Our small breweries are hurting

While many businesses are severely suffering today, this article focuses on our small breweries. Even though breweries can keep producing beer, they are rapidly running out of ways to sell it. Due to the on-premise sales ban and the quarantine advice, beer sales are bottoming out.

Taproom pint business gone

For a small taproom-focused brewery, which most West Virginia breweries are, the loss of their by-the-glass sales in the taproom is devastating. A brewery taproom’s on-premise pint sales often accounts for 75% to 90% of their total sales revenue. In normal times, can and growler carryout sales account for maybe 10% of a taproom’s sales dollars. While a taproom’s carryout business is likely growing during this crisis, it is not nearly making up for the loss of the by-the-glass sales. That means a brewery is forced to try to remain solvent on much less revenue.

Brewery taprooms have universally cut back hours and some have even closed temporarily. Cutting back hours is further evidence of decreased business. As of today, Brewstel, Bavarian Brothers Brewing, North End Tavern Brewery, Old Spruce Brewing, and Stumptown Ales remain closed, though Stumptown may reopen this weekend.

Distribution pretty much gone

While quite a few of our small breweries do some distribution, there are problems there too. First, the margins for the brewery on distributed beer are lower than those they get for sales in their taproom, especially for those that use beer distributors. If doing direct distribution rousing a distributor, the customers are bars and retailers. Many bars are shut down completely and those that remain open are selling very little beer, since they can only sell it to-go. If a brewery sells through distributors, they are often finding their orders cut back or even stopped because the distributors are not selling much beer to their customers (the bars and retailers). While the status of beer sales at grocery stores and convenience stores is a brighter story, that does not really help most small breweries in WV because their beer is not sold there.

In West Virginia, only Big Timber Brewing, Greenbrier Valley Brewing, and Mountain State Brewing have significant distribution in the grocery/convenience store channel. With food stores definitely remaining open and having steady business, those breweries stand to perform better than the rest as beer sales get more concentrated to that retail channel.

Beer flowing upstream

Another potential problem: With all the beer out in the market currently and with beer retailers closed indefinitely or on limited hours, a lot of that beer out there in the retailers and wholesalers will likely go out-of-date before it is sold. One brewery owner told me that beer is about to flow upstream from the retailers back to the wholesalers, then back to the breweries, and then down the drain. He said this is going to really put breweries in a pinch. Not only going without sales for months but having to buy back possibly two months or more of production would put some of them under or some may walk away.

That owner said maybe the brewer doesn’t have to take the old beer back—it likely depends on the individual signed franchise agreement with the distributor—but it puts the brewer in the position of having old beer out there. Would a retailer reorder in the future if they know the brewery wouldn’t help them out? Will the wholesaler want to sell the old beer? There is a lot to consider. Breweries that can afford it will probably take back a lot of beer. Also if a brewery has a distributor that has temporarily shut down (as some have around the country) and a bar is filling growlers for take out, a West Virginia brewer using that distributor can’t technically go around the wholesaler to make those sales directly to the retailer. There is so much here to consider.

Expensive to start; difficult to replace

Breweries are by their very nature are capital intensive businesses. They are basically manufacturers that also operate factory stores (the taproom). Brewery equipment is very costly. Breweries, compared to most small local businesses, are relatively expensive to start up.

Due to this large capital requirement for equipment and the more massive regulatory requirements, breweries are not as easily started as is a simple bar business. If we lose a few breweries, they will not be so easy to replace. If we lose a few, we lose some something special, something very unique to our community and our state.

Like most small businesses, our little breweries do not have a lot of cash reserves. A business slowdown of this magnitude can put them into dire straights pretty quickly. Hopefully, craft beer fans will do everything they can to help ensure that their local breweries stay in business through these tough times.

Things you can do

Consult this list of WV breweries with their hours and operations during the COVID crisis and div e them some business

Shop this list of retailers with growler filling licenses. Businesses that fill growlers/crowlers are more likely to offer a selection of West Virginia beer.

Make a point to purchase cans of WV beer from Kroger, Giant Eagle, or your favorite grocery store.

Share photos of your West Virginia beer purchases on social media and encourage your friends to do the same.

Contact your legislators and tell them our breweries need help.