COVID Impact on Breweries

Over the past decade craft beer has often seemed like a sure bet when it comes to growth and stability. In 2010 there were just 1,759 craft brewers in the US. In 2019, there were almost 7,500. The industry also saw 4% growth in production year over year, increasing the craft segment's market share of beer sales by almost 14%. Unfortunately, 2020 did not see this continued trend with volume down by 8% and many craft breweries on the brink of closure as 2021 grows near. That said, it hasn’t been all doom and gloom in the industry.

Craft breweries are still finding ways to open their doors. As of June 2020, there were an estimated 8,200 Independent craft brewers in the United States. As of November, that number had crept up to 8,400. 

Most of the losses seen for small craft brewers this year has been in on-premise sales. Prior to the pandemic, many small brewers had been moving towards on-premise sales because it offered larger profit margins. With many geographies limiting in-person drinking and dining, Nathan Greene, consulting analyst for New York-based Beverage Marketing Corporation said that 75% of the craft beer’s losses will come from these on-premise sales. 

These smaller breweries have been forced to pivot to off-premise sales. Many were unprepared or took some time to ramp up for off-premise packaging. As a result, many of the larger breweries have primarily benefited from the increased off-premise sales of beer during Covid. To add additional issues for craft brewers, there has been a massive aluminum shortage, meaning that even if these small brewers wanted to sell off-premise beer, they have had issues getting it packaged for sale. 

However, even with these struggles, overall beer sales numbers were staggeringly good for 2020. Total domestic beer saw sales of $26.6 billion, 5.9% year over year increase and craft beer has seen sales of $4.7 billion, a 10.7% year over year increase. For the 6 month period ending around September 5th, beer sales rose 11.2 percent in value, while craft beer sales increased 16.3 percent, according to Nielsen data. But these increases have not canceled out the widespread losses from sales at bars and restaurants.

Long term, the craft beer industry will remain strong. The TTB had 219 new brewery applications between Q2 and Q3 of this year, a period that many would have assumed to see almost none. Many experts imagine that future closures will not be due to Covid-19, but due to this increased competition. 

Unfortunately for those hoping to bring a new brewery to their vacant retail space, that may not be happening any time soon. BMC’s Greene said “Many craft brewers, if they hadn’t done so before, are embracing new online ordering systems, eCommerce and at-home delivery.

Pre-COVID, around 10-15% of independent craft beer volume went through direct sales, this will likely grow to about 20 percent by the end of 2020.” This means that the trend for breweries is much like the rest of retail, towards more e-commerce.

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January 4, 2021
Barton Strawn

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