How has coronavirus impacted the brewing industry?
Brewing is traditionally regarded as one of the more resilient sectors of the beverage market, able to weather the storms of crises due to the relatively stable profits generated by consistent demand. The current coronavirus-induced global economic downturn, however, is unlike any we have seen before. With the brewing industry currently experiencing its short-term effects, we examine whether these will manifest into a more lasting impact.
What have been the short-term effects of coronavirus on the brewing industry?
When lockdowns were enforced across the world, brewers felt an immediate impact to both their production lines and at the final point of sale. Unable to maintain effective social distancing between employees within their premises, some were forced to either operate at a severely reduced capacity or shutdown entirely. Members of staff taken ill with the virus or exhibiting symptoms caused further staffing shortages, with this trend replicated across the manufacturing sector as a whole.
Lockdown also resulted in the closure of on-licensed premise businesses such as pubs, bars, event venues and restaurants, with these accounting for 62% of alcohol consumption in the UK in 2019. As a result, demand for casks and kegs beer fell sharply. Larger breweries that have canning and bottling lines were able to ride this out. Regional, micro and craft producers that rely purely on keg and cask sales, however, did not have this option, and instead were forced to shutdown indefinitely.
Breweries with their own canning and bottling lines have faired better by focusing on direct to consumer sales.
Overall, these smaller breweries present a mixed picture. A recent survey by the Society of Independent Brewers (SIBA) revealed that its members have lost a collective 82% of sales since lockdown began. Some have begun to sell in smaller quantities and direct to consumers to regain lost revenue, but will continue to struggle while pubs, bars and restaurants remain closed. Those with bottling and canning lines have fared better, with consumers turning to drinking more alcohol at home. Some breweries of this size have even turned to the manufacture of hand sanitizer.
For brewers of all sizes, however, a significant hurdle to overcome has been the cancellation of pre-existing orders of both casks and kegs for licensed premises. It has been estimated that some 70 million pints of beer could be disposed of due to this problem. Some brewers have been able to give this unused product to producers of farming fertiliser or animal feed to prevent waste, but these efforts can only save a tiny percentage of the total volume set to be discarded.
What could be the lasting impact of coronavirus on the brewing industry?
Throughout previous recessions, brewing has typically suffered less severely than other industries. Brewers can cope with economic hardship because their ingredients keep long-term, people continue to drink alcohol during times of crisis and venues that stock and sell alcohol remain highly popular, with this expected to remain the case once lockdown is over. Although the initial impact of COVID-19 has left many struggling, the anticipated reopening of pub gardens, expected to be as early as 4 July, has caused a surge in orders.
Most of these orders have been placed with larger-scale brewers who both have the production capabilities to meet these demands and who produce more popular beers. As it stands, smaller brewers are unsure of the durability of their business models and are calling for the government to give more specific advice on reopening of on-licensed premises so they can be sure orders they make will be required and therefore paid in full. The fear is that orders placed will be produced and then government restrictions will change, meaning they are subsequently cancelled and further revenue is lost.
Ultimately, the long-term impact of the virus and its financial consequences are yet to be fully realised. Economists disagree on how best to respond to this downturn, with their different models resulting in conflicting forecasts. This means that it is difficult to calculate an accurate and coherent prediction of the future. However, with over one million jobs in pubs, brewing and the supply chain, it will be imperative that government support is given to enable the industry to emerge from the global pandemic successfully.
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