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News Article

Survival of the Fittest Brewer

By Jan Hogewoning | Fri, 04/24/2020 - 16:42

COVID-19 is having different impacts on the beer industry worldwide. Breweries are suspending operations, distributions networks are down and bars and restaurants have shut temporarily. When it comes to dramatic drops in sales, it is independent beermakers that are suffering the hardest. This is understandable, considering that independent brewers tend to have a higher dependency on sales through draft and bottle at pubs, restaurants and bars. Last week, it was reported that 50 percent of Mexican artisanal beer producers could go bankrupt if contingency measures would continue for another three months. In the UK, the Society of Independent Brewers announced on April 17 that sales of its member brewers had dropped by 65 percent. The association was originally created to form a front against the largest beer companies, which controlled the majority of UK pubs. Now, COVID-19 is demonstrating how vulnerable they remain with a lack of financial backing and mono-dimensional sales channels. The association also estimated, on the basis of the survey, that 29 percent of all brewers could go into redundancy.

In the US, the Colorado-based Brewers Association has reported that in a survey conducted with independent brewers, the median respondent had seen sales drop by 75 percent. In the draft area, the association reported a whopping 91 percent drop. The association has stated that it expects many independent beer brewers to close. While bars and restaurants have shut around the US, many brewers have attempted to push other sales channels. The association reports that some brewers have reported record online sales numbers. In addition, some were able to post positive sales figures despite the crisis, as they found ways to meet the demand of home-confined Americans ordering beer either online or through other channels. The association warns, however, that an online sales strategy, or more home delivery from retail spaces, is not an option for every brewery. It favors larger brewers over microbrewers, as they tend to have a stronger distribution network and more capital to make the transition.

This is a true stress test for independent brewers. Can they use this opportunity to fast track their online sales channels and find other ways to connect with home-confined beer aficionados? In the US, some bars have maintained the option of picking up a beverage. This however, will not be enough to keep many independent brewers afloat. The purchase of alcoholic beverages through online channels has grown steadily over the last year. Forbes estimates that this will grow faster as a result of the current circumstances. It also reports that particularly younger generations have been turning to this channel over the last few years. To take wine as an example, while seniors above 55 form the principal wine drinkers group, millennials are responsible for 25 percent of online purchases.

As independent brewers face a potential bankruptcy, they could become prey for larger brewers. On the other hand, larger companies could use this crisis to outmaneuver the independent brands with their own craft beers.

The data used in this article was sourced from:  
Forbes, Brewers Association, Imbibe, Mexico Business News
Photo by:   Pixabay
Jan Hogewoning Jan Hogewoning Journalist and Industry Analyst