What Will On-Premise Look Like This Summer?

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To me, the biggest question hanging over the craft beer industry right now is, “What will the on-premise look like in the months following the easing of stay at home orders?” This isn’t an easy question to answer. Even in simplified form, there is a policy piece, a consumer behavior piece, an economics piece, and an epidemiological piece, not to mention the interaction between each of those variables.

To steal a line from Jerry Steinman, founder of Beer Marketer’s Insights, my crystal ball is in the shop right now, but here are a few data points and insights for the policy and consumer behavior piece that may be helpful as you navigate re-opening your brewery to the public and the months beyond. I’ve already partially covered the economics piece and don’t think the two semesters I taught of health policy qualifies me to weigh in on the public health/epidemiological piece, so this will just cover policy and public behavior.

Policy Piece

The policy piece could likely but divided into many sub-parts, but I’ll focus on rules governing reopening: when will restaurants, brewpubs, brewery taprooms, and other hospitality businesses like bars be allowed to reopen for business and what will that look like?

Nationally, the Trump administration has given broad guidelines on a phased reopening, the criteria for moving between phases, and what those phases might look like for specific types of employers. For example, in phase two, “bars may operate with diminished standing-room occupancy, where applicable and appropriate.” Because these decisions are heavily influenced by local conditions, these guidelines are advisory in nature and the specific implementation of stages is left to the states.

States are beginning to relax their rules, and the first states have begun reopening. As of April 27, Alaska, Colorado, Georgia, Minnesota, Mississippi, Montana, Oklahoma, South Carolina, and Tennessee have lifted at least some restrictions on businesses. Another set of eight states have orders that expire by the end of the week. In case you are under any illusions that things will look like business as usual on the other end of stay at home, the first eight states show otherwise. Georgia Governor Brian Kemp stated that it is not “business as usual” and Montana Governor Steve Bullock echoed the sentiment, saying “our new normal is going to look different.” In Alaska, restaurants can take reservations only, no walk-ins, and seating is 25% of posted capacity. In general, restaurants and/or bars (which are often being treated differently) are seeing capacity restrictions in the 20-50% range as well as additional restrictions not related to capacity. It is likely that most states will move into this phase by sometime in May.

Brewers Association Checklist for Reopening your Brewery

It goes without saying that the coming months will force breweries to be flexible in their plans and business models. Restrictions on large groups are likely to continue in force even longer than those on breweries, restaurant, and bars. Events scheduled in June are in jeopardy in nearly every state. And these rules will interact with the public health piece. As seen in other countries, rules that get loosened can rapidly get more restrictive again with subsequent outbreaks.

Consumer Behavior

Perhaps the most important piece – and the one that motivated this post – is the consumer behavior piece. What will the general public do as these orders are loosened? The answer isn’t one-size-fits-all, and different people are likely to react differently based on their own personal psychology and beliefs, the level of cases in their area, and other factors like the density of their city.

Here are a few peeks based on survey data. On these, I’d also caveat that surveys may or may not be a good predictor or people’s actual behavior. A hypothetical answer about whether you’ll go out to eat or not when you can may turn into a different reality when you actually have that option.

A survey of 1,000 consumers conducted by Datassential found that only 20% of consumers will “absolutely dine in right away” when restaurants reopen, with 39% considering and 41% saying “no way.” Those results vary as you might expect by age, with Gen Z and Millenials rising to 25% and 31% respectively for “absolutely,” and only 10% for Boomers. As such, breweries with older demographics may see slower rebound trends at their establishments.

Many consumers are also likely going to want a different experience. Even among those who are willing to dine in right away, 37% say they want a “faster, streamlined dining experience.” That number rises for those who aren’t ready to come back right away.

While I urge you to click through the full Datassential reports (the data points above are from report 15), a few key points that jump out at me are:

  • The processes that will get the first 20-50% of customers in the door may need to be augmented and further marketed to get the next 50-80%.
  • There may be subtle shifts in behavior over time such as people ordering fewer shared plates and perhaps more bottled/canned beer over draught.
  • There will be much deeper and lasting behavioral changes by location and demographic.

An online survey by Monday Night brewing of 743 of their customers who had visited their Atlanta taprooms in the past three months yielded similar results. Only 36% of respondents (and remember, these are respondents who we know recently visited a brewery) say they will definitely visit a brewery taproom in the first two weeks after bars, restaurants, and breweries open again. 41% said “maybe” and 23% said “no.” Looking at when respondents thought they might be back in a brewery taproom, 35% said they wouldn’t go back until July or later. We don’t know what they would have said before this pandemic hit, but that data suggests visits are going to take a while to get back to where they were.

If consumers aren’t going into restaurants, bars, and breweries, that likely means they’ll be using some of the channels such as to-go, curbside, and delivery that have picked up significantly over the past month. In the first two weeks of April, Nielsen CGA found that between 60-70% of U.S. consumers had ordered takeout. 9% ordered a takeout or delivery that included alcohol (or about 15% of takeout/delivery orders). That’s actually a similar ratio to normal. A previous analysis of dining checks by Nielsen CGA found that 16% of checks in Los Angeles and 14% of checks in San Diego had alcohol included. Unfortunately, it’s at much lower volume. Prior to the outbreak, only 3.4% of restaurant orders were for delivery (and half of those were from a pizza restaurant). About 15% of Americans say they are using delivery more in recent weeks, suggesting it’s now around 20% of Americans, and about 30% saying they are picking up takeout more (Source: Gallup).

What does all this mean in sum? Both the initial policy responses as well as the early look at consumer behavior suggest it is unlikely we’re going to see total on-premise sales that are back anywhere near the level they were pre-COVID. It’s hard to quantify precisely, but given some of the data above, it seems to me that getting back to 50% onsite sales in May and June would be an optimistic scenario. And, as the economy struggles to return to health – the Congressional Budget Office is forecasting 16% unemployment in Q3 – there isn’t much positive news on that front either.

None of this is meant to scare brewers out there – you know the realities facing your businesses. And as you work to save those breweries, building a plan for a summer with weak onsite and distributed draught sales seems like a prudent move.