The existential crisis in the Colorado beer world is palpable right now as an industry built on social gathering comes to realize that social distance is the new normal.
As much as 15% of craft breweries expect to close by the end of the month if social distancing remains in place, according to a national survey from the Boulder-based Brewers Association, and more than 60% don’t expect to survive beyond June.
If applied to Colorado — which now counts about 420 breweries — the projections suggest 250 would close by summer. That would represent a huge dent for an industry woven into the state’s identity and one that contributes more than $3 billion a year to the state’s economy.
The alarming statistics sound unbelievable until you talk to brewers. The most optimistic response in conversations this week came from Andy Astor, the furloughed brand manager at Elevation Beer Co. in Poncha Springs. “We’re still here,” he said.
Thad Briggs at Mountain Toad Brewing put the situation in two understated words: “Not great.”
Like other small breweries that don’t package beer for distribution, the Golden brewer needs a bustling taproom to survive. In the survey from early April, Briggs put September as the breakpoint. “One month is fine. Two months and three months isn’t pretty. But six months is getting really ugly,” he said in an interview.
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The uncertain times are top of mind this week at the start of the now-online Craft Brewers Conference organized by the Brewers Association, the industry’s trade group. And the fears are being amplified by the latest pronouncement from Colorado’s governor that social distance orders may extend as long as 12-18 months after the state lifts its stay-at-home order April 27.
In the annual state of the industry presentation Wednesday, Bart Watson, the association’s economist, reflected on a history-making decade of growth and the uncomfortable transition to a new one marked by closures, slowing sales and more competition from other beverage sectors.
In 2019, small independent brewers saw 4% growth by volume and became 25% of the overall beer market. The rate of openings leveled off as closings continued to increase. Nearly 300 breweries closed last year, a nearly threefold increase since 2015.
Colorado and other states with mature beer markets “are seeing slower growth than overall, are seeing fewer openings and are seeing higher closings,” he said. “So I think we are seeing some markets where that mature, maybe saturated point, has come — and that was prior to this.”
What he means is prior to the COVID-19 pandemic.
Briggs, the Golden brewer, remembers the talk of craft beer at a turning point at the start of the year. Now he laughs at the predictions that seemed so bleak at the time. “It makes all of our concerns in January just seem trivial and optimistic, even though it was dire,” he said.
The coronavirus puts at risk the beer industry’s model for success
What makes the pandemic so troubling for the craft beer industry in Colorado is how it jeopardizes the model that drove the state’s growth.
The past decade is best characterized as the “at the brewery era,” Watson said, as the number increased from less than 2,000 in 2010 to 8,386 operating in 2019. “People like this model, they like going to the brewery, they like this experience,” he added.
In the past year the taprooms accounted for 26% of the sector’s entire growth, in part because on-premises sales offer the higher revenues compared to the additional costs with packaging and distributing beer.
The brewpub concept began to make a strong return to the mainstream, too, as consumers looked to pair a meal with a beer. Now, both concepts are at risk for the indefinite future. “We are going to see some wariness about being in public spaces, especially crowded public spaces, until there is a vaccine,” Watson said.
It’s the closest the industry has come to a bubble burst. About 400 breweries were projected to close in 2020 before the pandemic; now the expectations are much higher. “A bubble occurs when lots of people make the same bets, and those bets can’t occur at all at the same time,” Watson said. “I think this is one to watch because the health of most breweries depends on those (on-premise) sales.”
In the immediate future, brewers across the state are shifting to packaging beer and to-go sales. Elevation Beer’s Astor said the company lost huge sales with the closure of ski resorts and bars, forcing furloughs for all but the owners and two employees. But one saving grace is the brewery’s cans and distribution network. “It’s revenue — revenue coming in, period,” he said.
Other small breweries that rely on crowds for their sales — like those collected in Denver’s River North beer district — are headed toward packaging out of necessity. Codi Manufacturing, based in Golden, is making the rounds with a mobile canning machine to help breweries including Our Mutual Friend and Ratio Beerworks can beer for the first time.
“We were able to sell a lot of beer that way,” said David Wright at OMF, which had a steady line on the day Denver threatened to shut down breweries, selling new cans without labels. The to-go sales allowed the brewery to retain a couple employees, but it won’t make up the difference.
“I think realistically, if you’re going to run a brewery, (taprooms) are where the profits are at,” he added. “There’s no way we could sell enough beer to liquor stores and around to keep everybody on payroll employed.”
Some breweries stand on the edge, while others are optimistic
How many Colorado breweries close for good because of the economic restraints of the pandemic depends on how long it persists and whether they can get financial help, said Shawnee Adelson, the Colorado Brewers Guild executive director.
Many are applying for aid through federal stimulus programs, but the emptying of the Paycheck Protection Program means not all may get help. Others are in better financial positions because they own their buildings or have a more diverse sales model.
“The BA’s numbers were sobering for the public and the industry,” Adelson said. “Those numbers, I would say, are fluid and depending on (breweries) ability to secure extra funding or modify their business model.”
So far, no brewery in Colorado has gone out of business since the pandemic hit, she said. But at least two breweries — Black Sky in Denver and Front Range in Lafayette — are sounding the alarm, according to Westword, by setting up GoFundMe pages.
“It’s a difficult time for a lot of our breweries trying to anticipate what the future will look like,” Adelson said. “Luckily, we in Colorado have craft beer in our DNA, and consumers strongly support all of our small and independent breweries.”
Steve Skalski, the founder of Guanella Pass Brewery said he’s optimistic. “We are betting that the economy is going to come back, people are still going to come up to the mountains, and they are going to be looking for a place to go,” he said.
The brewery always anticipated a slowdown at this point in between seasons. And even though he’s experiencing a revenue pinch, Skalski said he is “full steam ahead” with expansion plans in Georgetown and hopes to open a second location in nearby Empire in the next two weeks.
The restrictions designed to stop the spread of coronavirus don’t “put us in any dire straits or jeopardy because of how we managed the money,” he said. “But if we don’t see the economy bouncing back — and we don’t have the ability to generate more revenue when the summer high season comes along — maybe my story will change.”
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