Mar 312020
 

We can all agree that the Corona virus has turned the world upside down. But perhaps a more accurate explanation is that the medical and political response to the virus has turned the world upside down. While the effects of the virus are uncertain, one thing is certain: it will be awhile before we know the full impact of the Corona virus… what it has done to our world, our nation, and what will be the repercussions of the decisions made in response to the virus.

We know that many business models developed by other CPG companies failed to perform in the early days of the virus. The highly acclaimed just-in-time business model supported by the made-to-order inventories collapsed under the public’s panic buying. What did work, and what was the most effective delivery model, was beer distribution. With the on-premise accounts closed, most distributors adjusted their off-premise teams by adding merchandising and delivery workers. The results were evident in the number of record sales produced. Many wholesalers had all-time record weeks, not seasonal records, company records.

Going forward, many wholesalers believe their all-time sales highs will slow as consumers begin to realize that grocery, liquor, and c-stores will remain open and well stocked. Once again, wholesalers proved their value to retailers and consumers. If sales begin to slow, however, expect wholesalers to being lay-offs.

While the world and the beer industry are working to get through this crisis, the next question is: what will the world look like when the virus ceases?  What will be the new reality? First, it is almost certain that we will experience a recession during the last half of the year. Unemployment numbers are already massive, with more to come.  The newly passed Congressional bill may convince many workers to stay home, as they may make more money not working than being employed.  This will leave restaurants, bars, and even craft breweries who survived the downturn, scrambling for workers.

Expect to see states with self-imposed shutdowns to become cash-strapped and begin to look for revenue streams. New or increased state taxes may come in the form of income taxes, sales taxes, property taxes, etc. States that have resisted legalized gambling may decide that such a revenue-producing stream might not look so bad after all. Consider how many direct and indirect jobs could be created from casinos. Sports booking could raise its head in every state. And the big one, marijuana sales, could be legalized nationwide. Even raising taxes on beer could become a reality. States will be strapped, and everything is on the table. Expect brewers and distributors to take a long hard look at their go-to market model. A 1990s video made about the Spanish Flu pandemic of 1918, which killed over 30 million people, suggested that those who survived did not even feel comfortable going back to church until 1922.

Consumers, too, will view the on-premise differently, but to what degree? Wholesalers may make the on-premise sales virtual, thereby reducing their sales teams, and putting more pressure on the brewers’ sales teams to become the in-market sales function. Expect brewers of all sizes to ramp up their chain departments. In the future, expect that off-premise will be the major battleground. Of course, online marketing and home delivery will become the big opportunity.

Consumers and retailers now know that the antiqued liquor and beer restrictions are irrelevant. This pandemic has made that fact crystal clear. And consumers will not put up with old laws. Most states have suspended restrictions for on-premise accounts to help them survive the current crisis. Look for the possibility of states permanently changing the laws once the reality of an increased revenue stream from beer sales tax sinks in.

There is a very realistic chance that the worst is yet to come. Regardless of that, the beer industry will adapt, improvise, and overcome. It will never be the same…that is the reality.

Now I am trying to decide:  ponytail or man bun? Barbers are going to be in high demand.

This is the age of disruption.

 Posted by at 6:00 am

  5 Responses to “This is the age of disruption.”

  1. Definitely ponytail!

  2. I vote for the pony tail

    Good insight in your column

    An item being discussed that will help jump start on premise when we settle down is suspending the current legislation and once again allowing you to write off 100% of on premise business expenses.

  3. The 1918 global flu pandemic forced paradigm shifts and we will see many paradigm shifts as a result of this COVID-19 crisis, both social and market driven. Already universities are gearing up for online classes, will they go back? “Medicare for all” may be the only logical choice as health insurance collapses.

    No man buns please!

  4. Geoff,
    I think “Gunny Highway” say’s go for the Pony Tail!

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