COVID-19 has hit the American brewing and hospitality industries like a battering ram, with 12.7% of Brewers Association-defined craft breweries telling the trade group they may close by early May. The down economy is now also posing a fundamental question to breweries in planning: do they dare even try to open?
The number of breweries in planning is difficult to quantify, but Bart Watson, chief economist for the Brewers Association (BA), estimates there were 2,000 breweries in some stage of planning or preparing to open before the coronavirus outbreak. Many are now asking themselves when it will be safe to open, and whether they can afford to wait.
“First and foremost, we want to see the number of [coronavirus] cases start to come down. I’m not even considering opening the doors until I see the other breweries in town open,” says Marc Grubert, cofounder of the Avimor, Idaho brewery-in-planning Spring Creek Brewing Company. “We’re going to see what our mentors do and how they proceed.”
The need to wait on others emphasizes the most unique and challenging point of this moment for businesses-to-be: there’s no precedent for reopening after such a massive health crisis, no roadmap for a business or the public to follow.
Choosing an opening date is a guessing game because medical experts haven’t determined when it will be safe for people to gather in public. Devi Sridhar, a public-health expert at the University of Edinburgh, tells The Atlantic: “Everyone wants to know when this will end. That’s not the right question. The right question is: How do we continue?”
According to a working paper published this month by the National Bureau of Economic Research, restaurants and related businesses are the most optimistic in their estimations of how long COVID-19 will last. But that hope flies in the face of what peers and C-suite leaders across the country are predicting. The paper goes on to note that “three-quarters of [businesses responding] state that they only have enough cash on hand to cover two months of expenses or less … suggesting that many businesses expect this to extend well beyond their current cash.”
Grubert says Spring Creek can probably delay its opening, which had been on track for late April, for a couple more months.
“After that, it’s time to make hard decisions.”
“While we are stalled, I do feel somewhat lucky in that a lot of people lost their jobs and are at a point in brewery planning where this is going to break them,” says Emily Richard, founder of Simple Brewing Company, a brewery-in-planning she intends to run on a social-enterprise model. For Simple, that means acting a bit like a B-corporation, prioritizing people and the environment over profits.
When COVID-19 hit, Richard and her partner, J.P. Houchens, were looking for a brewery location in the Brooklyn neighborhood of Gowanus. They hoped to open as soon as fall 2021; now it’s more likely a three-year project. Richard is discouraged by the setbacks for Simple, but grateful that she’s kept a part-time job as a recruitment administrative assistant at Open Society Foundations, a private funder of independent groups working for justice, democratic governance, and human rights.
If not for New York’s stay-at-home orders, Simple would have released its first commercial beer this month, a Pink Boots Society collaboration with fellow New York City brewery Randolph Beer. The American Light Lager, called Lager of the Ladies, was brewed on International Women’s Day in March. The plan was for Randolph to sell the beer through its taprooms to generate exposure and revenue for Simple. But with Randolph’s locations now closed to the public, the beer is sitting in tanks, its fate uncertain. Richard hopes Randolph could potentially sell a packaged version through delivery services.
“Right now it’s just a holding pattern,” Richard says.
She’d wanted to quit her job by the end of the year to concentrate entirely on launching the brewery, potentially opening a pop-up taproom in a cafe space inside a community center in Manhattan. The plan hinged on a space that can’t even legally open under current conditions. As a result, Richard has pushed those goals to 2021.
This is a setback not just for Simple, but spells trouble for craft beer overall. At-the-brewery sales accounted for 40% of BA-defined craft growth in 2018, and that’s expected to increase in soon-to-be-released 2019 data. According to Beer Marketer's Insights, breweries founded in the last five years are responsible for almost all BA-defined craft brewer growth in 2019. Even with off-premise included, growth in recent years has almost exclusively come from the smallest breweries. New breweries have been key engines for the industry—now, many of them are left waiting to rev up production and welcome customers.
“I like to think of myself as an earthquake-proof building that can bend and adapt to the shaking of the ground. This is another shaking of the ground,” Richard says. “It’ll change the resources that are out there, and how the market is. We can’t know what the beverage industry will look like after this is done.”
Breweries in later stages of planning say they’re checking near-daily to make sure local governments are able to conduct building inspections and issue permits due to social distancing protocols. They’re waiting for updates from contractors about whether construction crews can still perform work on job sites. They’re in contact with suppliers to check the shipping status of brewing ingredients, glassware, and materials.
In a sign of how truly bizarre these times are, some breweries say they’re actually grateful for the construction delays—the opposite of the rush to open that was common just months ago. In most places with mandatory stay-at-home directives, these breweries can’t open their taprooms to the public anyway.
“Thankfully we didn’t open in March. We would have opened and closed our doors in the same month, which would have been terrifying,” says Gabe Stinchfield, owner of OddPitch Brewing, a Missoula, Montana brewery-in-planning that is now tentatively targeting a late-fall opening, missing out on Montana’s busy summer tourism season. (In 2018, the most recent year for which data is available, nonresident visitors spent more than $307 million in Missoula County; $60 million went to restaurants and bars.)
If forced, OddPitch could wait an entire year to open, according to Stinchfield, but he acknowledges his business is “unique in that regard.” OddPitch has little overhead right now, as Stinchfield and his friends and family are the only investors. The business has taken out no loans and currently owes no debt.
Not every brewery can afford to wait. Brooklyn’s Wild East Brewing Company had its first batches of kegged beer in distribution around the city, and was planning for its taproom’s grand opening in April when New York State extended its stay-at-home order. The brewery realized its only option was to sell crowlers of its 13 draft beers via delivery and to-go from the taproom. Word of mouth has helped attract customers, and co-founder Lindsay Steen says Wild East was also lucky to be able to flag its business as “open” on Google Maps.
“People see that and come in like, ‘When did you open?’ and we’re like, ‘Well we never exactly opened,’” Steen says.
She says pallet sales and crowler sales—about 250 each weekend—have brought in enough money to pay some bills, but May will bring even more pressure. Because the brewery had been counting on taproom sales and the benefit of other high-margin, on-premise revenue in April, making up lost ground is going to take every penny. Steen says paying May’s rent will be a challenge.
The ability to open its taproom would be a boon to Wild East right now. But even if the local government were to relax stay-at-home orders and allow breweries to open tomorrow, it’s not clear that customers would return at pre-COVID-19 levels. Health concerns would still linger, as would financial ones. Strict guidelines regarding social distancing and protective masks would still be in place, and it’s unlikely people would instantly feel comfortable congregating in places like a taproom.
In the meantime, Wild East has accelerated its plans to package as a result of on-premise closures. The brewery signed on with a mobile-canning company and has hand-bottled a Belgian Witbier. Future bottles will likely include a Bière de Mars, a Farmhouse Blonde Ale aged on Earl Grey tea, and two Saisons; some of those might see limited retail distribution, but Wild East hopes to sell most stock through its quasi-open taproom. With 32oz crowlers on national backorder, Wild East recently switched to 25.4oz crowlers and 16oz Twistee cans in the interim.
“It seems like playing a game where someone is constantly changing the rules in the middle of the game,” co-founder Tyler March says. “Whenever we hit our stride, we get thrown another curveball.”
That sentiment is beginning to sink in nationally as the coronavirus’ effects linger. A recent PricewaterhouseCoopers poll of corporate chief financial officers found they’re increasingly pessimistic about the future. Asked how long it would take their companies to financially recover if COVID-19 were contained today, CFOs have shifted back the timelines for recovery. On March 11, 66% of them said it would take less than a month to bounce back; on April 8, 61% now say it would take between one and sixth months.
“Are people going to be able to afford to go out and socialize?” OddPitch’s Gabe Stinchfield asks. “We’re all living it thin. The day that we open, I know people may want to come, but can they afford to come?”
Customers will emerge from this economic downturn with limited discretionary income, and many will choose to spend it at their newly reopened standbys. As national beer sales data demonstrates, this crisis is prompting drinkers to spend money on what’s comfortable and familiar.
The crisis has quickly turned core tenets of the industry on their head. Taproom-exclusive breweries—the industry’s darling—are essentially dead in the water as long as public spaces remain closed. Debt-financed growth feels like a crushing burden. Draft beer in distribution is now money literally down the drain. Owners are watching other businesses for some sense of what to do and how to reopen, but not even government officials and scientists have a clear answer. Breweries of all shapes and sizes are finding themselves reevaluating their business models, trying to turn on a dime to focus on survival.
The forthcoming Missouri River Brewing Co. in East Helena, Montana, still intends to sell most of its beer through its taproom, even as breweries without major packaging operations have been walloped by COVID-19. As construction continues on its space, the brewery is investigating how newly loosened alcohol laws might enable it to deliver beer along a pre-planned route, reminiscent of old dairy delivery services. If Missouri River can’t open its doors in mid-June as planned, owners hope the deliveries would generate some revenue and act as a temporary patch.
Waiting has always been the hardest part of opening a business, but current conditions make that truism feel more sinister. Owners feel like they’re waiting for the other shoe to drop, the next problem to rear its head.
“I’m not afraid right now because I feel like the scariest part hasn’t happened yet,” says OddPitch’s Gabe Stinchfield. “I know I’m going to be afraid of something, I just don’t know what it is yet.”
Words by Kate Bernot