As Rough Winter Approaches, Brewers Look for Silver Linings

Drinkers are visiting less but spending more when they do. Package and store sales remain strong, while draft margins remain scant. Here we round up some recent data and analyses relevant to independent brewers.

Joe Stange Oct 30, 2020 - 5 min read

As Rough Winter Approaches, Brewers Look for Silver Linings Primary Image

Photo: Courtesy Monday Night Brewing

As the weather inevitably becomes less hospitable and more potential pandemic lockdowns loom on the horizon, breweries are bracing—again—for a drop in on-premise business. With the pandemic likely to stretch some way into 2021, the goal for many breweries this winter is survival.

Here is a brief look at some seasonal data, including indicators that drinkers are still buying plenty of package beer, both to-go and off-premise.

Drinkers still buying more off store shelves: Retail scans show growth in off-premise sales, according to IRI, the Chicago-based market research firm. For the 12-week period ending October 4, overall beer sales were up 12 percent (in total U.S. multi-outlet, convenience, and liquor stores) over the previous year. Sales in the “craft” category were up 14.6 percent over the previous year. (Powered by hard seltzer, the growth in flavored malt beverages in that period was 54.7 percent.)

Wholesalers at their busiest: The National Beer Wholesalers Association recorded a beer purchasers’ index (BPI) of 81 in September, up from 48 a year before. Based on a monthly survey of beer distributors, the BPI is a measure of expected demand for beer—a score higher than 50 means that it is expanding, and lower than 50 means that it is contracting. The high score of 81 is another indicator of how much beer is flowing through wholesalers and off store shelves—in lieu of on-premise sales and draft beer. Notably, smaller craft brewers are more dependent on draft and on-premise sales—and the BPI for the craft segment was 55, up from 45 a year before. Meanwhile, the BPI for flavored malt beverages (such as hard seltzer) was a robust 91, up from 79 the previous year.


On-premise sales down overall: By averaging several different indices—including Nielsen CGA retail, Arryved point-of-sale, USDA food spending, and even Google searches—Brewers Association Economist Bart Watson estimates that third quarter (Q3) on-premise sales were down 22 percent compared to 2019. That’s better than Q2, right after the March lockdowns, when it was down 45 percent. The BA’s own Q3 survey of members found similar results, as they reported on-site sales down 25 percent on average. Brewpubs also reported food sales down 25 percent on average.

To-Go beer grows, but… It doesn’t offset the loss of draft margins, but breweries selling beer to-go, via delivery, or via direct shipping are seeing median growth of 42 percent in those sales compared to a year ago, according to Watson. However, the overall volume is small, he says, and “without asking a ton of questions, it’s a bit tricky to fully pencil out this growth, but my back-of-the-envelope is that these sales will double this year.”

Negative growth overall: Watson estimates Q3 total growth at minus 5–7 percent, a slight improvement over the previous quarter. For the year-to-date he estimates negative growth of 8–9 percent overall. “Even if Q4 shows improvement, craft brewers are certainly going to end the year in the red in volume and even more so in revenue,” Watson says.

Going outside: In the Q3 survey, BA members estimated that 64 percent of their sales (on average) were happening outdoors. Obviously, this tends to be more feasible in suburban or rural areas and more challenging in urban neighborhoods. It will also be a challenge to keep drinkers coming out in similar numbers as the weather grows less hospitable. “In warmer climates, keeping outdoor space and flexibility in using it will be key for many brewers,” Watson says.

Fewer employees: On average, BA members said their full-time equivalents (FTEs) are down 15 percent versus a year ago. Brewers cited the need to cut costs and keep paying rent as reasons for reducing staff. “Much of our future relies on what landlords are willing to renegotiate and what the federal government will do for small businesses,” one member told the BA.

Traffic is down, spending is up: Based on Arryved POS data, brewery visits (measured by numbers of sales) were down 32 percent in September from the 2019 average, while the amount spent per transaction was up about 32 percent, according to Watson’s analysis. (Of course, those numbers were even more disparate and dramatic back in March.) Watson cites two reasons: The first is that customers are buying more package beer to stock up at home; the other is that those who are still coming are likely the more dedicated craft drinkers, and thus they’re likely to spend more anyway.

Joe Stange is Managing Editor of Craft Beer & Brewing Magazine® and the Brewing Industry Guide®. Have story tips or suggestions? Contact him at [email protected].