democrats and 11 Republicans have co-sponsored the House version of the bill, and 37 Democrats, 11 Republicans and one independent have signed on to co-sponsor the Senate version.
The NRA touted yesterday as a day of action for members to contact their congresspeople to support the Restaurants Act. As of yesterday, 17% (more than 110,000) of the country’s restaurants have closed their doors permanently or long term, the organization reported.
Last week, the BA, Beer Institute and other craft beverage trade associations championed a day of action to support the Craft Beverage Modernization and Tax Reform Act (CBMTRA), which would make permanent cuts to federal excise taxes for brewers and other alcohol producers. The current reduced rates are set to expire on December 31; raising them would be another crunch for financially squeezed craft breweries.
“Extending CBMTRA and not raising state excise taxes also matters,” Watson said. “As breweries pivot to more packaged beer and so the margins shrink, those factors are more critical.”