Born in SF, American Craft Brewers' Future Dims As Coronavirus Spreads
SAN FRANCISCO (CNN) -- America's craft brewers were headed for a rocky spell before the coronavirus pandemic. Now, many are worried their livelihoods could be doomed.
In 2019, more than 300 small and independent brewers closed -- the largest total in a single year. Sales at the high-overhead operations shrank as the market overflowed with competition: A record 8,000-plus breweries were scattered across the US in 2019, a fivefold increase in a decade's time.
It was anticipated several hundred more would go dark in 2020. But as winter turned to spring -- a time when brewers typically gear up for the busy summer season -- the rough patch turned disastrous. Potential outlets for beer sales shut off in quick succession.
Several states seeking to blunt the spread of coronavirus ordered weeks-long closures or drastically scaled-back operations of businesses that were once reliant upon being communal gathering places.
Much like others in the hospitality and food-service business, breweries have resorted to conducting large-scale layoffs, running on skeleton crews and, in some cases, permanently shutting down operations.
"As a small brewer, we've been struggling for a bit," said Dan Watson, co-owner of Cleophus Quealy Beer Company in San Leandro, California.
The founders started taking stock of the operation when Cleophus Quealy hit its five-year mark in 2019. Small breweries like theirs need to sell enough beer to pay the bills. Specializing in sour, fruited and barrel-aged beers, which can take months to develop, that volume wasn't always there. Competition grew from both the arrival of new entrants and also acquisition moves by the multinational beer-makers.
"So many bottles and brands," Watson said. "It's a really crowded space to compete in. We increasingly have depended on people who live in the area."
When the Bay Area's coronavirus ordinances were put into place, it resulted in the temporary closure of the taproom where 75% of Cleophus Quealy's sales took place. The brewery's founders opted to close the business entirely and funnel all remaining sales to the brewery's seven employees.
"It just became pretty clear that this was not a thing we could weather through," Watson said.
Charlotte's Legion Brewing laid off 90% of its workers -- about 135 people -- in a move intended to be temporary; Ska Brewing closed its brand new "brewstillery" in Colorado, 71 minutes after opening; in Austin, Texas, Jester King let go of longtime workers after losing the source for 77% of its sales.
"On top of that, the remaining 23% of our sales are in limbo, given the evidence we've seen of distributors and retailers being hyper-cautious in these uncertain times," Jester King's founder Jeffrey Stuffings wrote in a blog post. "All in all, but for the yet-to-be-determined impact of to-go only sales, we're in a position where 100% of our revenue is in jeopardy."
The curveball flung into operations forced brewers to scramble and get creative. The unexpected shift in operations created a bottleneck in the supply chain for to-go packaging. Crowlers, the large aluminum cans that can typically hold two pints, are on back order.
Brewers desperate to find ways of selling the beer that's sitting in tanks have flooded craft beer delivery site Tavour with calls, texts and emails, said Meghan Packard, vice president of the Seattle-area operation.
"I literally cannot keep up with the calls and the emails and the outcry from breweries," she said. "Unfortunately, we can't take every brewery."
SHIFTING GEARS
Other brewers' resourcefulness turned into unanticipated business ventures.
Yellowhammer Brewing, a 10-year-old craft brewery and distillery in Huntsville, Alabama, repurposed its entire production line to make hand sanitizer.
After getting the nod from federal agencies and securing hydrogen peroxide and glycerol from one of its chemical suppliers, Yellowhammer switched to full production of hand sanitizer at 4 a.m. on Monday, March 23. The initial production is intended for large organizations such as medical providers, civic agencies and nonprofits in need, said Ethan Couch, Yellowhammer co-founder.
"The only sad part is all of this just takes time," Couch said, noting the process itself as well as a recommended 72-hour rest for the system post-production to ensure no bacterial action is occurring in the vessel.
Help is on the way but draft beer is in trouble
The passage of the $2 trillion CARES Act stimulus would be a "good first step" for small and independent breweries, said Bob Pease, president and chief executive officer of the Brewers Association, the trade organization for craft brewers. The loans and forgivable provisions could help brewers stay afloat, he said.
About 40% of craft brewers' beers are sold via draft, with 26% distributed through a second party such as a restaurant or bar and the remaining 14% at the brewery itself, said Bob Pease, president and chief executive officer of the Brewers Association, the trade organization for craft brewers.
"If you don't put your beer in bottles or cans right now, you are the most at risk because you don't have a path to market," he said. "[Packaged brewers] that are decently capitalized, we believe most of those breweries should make it through."
The situation hasn't been easy for brewers of all sizes.
Russian River Brewing Company, the brewer known for its highly rated Pliny the Elder Double IPA, temporarily laid off 159 people -- or 80% of its staff -- at its two North Bay breweries -- locations that just a month earlier attracted hordes of visitors who waited in hours-long lines to purchase the even rarer Pliny the Younger Triple IPA.
The brewery scaled back production by 50%, stopped kegging beer entirely and switched solely to packaged beer, Natalie Cilurzo, Russian River's co-owner and president, wrote in an email.
"These are unprecedented and crazy times," Cilurzo said. "I'm not sure any of us had an emergency plan for a global pandemic. But we survived a Great Recession, wildfires, floods, and PG&E power shutdowns, and I am confident we will get through this one, too."
She added: "I miss our employees the most."
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