South Africa: Craft brewers plead for support from state

Only 10% of South African craft brewers believe they will be able to continue trading in the near future if the current restrictions on the trade of alcohol and the prohibition of on consumption sales continue. Seven breweries closed down in June, retrenching all their staff, Food For Mzansi reported on July 9.

Responses received from more than 100 breweries in a recent survey conducted by the Craft Brewers Association of South Africa (CBASA), shows that the industry suffered major blows resulting from covid-19 and the resulting economic lockdown.

The future of local craft beer is extremely volatile following a nine-week-long ban on the sale of alcohol and strict trading regulations. The industry has recorded alarming losses and has called on government to help give them a fighting chance of survival.

According to the survey seven breweries were forced to shut their doors permanently in June. More than half of the respondents indicated that their sales have decreased by between 60-100% since the start of lockdown, while 24% indicated that their sales dropped by between 90-100%. A bulk (87%) of the brewers says they are currently unable to meet monthly expenses.

Early in May, Food For Mzansi also reported on the forced closure of SA’s only malting company to offer a variety of specialty malts to beer brewers.

With rising concerns over how the industry will bounce back, some brewers have no expectation that they will survive the remaining days of lockdown.

“We won’t make it. Rent and keeping the staff going with no sales means we won’t have the cash flow to buy ingredients to start up production again, unless we can get an investor to help us through,” one respondent states in the survey.

Chairperson of the CBASA, Wendy Pienaar, is worried about craft beer and its uncertain future. She says government’s opening the industry more – specifically lifting the restrictions on on-consumption – will be the first step on the road to recovery for brewers. However, for some the damage is irreparable.

“Our sector already lost 15% of South African craft breweries and 68% of those still trading have a negative outlook for the sustainability of their businesses going forward,” she says.

Pienaar says the future of craft breweries in South Africa is extremely unpredictable and they are calling on the government to work with them give their sector a fighting chance of survival. She tells Food For Mzansi they just want to work with government to revive the industry.

“It needs to be a team effort, but at the moment our biggest problem is that government does not want to work with the industry,” she exclaims.

Pienaar’s says that 63% of craft breweries and brewpubs retrenched staff during May and June. Close to 70% of these businesses indicated that they retrenched more than 50% of their workforce. Eight breweries retrenched all their staff members.

According to the survey the owners of 84 out of 109 breweries applied for government’s covid-19 temporary relief scheme. 16 of these applicants have been receiving pay-outs each month, while 33 only received a payment for May. 35 employers have not received any pay-outs to date for their employees.

A large number of brewers have reported difficulties and delays experienced when it comes to purchasing raw materials. Many suppliers have been struggling with the coronavirus shutdown that resulted in no production occurring during levels four and five. Backlogs at the ports and poor exchange rates have also impacted negatively.

The tough times have forced brewers to implement penny-pinching strategies in pursuit of saving their battling businesses. Some have moved to manufacturing of other products such as cleaning products, fruit juice and other non-alcoholic beverages. Others have changed to cheaper recipes for their products.

Another respondent voiced their frustration and said that the lockdown is a threat to their business. “Online only is not enough to sustain the business. We need some on-consumption sales channels that the whole market has evolved for.”

The report further reveals that several brewers partnered up with other owners and some owners were forced to find second jobs to supplement their income.

Despite the industry spiralling down to a seemingly bleak future, 77% of breweries have been able to fairly easily implement covid-19 health protocols at their businesses, the report finds.

A major concern is that only 10% of brewers believed that they would be able to continue trading in the near future if the current restrictions on the trade of alcohol and the prohibition of on consumption sales continue.

The CEO of the Beer Association of South Africa, Patricia Pillay, says the craft brewing sector is vital to the long-term sustainability of the South African beer industry. The craft brewing sector supports thousands of livelihoods and contributes to an increasingly transformed industry, she says.

“We have seen remarkable growth in the craft brewer sector over the past few years, so it is extremely concerning to see the devastating impact covid-19 and the lockdown has had on this vibrant industry.

“The BASA remains committed to working with government to come up with joint solutions to ensure the safety of communities, while protecting the thousands of livelihoods and small businesses the beer industry supports,” Pillay commented in the survey.

09 July, 2020