The economic impacts of COVID have been widely discussed. With bars, restaurants, and taprooms closing their doors on-premise sales have slowed since March.
These on-premise losses led to large gains in off-premise-sales, but we want to know if overall sales have gone down. The economic effects of COVID increased consumers’ price-sensitivity, especially when it comes to beer. So, although most consumers haven’t slowed down their drinking, many have switched lower quality beverages. Brewers offering solely premium beer with a price to match are taking more of a hit. On the other hand, the Coors and Budweisers of the world are seeing noteworthy sales boosts on their cheapest brands.
Bart Watson--chief economist for the Brewers Association had some insights on, “The Coming Challenges Facing Craft Brewers”. For packaging breweries, he noted, the short-term effects will be mixed and hard to predict. Some consumers may buy more beer as they begin social isolation. Others may buy less, stocking up on necessities. However, March sales have been promising. Throughout the month, year over year beer sales hovered around 3-6% up from last year. The week of March 15 was especially big for craft breweries, craft beer sales were up 25% YoY. Also noteworthy is the increase in sales of 12-packs and the slow down of 6-packs.
Watson went on to point out some crucial questions that will need to be answered before we’ll know what the beer industry might look like over the next few years. 1) Are we headed into a recession and, 2) Will COVID impact supply or demand more. In the case of a recession, he looks at quarterly YoY shipment data from the Beer Institute. The shaded gray areas are the two most recent recessions.
The graph is quite revealing in that in times of recession, beer demand remains somewhat normal. Comparing recession quarters with growth quarters we see those that were covered by recessions average 0.08% growth, whereas those covered by growth average 0.27% – so growth quarters were better, but not by a statistically significant amount.
While I’d love to be able to provide some concrete answers, no one is quite sure how long this pandemic will last. The effects on brewers will vary based on the state’s lock down procedures, the severity of long-term economic impact, and the price points of beers offered. One thing is for sure though, cutting costs from your bottom line will not only make you more competitive but also more resilient in the case of a recession. Click below to learn more about our cost-saving solutions.