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The week of March 8 was an extraordinary one for beer as shoppers around the country managed an initial panic because of the COVID-19 (coronavirus) pandemic. States required bars, restaurants, and taprooms to close, completely halting on-premise beer sales in what is closing in on 30 states. This change has given a distinct advantage to breweries who focus on packaged beer sales, a role reversal of recent years as a taproom-only model has helped thousands of companies thrive.
This week Sightlines Premium will share data from the beginning of March to show the dramatic change that’s taking place, with insight on how it impacts you.
According to past figures reported by the Beer Institute, it's likely that somewhere around 14.5 million barrels would have been sold in March 2020 without COVID-19 wreaking havoc. On-premise sales represent around 18% of annual beer sales in the U.S., and as drinkers stopped going out to drink, the doomsday scenario of what a volume (and cash) loss could be is staggering. Aided by St. Patricks’ Day, March is typically the fifth or sixth top-selling month for beer every year.
An easy assumption is that hundreds of thousands of barrels of beer aren't being sold. Some breweries are transitioning beer meant for kegs into packages to try and sell off-premise in grocery, convenience, and other stores.
But let's play a wholly unscientific, back-of-the-napkin game to hammer home how big this is:
If 100% of on-premise sales disappeared for any 60-day stretch between March, April, and May, it'd equate to about 5 million barrels of beer. An amount equivalent to losing the combined annual beer production of D. G. Yuengling and Son, Boston Beer Company, and Sierra Nevada Brewing Company. In IRI-tracked channels, Bud Light lost 5 million BBLs of product 2015-2019. These are the Worst Case, Doomsday Scenario comparisons, but not what will come to pass.
That’s roughly 1.2 billion pints, which could turn into around $7.44 billion if we made a very conservative average of $6 per pint.
The biggest loser because of this shift was Guinness, which not just lost out with bars closed for St. Patrick’s Day. Packaged sales of Guinness Draught were down -16.7% in IRI-tracked volume over the first two weeks of March compared to the same time last year, including a staggering 38% drop in the week leading up to the holiday. The company had imported extra stock to the U.S. in advance of potential shipping issues because of COVID-19, and even discounted packages in stores couldn’t offer relief, whether it was lost among the noise of everything else, other beer options, or lack of interest.
It’s telling that even when people were flocking to stores, the timing of St. Patrick’s Day and discounted prices of Guinness weren’t enough to boost sales. Clearly (and understandably) minds were elsewhere, but that didn’t stop a run on beer. People are buying right now and this data point suggests that stocking up could be as valuable as brand choice for shoppers.
In the first two weeks of March, IRI-tracked off-premise sales in chain stores increased by about 300,000 BBLs compared to 2019, up 8%. What was most staggering was that not a single beer category showed volumed declines against the same timeframe last year. Premium plus (+16.1%), craft (+12.8%), imports (+11.3%), value light (10.5%)—everything grew. Even "value regular," which has otherwise-declining brands like Busch, Hamm's, and Genesee, grew by 1%.
At a time when “unprecedented” is used so often, it was another example to add to a list of superlatives. It’s a hard pivot when draft production is 40% of Brewers Association-defined craft sales.
Still, drinkers' money has to go somewhere. During the week of March 8, IRI-tracked off-premise dollar sales of beer grew 20% from the week before. That’s twice as much growth as 2019—an almost $100 million increase. A host of reasons around COVID-19 are likely the cause, especially since it wasn't just Guinness brands shoppers were focused on in the days leading up to St. Patrick's Day as all sorts of brands and categories sold well.
If you’re a brewery that sells packaged beer, now is the time to ramp up that production, as shopping behavior is likely to shift again should more states impose “stay-at-home” or “shelter-in-place” orders, which don’t mandate lockdowns, but require residents to avoid outings to “nonessential” businesses. To-go orders and curbside pickup have become common (even in the U.K.), but this new business function isn’t likely to offer more than a slight bump in sales.
And for breweries who typically sell a significant portion of draft beer in kegs, or focus on their own-premise taproom sales, it can only put a good dent in potential losses—which have already been dangerous for many, and devastating for more.
Research going back decades suggests that in an emergency, we may revert to "normative behavioral patterns" as a response to warnings, creating a tendency to act in familiar ways as an amount of comfort. Even further, creating "consumer normalcy" is seen as a way for shoppers to construct and maintain an identity they feel is normal—particularly helpful during a time of crisis.
If we consider how Americans responded in their beer-purchasing behaviors in the initial days of panic due to COVID-19, it hints at how you may want to focus your attention in the coming weeks. Notably, three key factors have come into play:
Price sensitivity—With a troubled economy and job losses mounting, “how much?” becomes an important factor when comparing beer to necessities. (See toilet paper or bread.)
Desire to pantry-load—Uncertainty about the length of self-isolation can cause a desire to make large purchases and of larger-volume goods to ensure things are stocked at home, especially when there’s a desire to limit shopping trips or deliveries. (Also discussed by economist Michael Uhrich in this GBH podcast.)
Interest in familiar brands—Combining a need for lower price and higher volume, this led drinkers to focus on flagships that have otherwise been in steady decline. Sales show that in chain stores were people flocked to stock up, newness and variety wasn’t a priority for people under this sudden economic and environmental stress.
The COVID-19 crisis has put particular emphasis on the financial strain of Americans, with a survey by AARP showing that most residents don't have an emergency savings account. Previous research has shown that 20-40% of U.S. households couldn't handle an unexpected emergency expense of $400.
This leads to the natural question of how we would expect Americans to splurge on premium products when making ends meet amid COVID-19 may be hard enough. In a follow-up analysis this week, we'll look at what's happened to beer categories specifically, what brands are driving growth in IRI channels, and how you should consider this new reality.
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