What does the coronavirus mean for the future of the corner brewpub?
By Matthew Korfhage
There will always be beer. But beer is different now.
In the months since the coronavirus swept through the commonwealth and the world, the once-busy taprooms of Virginia craft breweries have emptied by mandate of the governor, as almost all public gathering places are closed to help slow the spread of the highly contagious and sometimes lethal disease.
Bars and restaurants that serve local beer on draft have also had to close their dining rooms, a double whammy that has led to mass layoffs across the brewing industry in the span of only a few weeks. What’s worse, no one really knows when the crisis will end.
But the news isn’t all grim, and the pandemic hasn’t hit everyone the same way. Even though you can no longer drink a pint next to 30 people with beards, the spirits are still with us — and they move in ways that would have been unthinkable just two months ago.
In a period of weeks, the entire business of selling alcohol in Virginia transformed. Starting in March, as legislators tried to find solutions to the industry’s woes, the Alcoholic Beverage Control Authority temporarily peeled back its restrictive regulations one by one, like the layers of an endless onion.
By April, distilleries gained the permanent right to deliver their bottles to homes and ship them directly to customers statewide. And new licensing rules allowed breweries that once thrived on foot traffic to become takeout and delivery hubs, sending their products to the homes of the quarantined and the bored.
The Veil Brewing Company in Richmond, a beer-trader favorite whose special releases are known for being hard to find outside the brewery, now ships its COVID-themed Needy and Cope hazies all over Virginia and Washington, D.C. The same goes for Triple Crossing Brewing Company, whose beloved Falcon Smash is now just a mouse click away.
Walk into Benchtop Brewing Company in Norfolk today, and it’s a little like traveling back to a time before tasting rooms even existed in Virginia: The brewery looks like a cross between a hospital and a shipping bay. Bottles of sanitizer sit on the bar, while tables are filled with orders submitted online. Behind the bar, cloth-masked bartenders fill crowlers, or cart four-packs from the back room to the table where you pick up your order.
Like a lot of breweries, Benchtop has had to adjust quickly to the new reality. And hoo boy, they’re busy. Don’t dawdle while picking up your order, because there’s likely somebody standing outside waiting to come in.
“We are getting by,” says Eric Tennant, brewer and owner. “We haven’t cut any employees yet, and we can certainly use all of the local support we can get.”
But the pandemic will likely hit some businesses very hard, says Brewers Association economist Bart Watson. Watson outlined a possible whirlwind of awfulness: a short-term nosedive in taproom sales, followed by a long-term slump brought on by a recession that will leave people with less to spend on a cool, refreshing IPA.
And to top that off, there’s an impending carbonation shortage, which means the bubbles in your beer are getting more expensive. The shortage of carbon dioxide will also affect soft drinks, and the slaughterhouse industry.
“CO2 in the U.S. comes from recapture during ethanol production,” Watson says. “With oil prices cratering and no one driving, ethanol plants are shutting down, and there’s not enough CO2 being captured … . This may be the only time the brewing industry and the meat-packing industry are in perfect alignment.”
Add it all up, he says, and we could see a mini-apocalypse that hits the smallest breweries hardest. It’s impossible to predict, Watson says, but the country could see the highest number of brewery closures we’ve encountered in years.
In an association survey of 525 brewers taken in April, on-site sales were down by a median of 75 percent during the pandemic. Cans and bottles, on the other hand, were up about 8 percent. Virginia’s number roughly mirrored the national ones, though the layoff situation here was a little less dire: 38 percent of staff, compared to 66 percent nationally.
Still, with a majority of brewers eyeing closure if the shutdown lasts longer than three months, this pandemic is nothing short of an “existential threat,” Watson says. And a close look at the emerging numbers seems to upend the logic of how most brewers have been doing business.
The midsized craft breweries, the ones in the grocery stores who’d seen their gains eroded by AB-InBev’s inroads into the craft beer market, are now the ones much better positioned to weather the threat, Watson says. The small brewpubs, which up until recently were the industry’s area of greatest growth, are now in more trouble because on-site sales make up much of their business.
“Small breweries are likely to have been selling primarily at their brewery,” Watson says. “And if they’re distributing, it’s draft beer. They may not have the packing equipment on hand, though some get around it with mobile canning. The larger you are, the more packaging you do.”
This means the market has been turned upside down in the course of a month: Previously, the higher margins of brewpub sales were one of the main success stories in the industry.
“If we had this convo a year ago, I’d say distribution is crowded, and people like the experience of the brewpub,” Watson says. “If we saw startups, that’s where they were focused. This has exposed unique vulnerabilities.”
Watson says the pandemic doesn’t mean less beer will get bought. But it will likely lead to a short-term consolidation of the beer market, as many of the tiniest breweries close.
“The median craft brewer makes 375 barrels,” Watson says. “That’s a small local brewpub. A large percentage of breweries closing doesn’t translate to a large percentage of the market in volume. If 15 percent of craft breweries close, that’s only a 2 percent hit in volume.”
In Virginia Beach, Vibrant Shore Brewing Company has seen a two-thirds drop in its business since the pandemic started, says owner Rhett Rebold. Rebold, who had to lay off his entire staff, has been running a solo shop, brewing the beer and filling growlers and mason jars from the bar closest to the front entrance. “My wife reminds me to sleep, and things like that,” Rebold says. “And I miss my beertenders. Luckily, a lot of them have other gigs.”
But he says business has also improved as the weeks drag on and customers get used to the new normal: In his Oceanfront resort district location, nearly half his traffic is walk-up or bike-up. He’s also ordering a canning line a little sooner than otherwise planned, so he can send beer outside the brewery.
Still, he says, a lot of opportunities had to go into the recycling bin.
“The collaborations have been disheartening,” he says. “We were a Something in the Water sponsor, the city was gonna buy beer from me for their birthday celebration of Mount Trashmore. We were going to make a special brew for Cape Henry Lighthouse. Everything is canceled.”
Recalibrating for the new world
Several Virginia brewers have been able to weather the storm, in part by changing the way they do business. Virginia Beach’s Reaver Beach Brewing Company has maintained most of its sales volume, says general manager Josh Bennett. And while it tries to keep a business-as-usual vibe, the brewery has had to be flexible.
“We have our head brewer working the to-go sales with us, and it’s all hands on deck for canning runs,” Bennett says. Keg sales are up, and they’re selling beer in as many formats as they can get to customers: crowlers, cans, growlers and grenades.
In Richmond, tiny Final Gravity Brewing Company is selling more beer now than it did in its taproom, but the brewery had to change everything about its business to do it.
“Because we are so small we don’t rely on distribution,” says Tony Ammendolia, owner and brewer. “We sell directly to our customers and we are more of a community gathering place. Now we have to sell all of our beer packaged for off-site consumption.”
Ammendolia delivers beer personally to customers’ doorsteps, and staff had to figure out how to set up an online store — with a few hiccups along the way.
“There is nothing worse than someone buying a beer on your online store,” he says, “and you don’t have any left, so you have to offer a replacement or a refund.
Although sales are up, profits aren’t.
“We are selling a higher volume of beer than usual, which is amazing,” he says. “But the costs associated with all the packaging, plus the additional labor costs, offset the higher volume.”
This is a concern echoed by several other brewers, including Benchtop. At Commonwealth Brewing Company in Virginia Beach, all the staff have likewise been repurposed to new roles. The brewery also had to convert its merchandise store into an online pre-order system.
“Production staff that weren’t being utilized have moved to delivery, bar staff that used to run the taproom are now running curbside to-go and running order fulfillment,” says owner and brewer Jeramy Biggie. “Alicia was our event manager, but now that we don’t have any events, she’s become the website czar.”
The brewery is down maybe 20 percent in overall sales when you factor in distribution to bars, but Biggie says that selling all the beer personally helps keep his margins up. Beers intended for festivals, like their popular Common Grounds pina colada IPA, now get pumped out through curbside and delivery.
And like nearby Reaver Beach and Smartmouth Pilot House, they invite food trucks so customers can get beer and food as a one-stop.
Commonwealth is now making plans to ship beer all over Virginia, and makes regular delivery runs to Norfolk and Richmond in addition to Virginia Beach. Biggie says delivery is something they’ll likely continue even after the coronavirus pandemic has passed.
“It’s opened our eyes to demand we weren’t aware was even there,” he says. “Once things return to normalcy, we’ll continue the delivery and shipping options because the public has responded so well to it. They’re giddy and shocked they can have beer delivered to their homes. Why wouldn’t we?”
Other breweries have likewise expanded their online and canning capacity and added delivery capabilities that might extend beyond the pandemic as the new normal.
But Watson cautions that we should also expect many brewers to drop more costly delivery options if more profitable taproom sales ramp back up. He also says that the real effects of the pandemic will be seen over the course of a year, as breweries who took financial blows are less able to roll with additional unexpected hits to business.
Biggie remains optimistic about his brewery’s chances.
“The challenge has been exciting,” says Biggie. “We were scared to death initially, and fearful for the fate of the business. Now everyone has kind of jumped on and is working hard in a new way. We’re doing well enough to get by, and hopefully we’ll get through this.”