The COVID-19 pandemic and accompanying shutdowns of bars, brewpubs, taprooms and tasting rooms had an undeniably negative effect on West Michigan craft beverage makers and their balance sheets.
As brewers and spirits makers now begin to turn their sights to the post-pandemic era, they expect patrons may take their time to return in droves.
“We have a percentage of people who are still scared to go out,” said David Ringler, founder of Cedar Springs Brewing Co. “There is a percentage of people who are still pissed at you for enforcing the rules. That’s going to make everyone’s pool smaller.”
Ringler recently joined five fellow members of the craft beverage industry for an executive roundtable hosted by MiBiz and sponsored by Wyoming-based Vision ESOP Valuation LLC.
While participants swapped war stories on how they have muddled through the pandemic and the bruises it has left on their businesses, much of the discussion focused on community support during the turbulent time and what it will take to achieve a level of pre-pandemic normalcy.
Still not normal
For the last year, the pandemic has driven a wedge between local craft beverage makers and their patrons. When brewpubs, taprooms and tasting rooms weren’t shut down completely, they have been hobbled with capacity and other restrictions, which led industry professionals to wonder if these barriers will cause irreparable harm to their customer base.
“You still have a large chunk of the population that you probably lost as customers for one reason or another,” said Josh Cook, founder and head of Kalamazoo-based Green Door Distilling Co. “Whether it’s because you weren’t open when they wanted to come by or you had restrictions that they didn’t want to abide by or it just became too complicated to order online and you lost people because the convenience is gone, it’s really hard to say what the next year will look like.”
The term “COVID fatigue” has worked its way into the public lexicon lately to refer to people who are burned out on abiding by sometimes-daunting or inconvenient restrictions placed on everyday life. After a year of COVID-19, craft beverage producers that operate taprooms and bars are starting to notice that same phenomenon within their establishments.
“I think you’re seeing a lot of customers that are really fed up — I know ‘Karen’ is the popular term for it,” Ringler said. “We are getting people that have the expectations that it’s normal again and it is not normal. We’re still at 50 percent if you have a restaurant, and in some cases it’s less. We have skeleton crews and we can’t be open regular hours — we don’t have people to fill those hours. You can’t get a lot of supply, whether it’s a food product or a manufacturing product.”
The relationship with customers is an important one for these local, independent establishments that rely on ties to the community as a key differentiator from chain restaurants and national and regional beverage brands.
This crucial link between the local companies and their customers became apparent when the pandemic first struck and “shop, eat and drink local” became the rallying cry for communities all over West Michigan to preserve homegrown establishments.
While craft beverage producers certainly appreciate that sentiment, the industry members MiBiz spoke with agreed that the local movement wasn’t necessarily effective in driving new customers to breweries and tasting rooms.
“It reinforced the people that were already doing it and already aware and proud to support their local small businesses, but I don’t think we gained a single customer from that push,” said Cook, pointing to the persistently long lines at drive-thrus as proof that most people continue to opt for convenience over supporting local businesses throughout the pandemic.
Muskegon-based Rake Beer Project LLC has operated almost entirely during the pandemic, having opened its doors right before COVID-19 hit. Owner and head brewer Josh Rake said he noticed local support comes in waves. Whenever new restrictions were placed on the hospitality industry, patrons would respond with an influx of support.
“At the very beginning, it seemed to be a huge hug of local support, but not many new customers came in. The people who have always supported us were here,” he said. “That’s been our biggest thing, to figure out how to ride those waves and take the highs from the waves.”
Many breweries nationwide met their demise during the pandemic. Boulder, Colo.-based industry trade group the Brewers Association tracked 343 craft brewery closures throughout the country in 2020, and just 716 new openings, which was off by about a third compared to recent years. Retail sales in the $22.2 billion independent craft beer sector declined 22 percent compared to 2019, while volume fell 9 percent, ending an extended period of growth and expansion for the industry.
Even so, the 8,764 craft breweries that operated during 2020 set the highest number on record.
Over the last year, many breweries have stayed afloat in part because of state and federal grant funding and low-interest loans.
Kim Collins, owner, co-founder and head brewer at Saugatuck-based Guardian Brewing Co., noticed that some people are only conscious of the needs of local establishments when it’s too late.
“(The local first movement) reinforced local for people who already do local,” said Collins. “For folks that don’t always do local, I think it only hits when their favorite places have closed.”
Most craft beverage producers would agree that getting in front of customers with product and establishing genuine connections is the most effective form of marketing.
With taprooms and tasting rooms still under state restrictions and all major festivals and other public events shut down over the last year, craft beverage producers who have long relied on face-to-face interactions with customers have had to modify their approach to communicating.
Most of them pivoted to social media to stay top of mind with their customers.
“For us, that was a key thing,” Ringler said. “Being in a small community, we really expanded what we were doing (on social media). We actually did a little talk show thing for several weeks where we had other restaurateurs, bloggers and staff (on) in order to keep communicating.”
Brian Tennis, founder and president of Hop Alliance, an Omena-based commercial hop farm and broker, brings a different perspective as a business that supplies the industry. Communication with clients was still vital for a company in his position.
“We have definitely done a much better job of reaching out to Michigan breweries, whether that was through emails or direct marketing,” Tennis said. “Our sales to Michigan brewers have been up 25 percent year-over-year. We’re definitely seeing more support from Michigan brewers for Michigan ingredients.”
The industry also waits to see if this summer will feature festivals and similar events. While many craft beverage producers are optimistic that some semblance of normalcy will return in 2021, they are not yet banking on it.
“I’m still really hesitant to start directing any of our money toward getting ready for festivals and stuff like that,” Rake said. “I think it’s all something we hope is going to happen but it’s really hard to tell. I don’t know if it’s a good thing to invest in.”
Collins of Guardian Brewing echoed that sentiment.
“We usually jump all in and book live music every single weekend (during the summer) and we just haven’t decided to pull the trigger on that,” she said. “I don’t want to book a bunch of gigs, get the musicians all excited” and then have to cancel.
Aside from the challenged dynamics with their customers, the industry also has plenty of other issues to contend with as it continues to tread water through the pandemic.
Supply chain issues have plagued virtually every industry, including the craft beverage sector, where shortages are manifesting themselves in the form of higher prices and longer lead times.
Cook, whose Green Door Distilling packages its products for statewide distribution, highlighted an acute supply chain challenge with glass bottles.
“We’ve had dramatic issues in glass,” Cook said. “Our main packaging for our 750 milliliter bottles has been catastrophic.”
Cook said that the glass suppliers Green Door works with have all picked up contracts to make vaccine vials. Lead times skyrocketed from typical eight to 10 weeks to now 20 to 25 weeks.
“How can you plan for that? You really can’t,” Cook said.
Tennis from the Hop Alliance also noted rising shipping costs and increased lead times, which in turn affects all the company’s brewery client base.
However, it’s not all doom and gloom in the craft beverage industry. Companies have found silver linings and seized on opportunities throughout the pandemic. For new entrants looking to break into the industry, the time is right as these businesses continue scouring the market for new talent.
“Anyone wanting to get in the industry, man, is there not a better time?” Collins said, noting the industry-wide focus to hire more women and diverse candidates. “We are all hiring. You can get in the front of the house. You might be able to get into the brewery. If people are sitting at home reading this, and you think, ‘Maybe I want to be in the craft beer industry,’ there is no better time.”