On-premise retail sales will not rebound to pre-pandemic levels in 2021, Brewers Association (BA) chief economist Bart Watson shared yesterday in a webinar for members of the trade group.
“The on-premise is not fully going to recover next year,” he said. “The first half of the year is still going to be weak. We’re going to be cycling year-over-year of Q1 that was ‘normal’ until the second half of March.
“It’s hard to see how the on-premise can have any real recovery until late Q2 or Q3,” he continued.
Watson offered an overview of 2020 in several points. Here are four takeaways from his presentation.
Total craft beer volumes in 2020 will be down high single-digits.
In the BA’s mid-year survey, respondents reported an average 10% decline in volume, but this number improved to -5% in a Q3 survey. However, Watson cautioned that volume decreases vary by location and brewery size.
“Five percent is the total industry which takes into account many regional craft brewers that have been able to see maybe not growth, but stronger numbers based on their packaging percentage,” he said. “For breweries less than 1,000 barrels in Q3, that 5% was closer to -30%.”
Based on preliminary November data, Watson estimates a volume decline of 8% for the year, which would make 2020 the first year craft beer volumes declined since the BA has been tracking such data.
On-premise recovery has begun to stall.
The on-premise channel, which accounted for about 40% of craft brewers’ revenue on average in pre-pandemic times, had started a slow march to recovery after lockdown orders were lifted in early summer. However, COVID-19 cases are spiking nationwide and states are reintroducing stay home orders and limitations on bar and restaurant operations.
To paint a picture of on-premise performance, Watson integrated data from nine market research firms and other sources, including craft beverage producer point-of-sale system Arryved, draft sales tracking firm BeerBoard and Nielsen CGA ClipTrack, the check-level data tracker from market research firm Nielsen’s on-premise division.
“Late March, early April was certainly the worst part of the year for draft, and did steadily improve through Q3, but improvement doesn’t mean that they were back to their previous levels,” he said. “Most of these indicators still fall somewhere between -20% to -30% down — very similar to what we found in our Q3 brewers’ survey where brewers reported that their on-site sales of beer and food were down -25%.”
The fourth quarter of 2020 has shown little indication that on-premise sales will rebound, as November was softer than September and October. About a fifth of consumers have indicated they do not plan to return to dining or drinking outside their homes until a treatment or vaccine is available and have created new routines since the pandemic began.
“If one out of five people truly haven’t visited the on-premise for an entire year, by the time things start to improve, some percentage of them are just going to have adopted new habits,” Watson said. “They’re going to be buying more to-go, delivery. They’re simply just not going to be comfortable visiting, or they found new patterns that they like that were different from before.”
The pandemic has been catastrophic for the restaurant industry; more than 110,000 — about 17% of all restaurants nationwide — have closed long-term or permanently, according to the National Restaurant Association. Brewers may find an entirely different on-premise landscape on the other side of the pandemic, as casual sit-down restaurants are struggling more than fast casual concepts, Watson said.
“Many of the places that are growing right now and have seen their sales recover the strongest aren’t places where people typically buy beer,” he added.
Craft brewery openings are slowing.
This year is on pace to have 700 brewery openings, about 30% below recent years, which have seen more than 1,000 craft breweries open their doors. However, this slowing began before the pandemic and dates to early 2019, Watson said.
“Two-thirds of that decline appears to just be trend,” he said. “Openings were declining anyway.”
The decline in new breweries opening can be attributed in part to the maturation of the craft beer industry, and cities such as San Diego, California; Portland, Oregon; and Denver, Colorado having reached saturation.
“They’ve become much more of a one-in, one-out market where you’re not just seeing openings to increase the market anymore, because they’re very, very competitive markets already,” Watson said.
Fewer breweries are on track to close in 2020 than in 2019.
Although fewer breweries are opening their doors, fewer still are closing up shop, with fewer than 250 closures projected for 2020.
“Given how much we’ve seen sales drop, given how challenging a year it has been, it’s pretty amazing that we haven’t found more closings,” Watson said. “I do think we started to see that pick up a little bit in the second round of forced closures in various states.”
In the spring, nearly half of respondents told the BA they would need to close their doors if the shutdowns then in place continued for three more months. However, aid from the federal government in the form of Paycheck Protection Program loans and rent assistance from landlords staved off mass closures.
But Congress has so far failed to provide a second round of small business assistance and new restrictions will stifle revenue.
“My prediction for 2021 is something has to give, and we’re going to see those closings rise,” Watson said.