At the most fundamental level, the No. 1 priority of a business is to survive. At no time is this more evident than now—in the middle of the coronavirus pandemic. Other business priorities take a back seat. The new goal is keeping your team and customers safe while breaking even and surviving.
Like most others, Washington State named breweries as essential businesses. Despite that, we lost almost 50 percent of our volume overnight when bars, restaurants, and our own taprooms had to close in mid-March. We needed to ensure the safety of our customers and our team, pivot quickly, and look for new opportunities to survive.
During times of crisis, when you’re focused on survival, it can be incredibly challenging—but also very important—to see things from others’ perspectives, be they your team, customers, suppliers, landlords, or wholesalers. We need to make sure that we are not focusing on solutions that benefit us to the detriment of our stakeholders who are also going through their own struggles. It has never been more important to take a long-term approach, inclusive of the needs of all our stakeholders, and focus on the long-term goals of our businesses.
Crises lead to opportunities, and necessity is the mother of invention. It can be hard to see opportunities when you’re focused on survival, but through all of this, we need to focus on our breweries coming out of this pandemic stronger. Let’s take a look at some of those opportunities.
Business Models
The state-mandated shutdowns forced successful companies to change business models just to keep the lights on. While it may be essential now to try multiple new routes to market, it would also be wise to focus on sustainable changes to your model—new revenue streams that can be sustained after stay-home orders are lifted.
Ideas include:
- Pivot from tasting-room retail to a to-go model. Like many other breweries, we transitioned our tasting room from on-premise consumption to to-go sales overnight. We added an online ordering system to reduce customer interaction at pick up. About half our to-go sales are now ordered online. Customers appreciate the ease with which they can see options and place orders for pick up, and we expect to continue offering customers this service even after on-premise sales have resumed.
- Review your product channels and move into those with opportunity. Keg sales collapsed to virtually zero overnight on March 16, so we leaned into more releases via cans—transferring the volume from draft to package. Lots of breweries have been doing the same. We also saw some breweries without canning lines fill their crowlers and get them into distribution, which put existing draft beer to good use.
- Do online beer releases. We had done several online beer releases before the pandemic, so we had practice. We released a beer online in early March, before the shutdown, to reduce crowds and facilitate social distancing. That helped us to pivot to online sales (for to-go purchases) relatively easily. But these systems do need to be stress-tested. Some breweries moving to online sales didn’t start small with their releases, and they had system errors, creating some customer dissatisfaction. Stress-test solutions—perhaps with a mug club–only release—before letting the system loose to the wide public.
- Deliver beer… or send it. Lots of breweries have set up delivery models during the shutdown. Focus on longer-term, sustainable business models. I have doubts about the economics of brewery staff delivering to individual customers, and I’m not sure breweries will continue to do this when taprooms reopen. Alternatively, a shipping model takes a lot of time to set up—make sure that it’s not just a system for a few weeks of sales. Shipping agreements, ordering systems, back-end logistics, and building a website infrastructure on the front end are a lot of work. Make sure you invest your finite resources in long-term solutions.
- Consider changing habits. Breweries that distribute will need to consider wholesale customers in the long term. The pandemic will potentially shift customer preference toward eating (and drinking) at home, with less sit-down dining and more fast-casual dining. How does this impact your long-term product mix (draft/package) and channels (grocery/on premise)?
Liquidity
Businesses ultimately go bust when they run out of money. Pretty obvious, I know. So besides ensuring the business could pivot when taprooms and bars closed, I initially focused on making sure that we had money in the bank account. Liquidity is king. With our bank, I discussed getting an increased credit-card limit. I asked the bank for a 90-day payment deferral on our loans—well before the CARES Act gave an abatement. I called down a line of credit that I wasn’t planning to use before the pandemic started. We immediately started the process to remortgage our house, and we paused a large capital project to expand our tasting room. Liquidity is vital—and we did everything we could, as early as we could, to ensure the brewery has it.
If you have liquidity, you survive. It’s that simple.
Financial Forecasts and Cash Flow
Businesses should always be focused on cash flow, over and above profitability, and at no time more than now does this ring true. Having visibility into cash flow through forecasts is key to managing any business.
We were looking at various business models, and the first thing I did for each was create a financial forecast model to assess the impacts of each option. From these, I could ascertain key success criteria for each scenario, and I could do a high-level reasonableness test to see which options we should pursue. Without having visibility into the financial impacts of each business model, I would have been blind to its impact. This for me is key to successful decision making.
Times of crisis will stress your forecasting methodology and spreadsheet model more than usual. I used this time to rebuild our financial forecast model, to correct for areas I knew didn’t work too well—and that the crisis had exposed as weaknesses. For example, I updated it to account for sales of different packages (such as 16 oz versus 12 oz cans) at different price points, in different channels—so I can now more accurately predict my revenue and cost of sales.
Now’s the time to get tight with your forecasts, to align them with your key business drivers like never before. And, of course, make sure they focus on cash flow.
Business Risk Analysis
Very few people I know had a formal plan for their brewery in the case of a pandemic. Business risk analysis is looking at each significant risk to business operations and then putting redundancy or mitigating solutions in place. I had never done a formal analysis of our brewery, but it was always on my mind, and that directed some decisions.
Take this time to complete a full business risk analysis. Take each significant area of your business and work through the risks that could materially impact your bottom line. List out all the risks, no matter how apparently trivial or unlikely. Then run through them with mitigation strategies. You’ll have some risks that seem so unlikely to happen that you’ll decide you can live with that risk. But then, at least, you will have consciously decided that.
Some examples include:
- With potential supply-chain disruptions, ensure that you have redundancies in your processes and your suppliers—malt, hops, cans, etc.
- Now is the time to build multiple channels of distribution—such as on-premise with retail, to-go, delivery, shipping, and wholesale.
- Have a variety of package options—cans, bottles, growlers, crowlers—so that you can meet a greater number of customer needs and occasions. If you weren’t consciously diversifying your channels before COVID-19 hit, doing so now can make you stronger in the future.
- While business-continuity insurance excludes pandemics, it does include earthquakes and fires—consider insurance for those hard-to-mitigate risks.
Organizational Strength
This is a unique opportunity to help develop your team and strengthen your organization, especially if you’ve been fortunate enough to keep your team intact throughout the shutdown. With lower production and sales volumes at most breweries, there is an opportunity to let your team grow and take on more responsibility in their roles. While it’s less busy, it may be a great time to give your leaders some extra headroom. You may have more of an opportunity to coach team members now, so that the team and organization are stronger.
You might see that some team members step up or lead in ways you hadn’t anticipated. Recognize that. Create a trusting environment and show gratitude.
Offer Support to Others in the Community Where and When You Can
Recognize that you are not uniquely impacted by this crisis; it has impacted everyone. Your customers are struggling—often more than breweries—and they need support, too. Our retail partners support us in good times, and even though we’re hurting, too, we are finding ways to support them now. We’ve been providing lunch for our team twice a week, ordering from our long-term restaurant partners who are offering food to-go. The lunches give our team a bit of a morale boost, while also supporting our customers in a small way in these difficult times. (And on a personal note, it helps me assess who has the best veggie burger in Seattle. Current leader: Some Random Bar in Belltown.)
If spending money on lunches is not feasible for you right now, put the influence you’ve garnered on social media to good use. Highlight your retail partners. Help direct your regulars and followers to support them during this crisis.
We were also able to leverage some of our surplus merchandise to help support local businesses. We give away two camping mugs to anyone who shows a receipt from supporting a local business, even if it’s a gift card purchase for future use.
It’s also important to recognize that your customers who want to support you could use a little support right now, too. Our mug club has some taproom-specific benefits, such as a larger pour in a members-only glass—no longer available to them with the taproom closed. While they likely recognize that it’s not our fault that we can’t provide that right now, it’s important for us to see it from their perspective as well. So we are providing an additional, offsetting benefit to our mug-club members.
Lean into Your Values
We’re privileged to be a part of an amazing neighborhood community, and over the years we’ve developed ways to support our neighbors’ good work. Because we’ve always supported work and causes that are meaningful and aligned with our values, we see these contributions as core and essential to our business.
While our Thank You Thursday program (which has raised more than $150,000 for local nonprofits, one pint at a time) has been put on hold, while all on-site events are prohibited, we’re not letting that stop us from supporting organizations and causes.
We developed a beer called You Are Not Alone, put it in uniquely designed cans, and donated 100 percent of the profits—$28,000—to those in the service industry who have lost their jobs. Another 10 breweries made their own You Are Not Alone beers, using the label we designed. We published the recipe online for homebrewers, and we have heard about dozens of people brewing the beer while donating to good causes.
We will also proceed with Reuben’s Crush Cancer, a beer that raises funds for cancer research. This year we were able to partner with two of our hop suppliers, Roy Farms and Yakima Chief, to help us increase our impact.
Virtual World
While we must be physically distant, humans (being humans) are finding new ways to reach out and remain socially connected. The trend toward online interaction—Zoom, Facebook, Instagram—has accelerated. I think this trend is here to stay.
People are craving connection now, and finding ways that people can connect in new and meaningful ways is a change that can be sustained.
What can we learn from this?
- We have been recording more editions of our podcast, Reuben’s Sightglass, including a biweekly discussion with three other breweries from around the country and how they’re coping with the crisis.
- We created some Zoom backgrounds of the brewery, so people can look like they’re at the taproom having a pint.
- We started a 4 p.m. Beer Break, and I’ve been participating in the regular discussion on Instagram Live.
- Virtual brewery tours and virtual brewers’ nights are other ideas we’re working on.
Strengthen Internal Processes
Crises put strain on your internal processes. They also also shine a light on what you’d like to improve upon, and for us that has been internal reporting and visibility. Some examples include:
- Our sales director implemented new daily sales reporting by brand, enabling us to see real-time information on sales volumes as the pandemic unfolded. We’ve been able to make the most informed decisions about production and packaging while the world is fundamentally changing around us.
- We have implemented a weekly taproom sales report showing us what brands and packages are strong and using data rather than gut feel to direct decisions.
- We are implementing wastage reporting—looking at beers produced compared to sales, so we can see actual losses through the tasting room by brand.
Get to That Maintenance
An obvious advantage of a slower time is to get to those longer-term, more difficult maintenance projects. We’ve been focusing on resealing our bars, touching up the paint on our walls, refinishing the deck, painting the building, and other projects that are hard to complete when running at full steam.
Longer-Term Goals
Use this time to (1) keep your team and customers safe, (2) survive, (3) recognize and support your stakeholders, and (4) focus on the long term.
The ultimate long-term element is to focus on strategic business areas of opportunity. Are there new business cases to write for opportunities that you were considering?
We were working on two or three longer-term projects that hadn’t fully developed. We are using this time as an opportunity to focus and move those forward. I built a pro forma document to assess new, significant opportunities—a business case template, if you like. Using that for one concept we were working on, we can then reuse it easily on other concepts—helping those concepts become a reality much more quickly.
When we look back on this pandemic in a few years, we’ll define “success” in the most difficult of times as a healthy community, a strong business, and a thriving craft-beer industry.
Let’s all do as much as we can to make this a reality.
Photo: Matt Graves/www.mgravesphoto.com