E-Malt.com News article: UK: Prospect of restrictions to pubs reopening major problem for brewing giants

On a typical Friday evening in May, the White Horse pub in London’s Brixton neighborhood might go through 20 or more kegs of lagers and ales as hundreds of revelers stand four and five deep at the bar and spill out onto the terrace into the wee hours, Bloomberg reported on May 20.

But with London in lockdown, the pub has been shuttered since March 20, when owner Matt Ward—knowing he had to empty the taps—offered happy-hour discounts and at the end of the evening started pouring pints for free. And he was one of the lucky ones: Some pub owners who couldn’t sell their beer had to dump it down the drain. Ward now worries that when he reopens this summer, social distancing guidelines will force him to cut occupancy by about 90%, to just 30 patrons. “I try to keep positive,” he says. “But to go anywhere back to anything like it was before, with social distancing, you just can’t do it in a pub like mine.”

The prospect of once-bustling pubs reopening as ghost towns is a major problem for brewing giants such as Anheuser-Busch InBev, Carlsberg, and Heineken. While Americans prefer to drink at home—carryout sales account for about four-fifths of U.S. consumption—restaurants, bars, and cafes represent about half of brewers’ revenue in much of Europe. And the woes are compounded by the total shutdown of soccer and other sports, as well as the cancellation of big events such as Oktoberfest and a likely scarcity of barbecues and beach outings this summer—all of which are frequently doused in brew. The beer industry is facing its roughest patch in recent memory, says Cees ’t Hart, Carlsberg’s chief executive officer. With supermarket sales, he says, “cash is still coming in, so it’s not the end of the world, but it’s still a disaster.”

AB InBev, Carlsberg, Heineken, and Asahi have all reported a collapse in first-quarter sales and withdrawn their financial forecasts for the year. Asahi, which over the past five years has spent tens of billions of dollars acquiring some of Europe’s most coveted beer brands including Peroni and Pilsner Urquell, said its operating profit from overseas fell 72% during the period. AB InBev has lost almost half its market value since the beginning of the year, Heineken is down by 24%, and Carlsberg is off 20%. The British Beer and Pub Association predicts that 40% of Britain’s 47,000 pubs will never reopen without financial support from the government. “The U.K. pub and brewing industry is in the midst of an existential crisis,” Emma McClarkin, the group’s CEO, wrote in an open letter to Chancellor of the Exchequer Rishi Sunak that called for state subsidies.

To get the suds flowing again, Big Beer is seeking to prop up publicans. On May 11, Carlsberg introduced a program called Love My Local, which helps convert pubs in the U.K. into takeout businesses. In March, AB InBev, the company behind hundreds of brands, including Budweiser, Stella Artois, and—yes—Corona, launched a similar scheme called Save Pub Life, which encourages patrons to buy vouchers they can redeem for pints when their favorite venues reopen. AB InBev says it has sold IOUs for more than a half-million pints via such programs, raising €6 million ($6.5 million) for venues in Belgium, France, and the Netherlands. “During these unprecedented times, we are working closely with the sector with support for rent and services, but we also wanted to lead a wider movement,” says Jason Warner, who runs AB InBev’s business in Europe.

But the industry is also bracing for a long period of flat sales, as bars such as the White Horse will bear little resemblance to the ones drinkers staggered out of in March. When they finally reopen their doors—in July at the earliest—British pubs will likely have plastic shields to protect bartenders, markings on the floor denoting safe distances for customers, hand sanitizer everywhere, and draconian limits on the number of patrons allowed in the door at any time. And ’t Hart, the Carlsberg boss, is worried that many lower-income drinkers will find a visit to their local watering hole an unaffordable indulgence: On an April visit to Amsterdam, a taxi driver told ’t Hart that his €60 fare was the only income he’d had in a month. That suggests a shift away from the craft and premium labels that have driven growth in recent years. “It could be that for a while we will have a focus on economy brands,” says ’t Hart. The economic fallout “will be much longer and maybe quite a bit more painful.”

AB InBev, the world’s largest beer maker, is looking to China as a gauge of what it can expect when countries begin emerging from lockdowns. In April the company’s shipments to customers in the country, where brands such as Budweiser, Harbin, and Boxing Cat are a fixture of nightclub drinking, dropped 17%—a dismal result, but better than the 45% crash in the first quarter. To help kick-start sales, the company has provided 14,000 drinking establishments with “opening kits” that include sanitizers, masks, and blueprints with suggested layouts to keep drinkers apart. “What we see in China is that there is a recovery taking place,” says AB InBev CEO Carlos Brito. “Our customers are reopening, and consumers are back to doing the things they like to do.”


20 May, 2020