Colorado's craft-beer industry as we've known it is over.
Then again, it has been changing so rapidly over the past few years that evolution has become the norm for beer makers. Still, the coronavirus pandemic is almost certainly going to have a long-term and dramatic effect — the severity of which will depend on how long the public must/wants to stay at home.
It's a situation that threatens not just an industry known for good times, but as an economic engine in Colorado that pumps more than $3.3 billion into the national economy (as of 2018), employs upwards of 8,000 people and helps raise millions of dollars and lend visibility for hundreds of nonprofits and charities around the state. Like skiing, outdoor recreation and cannabis, it is one of Colorado's signature industries.
To get a feel for what that future might look like, we checked in with a few Colorado beer-industry pros, and combined their thoughts with recent survey results compiled by the Brewers Association, a national trade group. The conclusions don't look good, but they are particularly difficult for smaller breweries and taprooms, especially in the short term.
April and May
Although many breweries have completely overhauled their sales models in the past few weeks, finding ways to package their beer and sell it to-go from curbs or windows, or via delivery, this is not sustainable over the long term, as revenues for most have been cut in half, by two-thirds or even more. Most dire is the warning from the Brewers Association that more than 15 percent of the breweries that responded to its survey said they aren't going to make it another month unless they can reopen. A whopping 61 percent said they won't last three months.
"What we have seen... is that our breweries are creative and resilient and are finding ways to work within the restrictions to provide beer to consumers in a safe way," says Colorado Brewers Guild director Shawnee Adelson. But she cautioned that "no brewery is immune from what is happening right now."
It's impossible to know how long people will be required to stay at home (the order is currently through April 26 for Colorado and April 30 for Denver). But it's even harder to gauge when bars, restaurants and breweries will be allowed to reopen; remember that Governor Jared Polis separated the two things, closing the businesses on March 17 (ten days before ordering the public to stay at home). Michael Hancock has extended the closure for bars and restaurants out to May 11 for Denver.
In a recent conference call with the Colorado Brewers Guild, Polis told breweries that even when these orders are lifted, there may be a social-distancing requirement in which businesses can only allow a certain number of people inside — based on the square footage of the bar, brewery or restaurant.
While it will be nice for breweries to welcome customers back inside, the taproom model relies on selling as much draft beer over the bar as possible rather than on selling kegs, cans and bottles. The margins are higher, the volume is more reliable and the tips help keep employees on the job. So such a social-distancing model would only slow their eventual demise. That means that based on the BA model, sixty to seventy of Colorado's 420 or so breweries could close within a month, while a total of 250 could close by the end of June.
"Most of us have been planning for a six-to-eight-week interruption of service, but what happens if that turns out to be twelve to sixteen or, God forbid, more?" asks Dave Bergen, the co-founder of Edgewater's Joyride Brewing. "Delivery and takeout orders are helping, but I doubt breweries like ours, that rely on people sitting at the bar, can keep affording to pay rent on space that isn't being used."
Two small breweries, Black Sky Brewery in Denver and Front Range Brewing in Lafayette, have already indicated dire financial need by starting up GoFundMe pages. The Craftworks group, which owns Rock Bottom, Chop House and Gordon Biersch, filed for bankruptcy in early March, then shuttered 260 to 300 locations later in the month; it has at least eight restaurants and breweries in Colorado. Craftworks has indicated in financial documents that it may not be able to reopen any of its restaurants.
Furthermore, a significant number of brewpubs have decided to cease all food and beer operations for the time being, including Wynkoop Brewing, Trinity Brewing, Bull & Bush, Lowdown Brewery + Kitchen, Black Shirt Brewing and Vine Street Pub and its Mountain Sun siblings.
Some of this could be eased by emergency or forgivable loans, disaster grants, tax waivers or rent or invoice deferments by landlords and suppliers, but how much — and how soon — remains to be seen. The most important way that governments can help out the service industry is with forgivable loans, since the last thing that any small business needs is more debt; in the end, this would also help keep people employed.
In the meantime, there are two other factors conspiring against the smallest of the state's breweries. One is customer fatigue; the public, which so far has been turning out en masse to help their favorite watering holes, may tire of donning masks and gloves so that they can pick up Crowlers and six-packs. The second is data that shows that people are resorting to known brands, cheaper beer and larger formats, like 24-packs of beer.
"People are going with what they know," when it comes to ordering booze for delivery or at liquor stores, says Steve Findley, president of the Colorado Beer Distributors Association. Small breweries tend to sell products that are expensive and sold in small or unusual formats. They also rely on customers browsing liquor stores.
June, July, August
June will be a crucial month. If small breweries are allowed to open by then — and if beer makers are able to take advantage of loans and grants — many may survive. If not, this is the time when their reserves will run out and they will be begin to close their doors in much higher numbers.
"I don’t know how long landlords, lenders and other creditors can continue to defer payments," says Rick Wehner, co-founder of Brewery Finance, which lends money to craft breweries. "We are all in this together, and it makes sense to work it all out together, and so far I think that, for the most part, everyone has come together to help toward this goal, but I’m curious to see how long of a runway we have with deferred payments. Not all landlords or lenders have bottomless depth to their pockets, and eventually they will need to get paid."
In addition, the festival season will likely be wiped out, at least for the first half of the summer — and possibly into the fall. WeldWerks Brewing has already moved its highly touted Invitational from June to October, and other festivals may follow. If this drags into the fall, we could even see a postponement or cancellation of the Great American Beer Festival, which would be a huge loss for local breweries.
But this is when some larger craft breweries that have been able to weather the storm with supermarket sales may begin to feel a pinch. For starters, consumers may begin shopping in liquor stores again, seeking out beer from smaller breweries. But a larger problem could be the demise of large number of bars and restaurants. If this happens, then the bigger breweries could lose hundreds of tap handles in Colorado and in other states.
"Our restaurant and bar owners are suffering so much," says Terry Cekola, owner and president of Elite Brands of Colorado, which specializes is distributing craft-brewery brands all over the state. "This is a crazy time. Never thought I would experience something this dramatic in my lifetime."
Nationwide, the devastation that could take hold of the food and beverage industry would also affect the industrial breweries, like Molson Coors, Anheuser-Busch and Diageo. Diageo, which owns Guinness, was hit particularly hard because the shutdown took place on St. Patrick's Day, which Findley says is the largest day for bar and restaurant sales nationwide. But the destruction of the NBA and MLB seasons, not to mention the NCAA Final Four series, will force the big breweries to dump tens of thousands of kegs.
On the other hand, the demise of smaller breweries would help make up for some of these losses if the industrial breweries can insert their own craft-like brands where the independent breweries used to be.
"Ultimately, and it saddens me tremendously to say it, is that there are going to be quite a few [small breweries] that don't make it out of this," says Joyride's Bergen. "I don't want to throw out a number, but based off how the year started in regard to closings...I think it's going to get worse before it gets better.
"Breweries normally count on this time of year to restock the bank account after the slower winter months," he adds. "Breweries that were barely hanging on are going to have very difficult decisions to make, and I feel for them. I hope there are more mergers and acquisitions than closures."
Normalcy? It's probably not something we will see again until 2021 — if ever. A return to some facsimile of what we used to know? That could begin in the fall, when the predicted second wave of infections dies down. But what will it look like? Will people fall all over themselves to get out and about, or will they remain inside?
"I personally feel that when we are able to open taprooms again, people are going to come out in droves, like what we're seeing in China at their touristy sites right now," Bergen says.
But Steve Findley, after talking with the members of the Colorado Distributors Association, says they are worried about people's habits and whether they will change. Will they come back to bars, breweries and restaurants, or will they be too nervous? "We aren't expecting it to come out gangbusters right away. It's going to take a while."
When people do begin to head out in groups, beer, wine and spirits distributors "expect to see a strong desire for hyper-local," he adds, which includes neighborhood beers and neighborhood spots. That could come in part from people testing the waters by staying close to home, and partially as a way to help local businesses — similar to what we are seeing now with consumers turning as much as possible toward takeout and delivery.
"I think this whole thing has shown how important it is to be hyper-local as a brewer," Wehner adds, pointing to Downhill Brewing in Parker. "They are the gathering spot for many families and friends in and around Parker, and when they were faced with long odds due to tasting rooms being shut down, their community stood up and have completely supported them to the point where they have not had to lay off a single full-time employee. I find that amazing and inspiring. Their customers are invested in the solvency of that business, and they are supporting it — and I know this is happening with breweries all over Colorado."
But the state's fabled craft-beer landscape will no doubt be permanently altered, whether it is via significant contraction or changing business models.
"I think the to-go model is going to become more commonplace, and the mobile canners are going to get some long-term customers out of this," Bergen says, pointing out that more consumers are going to want to take a four-pack home with them after a pint or two in the taproom.
It would be nice if breweries were allowed to continue delivering beer as they have under the governor's emergency order from March, but that would take an act of the legislature, and Bergen is doubtful that would happen. "I don't see that happening anytime soon with the massive amounts of other priorities that the state will be focusing on. Plus, right now, under normal circumstances, delivery is a privilege that only liquor stores have, and I don't foresee them wanting to lose that exclusivity.
"Right now, the best we can all do is hope for the best in that this passes quickly and there aren't any future outbreaks that cause a quarantine again. And hope that our crowler shipments arrive on time," Bergen says. "Breweries are being extraordinarily nimble and are adapting the best they can, and I couldn't be prouder of my industry and the people who work in it for stepping up to the plate and hanging in there. We are resourceful and resilient, and we're going to throw the biggest collective party ever when this is all over."
Keep reading to see more comments from Adelson, Wehner, Findley, Cekola and Bergen.
Director of the Colorado Brewers Guild
“I’m hesitant to provide predictions, because there is just too much uncertainty,” Adelson says about the length of time that brewers could be closed and people are required to stay home. “But I would reiterate [the Brewers Association’s statement] that the longer this goes on, the harder it is going to be for breweries to sustain at this level. That is our biggest concern.”
So far, Adelson hasn’t heard of a single Colorado brewery that has closed permanently, but she cautioned that each one has a different business model and level of cash flow. “What we have seen, though, is that our breweries are creative and resilient and are finding ways to work within the restrictions to provide beer to consumers in a safe way.”
No brewery is immune from what is happening right now, but Adelson pointed out that some are feeling optimistic about survival because of the loan or grant programs that are out there. Finally, she expressed concern for breweries that had been planning to open this spring and summer. "Who knows how long they can afford to remain in that phase?" she says. "It's possible some of them may never open."
Co-founder of Brewery Finance
Through the grapevine I have heard of a few breweries that have already decided that they cannot make it through this crisis and have decided to shut their doors. Without having any firsthand knowledge of these breweries, my first thought is that they were probably already pretty close to the edge if they have already shut down and are selling equipment, etc…I think this virus was either the final blow, or perhaps a perfect excuse to do what was, perhaps (and unfortunately), inevitable.
On the plus side, I have always said that brewers are the most creative business owners that I have ever come across and this is evidenced in the ways that so many Colorado breweries have quickly adapted to the changing times. I will be curious to see if the “to-go” beer model and the beer delivery model will become new business models (assuming the politicians allow it) after all of this is done. I’ve enjoyed seeing breweries continue to promote their beer through virtual happy hours and virtual tours... But I personally really miss the experience of sitting in a tasting room and shooting the breeze with the employees and fellow beer enthusiasts. I think the tasting room model is here to stay.
I think this whole thing has shown how important it is to be hyper-local as a brewer as well. For example, Downhill Brewing has done an amazing job of becoming a part of the community in Parker. They are the gathering spot for many families and friends in and around Parker and when they were faced with long odds due to tasting rooms being shut down, their community stood up and have completely supported them to the point where they have not had to lay off a single full-time employee. I find that amazing and inspiring. Their customers are invested in the solvency of that business, and they are supporting it, and I know this is happening with breweries all over Colorado.
At the end of the day, I don’t know what the landscape will look like when this is all over. Sadly, I think we’ll lose some breweries and probably a number of bars and restaurants that support the local beer scene. I don’t know how long landlords, lenders and other creditors can continue to defer payments. We are all in this together, and it makes sense to work it all out together, and so far, I think that, for the most part, everyone has come together to help toward this goal, but I’m curious to see how long of a runway we have with deferred payments. Not all landlords or lenders have bottomless depth to their pockets, and eventually they will need to get paid.
President of the Colorado Distributors Association
Most people are buying big-name brands or larger formats. People order what they know and are not, quote-unquote, shopping. They are going with what they know. That’s off-premise [liquor stores]. As for on-premise [bars and restaurants], we are expecting a lot not to be around when this is over. Some say they can make it a week, some say they can make it ninety days.
[Our distributors] are also worried about people’s habits and whether they will change. Are they going to come back or continue to be nervous? They are not expecting it to come out gangbusters right away. It's going to take a while. They expect to see a strong desire for hyper-local. Neighborhood spots and neighborhood beers.
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Joyride Brewing co-founder and chairman of the Colorado Brewers Guild
It's so tough to predict anything right now because of how much uncertainty there is surrounding everything. The "stay in place" order has been extended to April 26, but the governor mentioned to us on a conference call yesterday that when that gets lifted, it probably won't be allowing restaurants and bars to immediately reopen. When we are able to reopen, there will initially be social-distancing requirements built in. I interpret this to mean that you take the square footage of your serviceable area and divide it by six and that's how many people you can have inside to theoretically ensure six feet between everyone. If that is the case, how will busier taprooms who are used to being packed adapt? I personally feel that when we are able to open taprooms again, people are going to come out in droves, like what we're seeing in China at their touristy sites right now. So what's going to happen when "busier" taprooms turn people away at the door by a person with a clicker? Will they wait outside to get in, go home, or go to other taprooms that may not be as busy? I don't know."
This is all assuming that the stay-at-home order doesn't get extended again, which it very well might. Most of us have been planning for a six-to-eight-week interruption of service, but what happens if that turns out to be twelve-to-sixteen or, God forbid, more? Delivery and takeout orders are helping, but I doubt breweries like ours that rely on people sitting at the bar (we have a capacity of 280 including the roof) can keep affording to pay rent on space that isn't being used. If we wanted to go to a straight delivery/takeout model, we could probably reduce our square footage by 75 percent.
Ultimately, and it saddens me tremendously to say it, is that there are going to be quite a few that don't make it out of this. I don't want to throw out a number, but based off how the year started in regard to closings...I think it's going to get worse before it gets better. Breweries normally count on this time of year to restock the bank account after the slower winter months. Breweries that were barely hanging on are going to have very difficult decisions to make, and I feel for them. I hope there are more mergers and acquisitions than closures.
I think the to-go model is going to become more commonplace, and the mobile canners are going to get some long-term customers out of this, and canning-line manufacturers like Codi and Wild Goose may sell more units after this is over as more consumers are used to taking four-packs to go after they have a pint or two in the taproom. Delivery is included under the emergency declaration by the governor, so as soon as that's over, delivery goes away for everyone. In order for that to stay long-term, that would have to be voted into law at the Statehouse, and I don't see that happening anytime soon with the massive amounts of other priorities that the state will be focusing on. Plus, right now, under normal circumstances, delivery is a privilege that only liquor stores have, and I don't foresee them wanting to lose that exclusivity.
Fortunately for all of us, the Guild has been an invaluable resource and advocate for independent Colorado brewers and consumers. Without them, we may have not been declared an essential business, meaning all of our to-go stands and manufacturing activities would've come to a screeching halt, and we'd be stuck with less desirable options at various retail outlets. The Guild was also instrumental in getting us the ability to deliver, which is keeping many breweries busy. At this point, we need to sell beer any way, shape, or how, and the Guild has helped to access markets that previously didn't exist.
Right now the best we can all do is hope for the best in that this passes quickly and there aren't any future outbreaks that cause a quarantine again. And hope that our Crowler shipments arrive on time. Breweries are being extraordinarily nimble and are adapting the best they can, and I couldn't be prouder of my industry and the people who work in it for stepping up to the plate and hanging in there. We are resourceful and resilient, and we're going to throw the biggest collective party ever when this is all over.
Owner and President of Elite Brands of Colorado
This is a crazy time. Never thought I would experience something this dramatic in my lifetime. Our restaurant and bar owners are suffering so much. We have taken a huge hit, too, but we still have some people we can sell to, and luckily, people are still drinking.
I’m seeing most things from the retailer side. Their information plus the IRI data I saw earlier this week show that buyers' tendencies are buying large packs of inexpensive beer. 24 packs of Coors products, bud, PBR, etc. As a full house distributor, our wine and spirit numbers are up while our beer is down.
"My hope is that when this 'stay at home' order becomes more normal and there is light at the end of the tunnel, we should see craft pick back up. I know breweries are doing whatever the laws will allow them to do. Selling out of the taprooms, delivering product, etc… it’s not a lot, but it's something.