THE GIST
Breweries are scrambling to launch online stores and to obtain takeaway licenses as the U.K. government fails to reassure them it will protect the brewing industry from “decimation” during the COVID-19 (coronavirus) pandemic.
Early this week, Prime Minister Boris Johnson refused to close all pubs and restaurants, leaving them unable to submit claims for insurance payments even if they have pandemic coverage. Johnson instead warned the public to stay away from them.
The result has been a dramatic decrease in the number of people going out to drink and eat. A 30%—40% drop in traffic in towns and cities was estimated even before the announcement, due to public reaction toward the global outbreak of COVID-19. Levels are expected to continue to fall, leaving the beer supply chain in stasis and brewers clasping at straws to find ways to pad their bottom line.
WHY IT MATTERS
In response to the directions of Johnson’s early-week press conference, the government announced a £330 billion package of support to small businesses, but it received a mixed reaction from the beer industry in particular.
While industry professionals welcomed the abolition of Business Rates for a year and grants of up to £25,000 in the hospitality industry—significantly more than what was announced in the budget last week—questions still remain about whether they will apply to breweries themselves. The government is yet to confirm if the definition of the “hospitality industry” can stretch to breweries, instead implying such decisions will be up to the local councils. Currently it will only apply to businesses offering services directly to the consumer, such as pubs, restaurants, cafes, and retailers, but could be stretched to include breweries with taprooms and shops.
In a statement about the tax cuts and grants, James Calder, chief executive of the Society for Independent Brewers (SIBA), said it could mean grants for some breweries but not for others. With local budgets severely strained by budget cuts and preparations for Brexit, it may be difficult for some councils to extend the relief it is being forced to pay by central government.
Another policy included in the government’s bailout package was the offer of government-backed loans at what the Chancellor Rishi Sunak called “attractive rates,” although he didn’t clarify what “attractive” would mean in terms of the actual interest rate. Any business would be able to borrow up to £5 million with no need to pay the money back if it went under, but the offer still drew ire from many in the industry for simply adding debt to their list of future worries.
“A loan to cover £300,000 of stock for us isn’t helpful regardless of the rates, unless the payment terms are extended over decades,” says Chris Mair, founder of Scottish beer distributor New Wave. “It assumes these companies make enough money to pay back a loan.”
Mair adds that he is essentially just a holding warehouse now, unable to collect funds, unable to pay them, and unable to sell most of the assets for which he’s already paid. For him, the only solution to save the industry is to close all the U.K. pubs and for the government to cover the losses.
“The government needs to pay the chain and then force closures and fill the rent and wage gap until we can all get going again,” he says. “The current situation is creating a bloodbath.”
In the meantime, breweries are left planning for the worst. Whether pubs close or not, they are faced with dropping sales from the on-trade and a reduction in draft sales in their own taprooms. Many have turned to takeout beer and webshops, offering discounts on delivery and orders by the case. Some without direct sales channels have even built them from scratch in recent days, but have been unable to immediately launch them due to alcohol licencing issues.
Applying for permission to sell alcohol on and off premise can take months, but a workaround has been found via a Temporary Event Notice (TEN), which allows for the sale of alcohol for a specific time and day. Businesses without an alcohol license can apply for up to five TENs a year, which would allow for five shipping days if required.
Approval of a TEN, which it comes via the local council, takes a matter of days and can be used for webshops as long as it applies at the time that the alcohol would be packed and shipped. It’s unlikely to be able to sustain larger businesses, but it could minimize losses for hundreds of small breweries—especially those not weighed down by high rent and employee wages. Reece Hugill, founder and sole employee of Hartlepool’s Donzoko Brewing Company, sees his new webshop as the only way to keep stock moving and money coming in.
“I was doing keg delivery runs today and I’ve kind of accepted this will be the last for the next three or four months,” he says. “I’ve had no orders from bottle shops really either, so the webshop could be my only income. People aren’t going to stop drinking beer, they just need it brought to them.”
With only one core beer—Northern Helles—he’s had to buy stock from three breweries he’s recently collaborated with to bulk out his offer, and he’s also approached other local businesses to stock their products. As a result, he’s got a lineup of Donzoko beers next to artisan coffee, tea, and charcuterie, all available to order and shipped under his TEN license.
“I’m rebranding the whole thing as Donzoko and Friends,” says Hugill. “It means I can get their products moving, help people not going to shops and make my webshop more appealing with some proper black pudding.”
Whether webshop sales can save businesses remains to be seen, but they could mark a shift in how craft beer is sold in the U.K. With hundreds of new, direct-sale online stores opened in the last few days, they could spell a second crisis for brick-and-mortar bottle shops when the Covid-19 crisis ends.
Words by Jonny Garrett