COVID-19 has posed a set of unexpected and extreme challenges on America’s small hospitality businesses, including small and independent brewers. In our second impact survey, we found that many breweries were uncertain how long they could last in an environment where onsite sales were down sharply, distributed draught was non-existent, and the bump in off-premise sales was not enough to offset those losses for most breweries.

Nevertheless, over the past six weeks to a month, brewers have pivoted their business models, reopened in line with local and state guidance, and found new innovative ways to keep their businesses afloat. Although we haven’t yet reached the three-month threshold we asked about in that survey, there has yet to be a massive surge in brewery closures. Yes, some breweries have closed, but to date, the vast majority of breweries have managed to stay in business.

With that in mind, we targeted our third impact survey at probing what has helped, what has hurt, and how breweries have seen their outlook change over the past month.

I’ll start by thanking the more than 850 breweries that took some time to fill out the survey. If you want to read about those breweries, and what it suggests about potential survey bias (or lack thereof), please skip to the end.

Topline Summary

• Craft brewer sales continue to lag overall beer sales due to different business models, with revenue weaker than volume sales
• A majority of breweries are reopening in states where they are able
• Breweries are rapidly shifting their business models, with delivery, either by the brewery team or third party, seeing the largest increase
• More than 80% of breweries indicate having received a PPP loan, though this is not making them universally more positive, suggesting they are only a partial measure
• In general, breweries are more optimistic than they were a month ago, but this varies widely by individual business circumstance
• While a majority of breweries remain confident their business will survive 2020, between 15-20% are unsure or actively pessimistic

Sales Volume and Revenue

In terms of volume growth, results are similar to what we found in early April, with a weighted estimate of total brewery sales down 30.5%. The median brewery respondent has sales that are down 50%. Note that while we had representative participation, the volume above 100,000 was far less than it is as a percentage of the full data set, so accounting for that would likely improve the total number, and I think it’s likely that if we use this survey to build a broader estimate, total craft is likely down more like 20-25%.

We also asked about revenue and found that the average revenue decline was slightly worse than the average volume decline. I don’t have revenue data, so it’s impossible to do a weighted average, but the non-weighted average revenue drop was 43.1%, versus the average volume drop of 40.6%.

Reopening

One primary reason for increased optimism is that states are beginning to reopen, and in most states, we are seeing breweries be included in fairly early stages of reopening, often in line with restaurants.

In states that have reopened or are reopening soon, 55.7% of breweries eligible to reopen indicate they have at least partially reopened their brewery. 23.5% indicate they plan to reopen within the next few weeks, while 16.2% say they are still taking a wait-and-see approach.

Finally, 18.3% of breweries in states that have partially reopened indicate that either they are in a city or county that has not reopened or that their license type was not eligible for reopening at the time they took the survey (this is rapidly changing, so it is possible the great work the guilds are doing moved some of these breweries into the reopening category after they answered).

Sales Methods

To look at the changes in brewery business models, we asked breweries how they were selling beer before and how they are selling beer now. The table below shows these shifts.

Sales Method	Before	Currently	Change
To Go	86.2%	94.4%	8.2%
Via Delivery (Delivered by Brewery)	2.9%	33.4%	30.5%
Via Delivery (Delivered by Third Party)	3.5%	7.2%	3.8%
Delivery (Total)	5.8%	37.5%	31.8%
Direct to Consumer (Shipping)	7.6%	12.4%	4.8%
Distribution (Self or Partner)	77.1%	65.6%	-11.5%

The biggest jump is in delivery, while the only channel that has dropped is distribution. The total delivery percentage isn’t additive, as some breweries are doing both brewery deliveries and third party deliveries. Combined with the jump in direct-to-consumer shipping, these numbers show how rapidly breweries have changed their business model.

The distribution drop is equally interesting, and points to the percentage of breweries that distribute draught only, and so have little to no reason to distribute with bars and restaurants shut down. As we’ll see, some brewers have also seen their stock keep units (SKUs) cut, which may be partially reflected in these figures.

SBA Support

In addition to sales, SBA loans, either through the PPP program or via the EIDL program have provided breweries with additional support. 84.9% of breweries indicated they had applied for a PPP Loan, with 50.4% applying for an emergency EIDL grant and 38.7% applying for an EIDL loan. Of breweries that applied for a PPP loan, 95.7% indicated they had received their funds, meaning that 81.2% of breweries who responded to this survey have received PPP loan funds.

Change in Attitude

Next, we asked brewers how their attitudes about the future of their brewery had changed over the past month. In general, breweries are getting more optimistic.

Attitude About the Future	Percent
Much more optimistic	10.2%
Somewhat more optimistic	32.2%
Same	33.6%
Somewhat more pessimistic	16.7%
Much more pessimistic	7.3%
Net Optimism	18.4%

It’s easy to overstate these changes. Yes, we saw an almost 20 point swing over the past month, brought on by PPP loans and better than expected sales. With that said, a majority of breweries feel similarly or worse about the future of their brewery than they did a month ago, so the findings are mixed.

Why are breweries more optimistic? The number one reason is PPP loans, followed by the imminent reopening of states and then better than expected sales. The results below are presented as a percent of those who stated they were more optimistic, as well as in terms of the total sample. So for example, for PPP loans, 63% of breweries who are more optimistic indicated receiving their loan was a reason why, but that group (more optimistic because of PPP loan) is only 27% of the total brewery sample.

Reason for Optimism	Percent of Group	Percent of Total
Received PPP loan	63.0%	26.7%
State reopened or reopening soon	56.3%	23.8%
Sales better than expected	49.5%	20.9%
New sales channels	34.5%	14.6%
Saw cost decreases (renegotiated rent, etc.)	17.9%	7.6%

The number one reason for pessimism is continued slow or declining sales, followed by the challenges of reopening in a world of capacity restrictions.

Reason for Pessimism	Percent of Group	Percent of Total
Sales worse than expected and/or declining	68.4%	16.5%
Capacity restrictions more challenging than expected	50.7%	12.2%
Have not been able to reopen	42.6%	10.2%
Costs increasing	42.6%	10.2%
Been unable to rehire workers	19.1%	4.6%
Distributor dropped SKUs	10.5%	2.5%
Did not receive PPP loan	8.1%	2.0%

The Rest of 2020

The final question we asked was a re-framing of a question we asked last time, about how breweries viewed the future of their business. “Given what you know right now, how confident are you that your brewery will still be in business at the end of 2020?” The results are in the table below, both in total and broken out by business model.

Confidence through 2020	All	Brewpub	Taproom	Micro	Regional
Very confident	54.9%	48.3%	55.1%	57.7%	69.6%
Somewhat confident	27.8%	33.3%	27.2%	24.4%	23.9%
Unsure	11.6%	12.6%	12.0%	10.9%	6.5%
Somewhat pessimistic	3.4%	2.4%	3.0%	6.0%	0.0%
Very pessimistic	2.3%	3.4%	2.7%	1.0%	0.0%

Depending on whether you’re a pint half full or pint half empty kind of person, these can be interpreted multiple ways. On the positive side, almost 83% of breweries are somewhat or very confident they will make it through 2020. The flip is that 17% are unsure if not actively pessimistic. Given the number of active craft brewers, if this sample is representative, that’s 1,400 breweries, with more than 450 somewhat or very pessimistic.

Summary

In a community of more than 7,000 companies and 8,000 brewing locations with different business models spread across a variety of locations, there is wide variation in how brewers view the market right now. Sales are down for most brewers, with half seeing their sales down 50% or more. Faced with these challenges, brewers have pivoted their models, applied for PPP loans, and cut costs as able. These new sales channels and government support have helped to turn their attitudes in a somewhat more positive direction, but it is understandably a mixed picture.

The comments show a set of owners working as hard as they can to save their businesses, but with uncertainties about capacity restrictions, whether customers will return, revisions to the PPP and forgiveness conditions, new costs from cleaning on top of existing bills, not to mention future public health concerns.

Sample Characteristics

We received 869 total responses (removing duplicates), of which 859 were fully identifiable (some didn’t include name, so we couldn’t match). The sample covers 3.4 million barrels of 2019 craft production. So both the company count and barrelage total are well above 10% of the total data set. There is always the risk with these types of surveys for survey bias – that breweries in better or worse standing were more likely to fill it out – or for geographic or business model biases that shift the results. With that said, as with the last survey, the results appear to be broadly representative. We received responses from 49 states plus D.C. and no region stands out as being highly over or underrepresented.

On business model, as with last time, brewpubs are slightly underrepresented, with taprooms overrepresented. I do not have any expectation that is introducing major bias, and many of the findings above are broken out by type which would control for many issues. Brewpubs are around 35% of total craft breweries and 6% of total craft volume, but are only 25% of the breweries and 6% of the volume in this sample (so we got fewer, but larger brewpubs). Taprooms made up 46% of the sample, versus closer to 35% of total craft breweries. The references to weighted figures make adjustments for these representation issues (and the much smaller discrepancies in regionals/micros).