Apr 072020

Many of us are now into the fourth week of the shelter-in-place virus edict and trying to adjust to our new way of life. Some experts are forecasting that the next couple of weeks will be the most difficult yet as the rate of infections rise and grave economic news continues to increase. 

Bump William’s recent update of the IRI data for the week ending March 22nd, clearly illustrates this point. The majority of the major breweries are experiencing extraordinary off-premise numbers while, at the same time, experiencing sharp declines in on-premise sales. Currently, off-premise volume gains are off setting on-premise volume losses. Even with strong successes in the off-premise, some major breweries, including Pabst and Deschutes, have laid off their on-premise teams, and many breweries may announce additional layoffs by the time this post become public. The longer the pandemic continues, the greater the chance that beer industry people will lose their jobs.

Last week, Nielsen CGA projected a loss of 18 million cases of craft beer during the shutdown, an estimate which could be conservative. Already there have been a number of craft breweries close and the industry expects more to follow suit. The general consensus is that the crafts were over indexed, and this situation is weeding out the weak sisters. Those breweries with owners whose intent was never to invest for the long haul will be among the first to close their doors. While, unfortunately, those crafts that were in the business for the love of beer and had goals of being in for the long-haul, could be negatively affected through no fault of their own. Numerous retailers and wholesalers are instituting policies that have directly impacted the financial viability of crafts, many of whom have over-indexed their on-premise marketing, while simultaneously limiting their investment in the off-premise accounts. The on-premise business is gone, and it will be awhile before it returns.

Many crafts have invested in the chains with new packaging, cans, and chain specialists.  These investments were to have been paid off this spring with new chain resets.  Despite the continuation of sales and services for the retailer, when the retailers postponed their resets, or wholesalers discontinued undertaking resets, the decisions were financially devastating to the crafts. Craft brewers cannot get their beers to the consumer.  When a vendor has their approved products scanning with a retailer, that product should have an opportunity to succeed or fail.

No one truly has a clear picture of what the industry’s future will look like in six months or a year, but one thing is certain, the beer industry will never be the same. Undoubtedly, when the industry looks back, the reflections will be: “we could have done this,” instead of a “what was done.” Hindsight is always 20/20.

Yesterday, the CEO of Raytheon stated that the airline industry would not return to normal for two years assuming a vaccine has been found.  Raytheon, with access to 12 billion dollars, is concerned about small businesses and their supply chain.  To support that chain, Raytheon is making cash available to those vendors.  The CEO stated, “Without our supply chain, we are out of business.”  Retailers and wholesaler should take his words to heart.

Groundhog Day. 

 Posted by at 6:00 am

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