Pretty much since the phrase was coined, people have been predicting when the “craft beer bubble” will finally burst. Some said supply would outstrip demand, or young drinkers would turn their backs on craft—or alcohol, full stop. The elders prophesied that Hazy IPA would kill diversity, while the new geeks feared “Big Beer” would buy it all up.
In the end there was no tipping point of saturation, generational shift, monoculture, or corporate conspiracy. There was just nature, leaving us scrambling to adapt.
The COVID-19 crisis is proof, if you needed it, that our industry does not exist in a vacuum. “Sticking to beer” has never been harder, or less relevant, as the world’s financial fortunes, political crosswinds, and environmental health have as much say about the industry’s future as its devotees do. The pandemic and our response to it have pushed drinking habits away from bars and into the home, away from tap takeovers and festivals and toward Instagram Lives and Zoom bottle shares. That means no business—however hyped, however established—is immune.
It will take years to fully understand the gravity of the situation, but one thing’s for certain—not all breweries or bars will live that long. A survey conducted by the Brewers Association in April found that nearly 60% of American breweries expect to go out of business if local lockdowns last beyond July, and 57% were equally pessimistic (if not more so) by late May. In the U.K., beer sales volumes fell by 82% in the aftermath of the lockdown, and the mess made in reopening pubs will delay any recovery. In Germany, a 400-year-old brewery that survived the Spanish Flu, two cholera outbreaks, and the Great Plague will soon close its doors, and Oktoberfest has been canceled for the first time since World War II.
Sadly, things will get worse before they get better. Right now, breweries the world over are being propped up by their governments in the hope of seeing them through to better times. When the public purse is snatched away, they face the second once-in-a-lifetime recession in 15 years. Most closures will likely be small, local breweries focused on draft beer and loyal regulars: the kind of sub-1,000-barrel brewery that makes up 75% of the U.S. scene and is best known by the people in its hometown. Those businesses don’t necessarily make the headlines (and nor will their closures), but they make up a lot of the culture.
Culture is the key word when it comes to examining the impact of COVID-19. The crisis has forced the industry through several generations of maturation, and changes we didn’t expect to hit for years have become the norm in a matter of weeks. How drinkers and businesses respond to these changes will in turn set the course for decades.
As bars and pubs closed and people were forced to drink at home, historical laws around alcohol take-out and online retail were broken—and then loosened almost overnight. As a result, huge chunks were taken out of supply chains; meanwhile, brewing volumes slumped across the world. With some degree of legislated social distancing set to last in many countries for the rest of the year, those changes are likely to persist for the long-term.
Even when pubs, taprooms, and restaurants open again, people will stay away in droves—experts aren’t just predicting this but encouraging it—and that will likely translate to thousands of closures. In the U.S., where off-premise sales were already around 80%, a long-term drop in draft volume won’t be quite so dramatic—but in pub-loving countries like the U.K., where off-premise beer sales only overtook the on-premise in 2015, the shift is seismic.
Against the backdrop of these enormous changes, serving up the right product and message has never been more important for beer businesses, but it’s also never been harder. Consumers today have bigger things to worry about than the craft credentials of what they’re drinking. With unemployment in the U.S. expected to peak at around one in five and the U.K. recording the highest number of unemployment benefit claims since 1996, there’s going to be unprecedented pressure on volumes and pricing. How many consumers will worry about the key marketing touch points of craft—freshness, flavor, locality, independence—when they are living paycheck to paycheck?
Any argument that craft beer fared well during the financial crisis 12 years ago doesn’t hold water as a comparison. The beer industry now, and the one back then, were up against entirely different challenges. Until Goose Island was bought by AB InBev in 2011, craft beer largely developed in isolation, chipping away at other markets and growing to fulfill demand. Now, independence lines are blurred, locality comes second to accessibility, and small businesses are in direct competition with larger companies that have either acquired craft breweries or developed the ability to approximate their look and feel.
It’s also worth remembering that craft breweries weren’t eating themselves at that point, either. There were just 1,500 craft breweries in the U.S. when the recession hit in 2008, making 8.5 million barrels per year—compared to over 8,000 craft breweries making around 26 million barrels today. Some of those breweries have expanded considerably faster than the 4% year-on-year growth average, and their extra volume certainly didn’t come from the macro segment.
This all adds up to an unprecedented scenario for the industry—and one that will need to be handled with previously unthinkable approaches.
As a global recession bites, growth for even the most established breweries could be hard to find—and sadly most of it is likely to come at the expense of other craft brewers. That will have a knock-on effect across the industry, because when demand is stagnant or drops, so does the appetite for innovation and investment.
Back in March, many breweries expected the downturn and rise in home consumption to revive flagship brands and traditional styles. That’s yet to happen, as consumers play it safe in a different way—sticking to the styles they love most, and the breweries they know will deliver them time after time.
In throwing resources at the most popular beers in their portfolios, many breweries are also narrowing their production; experimental or expensive releases may then fall further to the wayside as the pandemic continues, and as the financial reality gets tighter. If variety may suffer, so too will bigger-picture investments. Breweries will likely see less commercial reason to invest in horizontal tanks and lager time, barrel programs and slow mixed fermentations, and in new styles and processes that risk liquid going down the drain—even if that’s where their production team’s passions lie.
There’s another underlying issue that will likely dampen creativity in the industry. Even as online sales rocket, and as breweries find new ways to engage with drinkers online, no amount of live shows or subscription clubs can cover the loss of draft volume—and those are the figures that will alarm people opening or investing in new breweries.
Counting the number of breweries that never get past the dream stage is impossible, but given that more than two breweries opened every day in the U.S. in 2018, we can assume the total of never-to-be businesses will add up to the hundreds, at least. There was already talk of such pace of growth being unsustainable, and it certainly is now. In fact, it’s possible we’ll see more closures than openings for the next few years.
The effect of that shift is going to domino down the supply line, hurting maltsters building new kilns, hop growers planting new fields, fabricators relying on new builds and expansions, and the wholesalers and bottle shops that rely on new products to bring in the same customers time after time. A stagnation among craft breweries is also a stagnation for the wider industry, and all of its affiliated businesses.
Then there’s the human cost. Craft beer is a social industry, and I don’t mean that as a slogan. It’s built on ideas shared between brewers at events, facilitated by salespeople pounding the pavement, and spread by consumer discoveries at festivals and bars. COVID-19 is not just freezing the supply chain—it’s also affecting our communication lines, and extinguishing signal fires that connect disparate corners of the global beer community.
The evaporation of beer’s social side has had a profound impact on breweries, many of whom previously attracted attention through word-of-mouth, digital column inches, and collaborations. As people increasingly buy online, and work and drink from home, achieving the mindshare required to build momentum as a business is exponentially harder. Many of the top-ranked breweries on sites such as Untappd and RateBeer are there off the back of thousands of Instagram images and ratings from festivals and fringe events, where a thunderclap of digital exposure can send brands hurtling up the rankings and across other media.
In the future, those can drops and launch parties will see less footfall, online releases will be staggered by the gap between digital announcements and physical deliveries, and multiple posts and check-ins from bottle shares will dry up. With less user-generated and influencer-boosted content to feed off, that exposure will be harder to find. Ask any social media manager how much easier it is to produce content and foster interaction when new products and events are being shared all the time.
The lack of events has forced breweries to find new spaces in which to communicate with both trade and consumers. Of all the trends accelerated by COVID-19, video conferencing has been among the most noticeable. You only have to look at the 220% jump in Zoom’s share price over lockdown to understand the scale of social change, and breweries have been quick to adapt.
It must be a relief to brewery owners, many of whom once traveled the world to host meet-the-brewer events in half-empty bars, that they can now go live on Instagram and garner hundreds of views without even putting their trousers on. But a question remains around whether fatigue will set in—the interaction we crave as humans can’t be fully satisfied by listening on headphones, asking questions in the comments, and hitting hearts when we agree.
Any drop in interaction will be compounded by the crowded nature of the beer market. Social media has opened the beer world up by erasing borders and physical distances, but that means breweries everywhere are now competing for the same space on news and social feeds. More than ever, small breweries looking to reach their local audiences will have to shout over the international reach of others, fighting the algorithms that push the most popular content to the top of feeds. Ultimately, though, craft beer as a whole might struggle to keep its hard-won mindshare among the public.
The loss of the international festival circuit goes beyond hurting beer geeks’ social lives. Many breweries invest in sending brand representatives, brewers, and company higher-ups to a series of annual events: the Copenhagen Beer Celebration, London Craft Beer Festival, MASH in Barcelona, the Great American Beer Festival in Denver, Indy Man Beer Con in Manchester, and more. They’re loss-making trips, but for many, they’re key to establishing a global reputation. Breweries like Other Half, Trillium, and The Veil might not need sales from the European market, but they need the tweets, Instagram Stories and posts, and ratings of its beer geeks. It’s a digital marketing strategy that’s predicated on physical events and real life.
But festivals are about more than just reputation-building. Where is the innovation going to come from when brewers, hop growers, yeast suppliers, and maltsters can’t meet to discuss and experiment? Look at how Garage Beer Co got its start with an Other Half collab; consider how breweries will select their hops if they can’t travel; ask how complicated ideas, studies, and processes spread without the lectures and talks offered at events like the Brewers Association’s Craft Beer Conference.
These connections and events are vital to the collaborative nature of the craft beer industry. Many of the breweries who attend the Craft Beer Conference don’t even buy tickets to the seminars and talks: they are just there for the fringe events. It’s there that big deals are negotiated, distributors sounded out, collaborations arranged, jobs offered, and ideas shared. In one night you could do months’ worth of networking and brainstorming, and make acquaintances not feasible by cold calls and speculative emails.
It’s not just the large-scale events where all this happens, either. All over the world, tiny pockets of influence and connection spring up around beer, during small get-togethers and bar crawls and celebrations.
The loss isn’t just felt among beer businesses: for untold numbers of drinkers, both members of the “beer scene” and otherwise, the disappearance of events and the closure of public common places, the canceled trips, the emptying calendars all add up to a deep and intangible loss. The end of the natural cross-pollination that occurs when ideas are shared in person is hardest to quantify, but speaks most to what many understand as craft beer’s core ideology.
If the entire culture of beer drinking is going to shift towards home, the doomsayers of the pre-COVID-19 world might just see their prophecies come true. Saturation could be reached as demand drops, generational shifts could be accelerated as unemployment hits the young hardest, monoculture could arise from fear of investment and doubling down on popular styles, and multinationals will likely watch as their sporadic enemies fade from the radar, picking off those they deem worth saving.
There’s no doubt we’re going to see some desperate moves from breweries as they try to cut costs, but there are a few positives to be drawn from the fact that the evolution of craft beer has been forced into its next phase prematurely. Most notably, the surge in grocery store beer sales also saw an increase in craft sales at convenience stores, which can be more accessible retail routes for small breweries. A larger beer range in small and specialized retail spaces would be a boon to both industries.
Longer-term accessibility to craft beer might even increase as a result, especially in the U.S., if—and it’s a big if—draconian distribution laws that date all the way back to Prohibition could be torn up. Breweries in three-tier states might be able to sell to convenience stores on the same block or to more isolated towns via the mail. Those potential changes could even help foster a greater breadth in craft beer consumers, as hard-to-find beer reaches new distribution channels and spaces.
As for the potential drop in diversity of brewing styles, that could have a silver lining. As breweries focus on what they do best, we might see a return of the regional variations that have been blurred by the omnipresence of Hazy IPA. Countries, provinces, and towns could once again become famous for specific styles and processes in the way of Lambic and British real ale. Perhaps we’ll see more regions adopt new style interpretations, like we’ve seen with Florida Weisse, or new product development using genetically modified yeasts that speed up production or create new flavors. Of course, the current situation could just mean more DDH.
The new beer world will have to be more immediate, perhaps less adventurous, and sadly smaller, but in some ways it might be better. All three changes could result in better margins as sales go direct; in more quality assurance and fewer experiments pushed onto consumers as brewers are forced to focus; in less noise and clearer communication with drinkers as online spaces evolve. With old legislation up for debate and the digital world opening up, this is a once-in-a-generation opportunity for change, both within the beer world and without.
We may never know the full cost to our industry of those lost face-to-face meetings, chance encounters, drunken plans, and sober promises to visit. But as brewers all over the world tear up their business plans and direct everything straight at the consumer, I hope the industry remains as connected and supportive as it was before the pandemic. That way, when we reach final gravity, we’ll at least all be in the same place once again.
Words, Jonny GarrettIllustrations, Colette Holston
