Published in Food/Agribusiness

Breweries enter ‘make-or-break’ year as industry slowly rebounds from the COVID-19 pandemic

BY Sunday, April 17, 2022 07:13pm

With 2021 data pointing to a healthy rebound for the ailing nationwide craft beer industry, West Michigan brewers are heading into a pivotal year.

Boulder, Colo.-based industry trade group Brewers Association (BA) released its annual report earlier this month, painting a picture of an industry that rebounded from a slump associated with the COVID-19 pandemic. Production-wise, the industry experienced 8-percent growth, more than the BA originally forecast.

Still, the industry has not crept back up to pre-pandemic levels in 2019, and the group cautioned that many brewers are not yet out of the proverbial woods.

“I do think it’s possible that, even with a bounce back year, many breweries are still struggling with the effects of the pandemic, so 2022 is going to be a make-or-break year for many breweries,” Brewers Association Chief Economist Bart Watson said during a press conference that accompanied his group’s report.

Production volume is one key metric that the organization tracks to gauge the vitality of the industry. In 2021, small and independent brewers produced 24.8 million barrels of beer, which was up 8 percent from the previous year.

Craft beer grew its market share to 13.1 percent while the beer market as a whole grew by 1 percent, now standing as a $26.9 billion industry.

(Still) open for business

When the pandemic descended on the industry and had many breweries temporarily shutting down on-premise operations, many industry analysts cautioned of the potential for a major rash of closures. That hasn’t materialized, and the recent BA report shows it’s unlikely to anytime soon.

Operating craft breweries continued to increase in 2021, reaching an all-time high of 9,118. This included 646 new brewery openings and 178 closings.

“The closing number is still surprisingly small,” Watson said. “I think this low closing number is real. I think we’ll see a lower percentage of closing numbers than we’ve seen in previous years. I think that can be attributed to two things. One, a strong bounce back for craft brewers. …The second is government relief.”

Scott Newman-Bale, CEO of Bellaire-based Short’s Brewing Co., agreed that the industry never reached the day of reckoning that many predicted.

“We haven’t seen it in Michigan and haven’t really seen it as a nationwide trend yet,” he said. “I think we’re starting to see pockets. If you look a little closer — maybe in California or the west coast in general — I think we’re starting to see some significant turnover.”

Government relief is the key component that has made it tough for anyone to see clearly into the industry’s crystal ball, according to Newman-Bale.

“I don’t think, when we first started talking about the pandemic, that we factored in the huge amount of money the government was going to print. As that runs out, I think the true state of the industry will become aware, and I don’t think we actually know what it is,” he said.

On/off premises

Breweries had to continuously tinker with their business model during the pandemic as demand shifted from on-premise consumption — at bars, taprooms and brewpubs — to retail and back.

Watson said the resurgence of on-premise consumption in 2021 has benefitted breweries. However, that isn’t necessarily the case for Jason Spaulding and Brewery Vivant.

Spaulding, co-owner of the Grand Rapids-based brewery, said wholesale typically accounts for 30 percent of the Grand Rapids-based brewery’s sales. The brewery has seen a 30-percent drop in that segment of its business compared to 2019, as roughly 2,000 of its 3,000 kegs are sitting empty in its warehouse.

“What we’ve seen is bars that have 12 taps on are only running six of them — we’re seeing the restaurants are being conservative and that’s understandable,” Spaulding said. “The six beers they do have are probably doing well, but it makes it that much more difficult to get on tap at these places.  …They’re going for the sure things, like the bigger breweries.”

Another highlight in the report indicated that the craft beer industry accounted for 172,643 direct jobs, which was a 25-percent jump from 2020.

“Jobs numbers bounced back and it’s great to see breweries and taprooms, as they open, are back in job creation mode,” Watson said.

Read 2286 times Last modified on Sunday, 17 April 2022 20:12