Brewers and other beverage companies see business shift during pandemic.
Among the business lessons that might be gleaned from the COVID-19 pandemic: sometimes bigger companies can be nimbler than small ones.
At least this seems to have the case in the beer industry. Major brewers and their distributors have proved to be better positioned to meet changing consumer demand during this pandemic than smaller craft brewers — at least here in the nation’s central corridor. Other beverage categories appear to have had similar experiences.
There are several reasons for this. For one thing, larger producers were able to respond quickly when stay-at-home orders curtailed bar and restaurant operations and consumers shifted more to in-home consumption. And the shift to retail sales was pretty dramatic. One survey found brick-and-mortar alcohol sales up 41% the first week of May, compared to the same period a year earlier.
Consumers didn’t just change WHERE they purchased their beverages. Seeking to minimize shopping trips and reduce COVID-19 exposure, they also changed how much they purchased. A shopper who may have opted for a four-pack of a craft beer pre-COVID-19 for a Friday night, for example, was now more likely to purchase a 24- or 30-pack case that would last longer.
According to a survey by Nielson, in fact, sales of 30-packs were up 21% and 24-packs were up 20%, while six-packs decreased 2% during a representative week in April. With few craft brewers equipped to package their products in bulk, consumers have gravitated toward for the larger, national brands that offer larger volume packaging options.
While these sales trends are clear today, they were much less certain in the spring. Like many of our wholesale and distributor customers, other beverage companies found that keeping retail store shelves fully stocked to be challenging, especially in the pandemic’s early days.
Inventory days for beer — the average number of days a store holds its inventory before selling it — dropped from a pre-pandemic average of 22 to just eight in July 2020. At their low point, some stores reported just a two-day supply of some beverages. This was especially true in the early days of the pandemic when some brewers and other beverage companies were tempted to delay production while figuring out the stay-at-home orders’ impacts.
Global brewers like Anheuser-Busch InBev benefited from their ability to learn from their operations in China and Europe, where COVID-19 struck earlier. Given that it takes about 30 days to brew beer, a head start on brewing and packaging decisions could have a significant impact on keeping store shelves stocked.
Changes in local laws allowing distributors to repurchase kegs, bottled and canned products sold to bars and restaurants prior to mandatory closings also created a win-win situation. It helped the on-premise sellers with cash flow, while adding inventory that brewers could repackage for retail sale.
While some smaller brewers are struggling, especially newer brewpubs that sell their products primarily on premises, others have added online sales and retail locations, or changed packaging to accommodate demand for higher volume sales.
Despite increased retail sales, overall alcohol consumption has been down slightly during the pandemic, studies show. Industry analysts say that is most likely attributable to the decline in social gatherings, sporting events and other public activities.
Current sales trends, analysts say, are expected to continue until next summer, when a COVID-19 vaccine is likely to be available and the former balance between on-site/off-premises drink sales seems most likely to return. Let’s hope that industry players, large and small, will have weathered the pandemic and be here to meet that demand.