![#](https://e-malt.com/Images/left_top_corner16x200.gif) | E-Malt.com News article: USA: On-premise channel shutdown could result in $80 bln losses for beer industry![Brewery news](https://e-malt.com/Images/BeerBullet2.gif)
The near-nationwide shutdown of the on-premise channel will result in a loss of $8 billion for the beer industry if it continues into June, National Beer Wholesalers Association chief economist Lester Jones said during a State of the Industry webinar hosted by the NBWA and the Beer Institute (BI) last week, Brewbound reported.
“We really need to step up our conversations and talk about how the loss here to the industry is significant,” Jones said. “It’s not going to be made up through grocery stores and 30-packs and cases people are stashing in their garages. It will not be compensated by those additional off-premise purchases. And, of course, the longer the shutdown, the greater the loss.”
On-premise sales account for 9% of the industry’s $328 billion annual economic impact, which translates to $3.1 billion per month. If a quarter of the on-premise channel reopens in May and half reopens in June, the beer industry stands to lose $8 billion.
As states begin laying out plans for the reopening of their economies, the beer industry will need to consider the health of geographic markets when deciding how to return to the shuttered on-premise channel, Jones said.
“The new marketing strategies won’t just be income and demographics and advertising, there will be a certain amount of health policy that overlays marketing strategy for brewers,” Jones said. “Where can I send my beer safely, knowing that the bars and restaurants and taverns will be open? And where should I not go?”
Using insights from Health Data & Management Solutions, a Chicago-based health analytics firm, Jones showed how age, underlying health conditions and infection rates intersect to determine a geographic region’s safeness for social interactions.
“Their data that we have that shows relative healthiness of individual markets will indeed be quite interesting to see how we all get back to work, with the need for an additional layer of data that gives us the confidence and the ability to enter these markets,” he said.
As unemployment skyrockets to historic levels and the nation stares down a recession or possible depression, beer consumption patterns may become difficult to predict. When total volumes of alcoholic beverages consumed are divided down to pure alcohol to account for the volume difference between beer, wine and spirits, Americans tend to drink about 2.5 gallons per year, Jones said. That number dips slightly during recessions, but bounces back and increases when the economy grows. It was slower to recover after the 2001 recession than after the 2008 recession.
“In aggregate, there’s not a lot you can gain from looking at the long-run recessionary impacts, but what we do know is that these are unprecedented economic events,” Jones said.
The COVID-19 crisis differs from past recessions. Public health concerns have led to social distancing policies that have forced the closure of on-premise establishments and shuttered most Americans in their homes.
That has led to some drastic swings in purchasing. During the week of March 16, wholesaler data firm Fintech recorded depletions (sales-to-retailers) on par with the weeks of Memorial Day, Independence Day and Labor Day in 2019. Two weeks later, depletions nosedived well below 2019 levels, as consumers had loaded their pantries up and didn’t need to shop more. The week of April 6, depletions were back on track with 2019 levels.
“This idea that there’s this massive amount of consumption and all this partying going on — it’s beer that lands in people’s homes,” Jones said. “It just takes them a while to burn through that pantry.”
With nearly 30 million people out of work, Jones said that some segments of the beer category can expect to feel a bigger hit than others based on their consumer bases’ employment levels. For example, FMBs overindex with drinkers in the construction and extraction industries, both of which are struggling.
However, in the healthcare industry, whose employees are working hard during the pandemic, both practitioners and support staff under-index for consumption across the entire beer category.
“The occupations in the industries that open back up will certainly lead the types of beers and consumer behavior that we see going forward,” Jones said.
Since the pandemic began, the BI has been hosting regular webinars for its members. Earlier this week, Sen. Cory Gardner (R-Colo.) joined to discuss Congress’ reaction to the economic impact of COVID-19.
Gardner said that he would “absolutely” like to see permanence of the Craft Beverage Modernization and Tax Reform Act (CBMTRA) included in the fourth phase of financial relief. The law, which went into effect in late December, extended federal excise tax relief for craft beverage makers, including brewers. It is slated to expire on December 31, 2020.
“I’d like to see a permanent change, but let’s see what we can do to make sure that it does not expire at the end of the year under any circumstance,” Gardner said.
03 May, 2020
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