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Retail beer sales are up but that’s not cutting it for many craft breweries

Andy Uhler May 27, 2020
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A brewery in Washington, D.C. seen in 2019. One brewery owner said about 40% of his brewery’s revenue comes from selling kegs to bars and restaurants. Saul Loeb/AFP via Getty Images
COVID-19

Retail beer sales are up but that’s not cutting it for many craft breweries

Andy Uhler May 27, 2020
A brewery in Washington, D.C. seen in 2019. One brewery owner said about 40% of his brewery’s revenue comes from selling kegs to bars and restaurants. Saul Loeb/AFP via Getty Images
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Before the pandemic shut down its indoor-outdoor taproom, St. Elmo Brewing Company in South Austin sold patrons beers on tap with names like “Carl” and “Norm!”

“We’re looking at a split of probably between 78% to 85% of our sales coming from in-person traffic. So, when social distancing is in place, that 80% just kind of vanishes,” said co-founder Timothy Bullock.

Retail beer sales are up around the country, but that doesn’t help St. Elmo. It doesn’t sell its beer in grocery stores. While the taproom remains closed, St. Elmo is trying a few different things to bring in revenue like selling growlers and four-packs of cans directly to the consumer out of its taproom.

“It’s a middle school dance, like where everybody’s just out on the dance floor and not knowing exactly what to do,” Bullock said.

St. Elmo also recently worked with another local craft brewery, Austin Beerworks, on a limited edition hazy IPA just for the quarantine. St. Elmo’s version was called “Air Five” (like a high five but without slapping hands). And Austin Beerworks’ beer was called “No Touching” (for all those “Arrested Development” fans). 

Michael Graham, one of the owners of Austin Beerworks, said about 40% of his brewery’s revenue comes from selling kegs to bars and restaurants. But unlike St. Elmo, Austinites can find Beerworks beer at grocery stores all over town. 

“More people are buying beer in the grocery stores and convenience stores, but not nearly enough to make up for that lost volume from bars and restaurants,” Graham said.

The numbers also tend to be more favorable to breweries when selling draft beer.

“One of the things that I think people aren’t aware of is just how dramatically different brewers’ margins are when they’re selling into bars and restaurants versus when they’re selling packaged beer,” said Michael Uhrich, chief economist at the alcoholic beverage consultancy, Seventh Point Analytic Consulting.

Graham and the other Beerworks owners have talked about lowering the price of its beer to move more volume. But playing the price game can be treacherous. 

“You might attract new customers, but those are customers who are buying you not just because of the strength of your brand or the beers but also because of the price and so what happens if somebody else comes in at a lower price,” said Bart Watson, chief economist at the Brewers Association.

That value market isn’t really a craft brewers wheelhouse market, either. And most small breweries can’t compete with AB Inbev or MillerCoors on price.

COVID-19 Economy FAQs

What are the details of President Joe Biden’s coronavirus relief plan?

The $1.9 trillion plan would aim to speed up the vaccine rollout and provide financial help to individuals, states and local governments and businesses. Called the “American Rescue Plan,” the legislative proposal would meet Biden’s goal of administering 100 million vaccines by the 100th day of his administration, while advancing his objective of reopening most schools by the spring. It would also include $1,400 checks for most Americans. Get the rest of the specifics here.

What kind of help can small businesses get right now?

A new round of Paycheck Protection Program loans recently became available for pandemic-ravaged businesses. These loans don’t have to be paid back if rules are met. Right now, loans are open for first-time applicants. And the application has to go through community banking organizations — no big banks, for now, at least. This rollout is designed to help business owners who couldn’t get a PPP loan before.

What does the hiring situation in the U.S. look like as we enter the new year?

New data on job openings and postings provide a glimpse of what to expect in the job market in the coming weeks and months. This time of year typically sees a spike in hiring and job-search activity, says Jill Chapman with Insperity, a recruiting services firm. But that kind of optimistic planning for the future isn’t really the vibe these days. Job postings have been lagging on the job search site Indeed. Listings were down about 11% in December compared to a year earlier.

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