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Beer in 2021 and Beyond

12/15/2020

Don’t panic–beer and the brewing industry will live on. Beer has survived many incredible challenges and it’ll survive this pandemic, too. That said, breweries that want to not only survive but to thrive on the other side will need to change and adapt.

2021 may or may not mark the end of the pandemic, but it will certainly bring additional twists and turns for breweries as they weather the current crisis and position for growth in the coming years.

As 2020 finally nears its end, here are some items to watch in 2021.

Reconfiguring On-Premise Sales
There is no denying COVID-19’s impact on on-premise sales for the alcohol beverage industry. Suppliers, including breweries, felt the impact even to their on-premise accounts. Before COVID-19 began to spread, the taproom/beer garden concept was invaluable to any new or mature brewery. It was the brewer’s interpretation of the weekend bar. However, when shutdowns began to cascade through urban and rural areas, the ability to congregate was removed.

As a result, many in the industry began to incorporate creative ways to get more product out the door. We saw an increase of larger purchases, but over infrequent time periods. Draft beer converted to bottles and cans. Breweries gained the (temporary) ability to sell its beer in to-go containers straight from the tap. We saw on-premise retailers incorporate some element of food to meet the exceptions of the governor’s executive orders to allow food service with a side of alcoholic beverage. Breweries also followed suit in incorporating a fast-casual concept, one that is likely to remain once the COVID-19 crisis is in the rearview mirror.

The rules and regulations are bound to continue changing throughout 2021 and it is important for breweries to keep close tabs on these changes.

Packaging (But Don’t Lose Track of the Beer Garden Concept–It’ll Return)
COVID-19 exposed the pressure points in the package-to-draft split for breweries. Across the board, the draft model has suffered, with a lopsided emphasis on brewers’ packaging lines. However, not all breweries had an emphasis on packaging and their distribution channels, and that was okay – so long as brewers were intentional about their own models. The industrywide impact refocused brewery owners to the business basics: managing cash flow, analyzing and leveraging profit margins, and focusing on product-to-consumer flow.

Consumers’ home bars have taken up both refrigerator and wall space, in place of bringing a casual four- or six-pack to a friend’s house. As such, it is likely that lower ABV sessionable beers will continue, and the volume each consumer drinks at home is likely less.

Increasing Direct Access to Consumers in Creative Ways
Demand for consumer consumption has increased – not necessarily in volume, but in how the product reaches the consumer. Because brewery taprooms and on-premise retailers were heavily impacted during the COVID-19 pandemic, consumers looked to deliveries and greater access in grocery stores. It is safe to assume that in 2021, the way in which consumers get their beer will continue to evolve.

Prior to 2020, the grocery store footprint wasn’t on the radar of some breweries – they were too small, it didn’t align with their sales strategy or business philosophy, or they didn’t have the appropriate distribution relationship to adequately stock product to the grocery store demand. While many brewers may continue to avoid the grocery or convenience store space, some have considered other ways to provide their product to consumers. A strategy that has gained increased attention is the direct delivery of beer to consumers out of state. For breweries that deliver beer in state, it goes without saying that it is very important to understand and comply with all of the applicable rules and regulations. For breweries that are considering direct-to-consumer delivery out of state, it is even more important to hit the brakes and speak with a professional. The network of laws and regulations related to out-of-state direct delivery of alcoholic beverages is inconsistent and complex and the costs associated with violations can be high.

Continue to Harvest Relationships (Drinks Will Be Necessary on the Other Side)
COVID-19 has exposed the vulnerabilities and the resourcefulness in relationships. This extends to supplier relationships – hop market, malt market, aluminum and bottle manufacturer, and the relationship with your distributor. It also has stress-tested brewers’ relationship with their landlords and banks.

Beginning now and into early 2021, many distributors will meet with their brewers to discuss their annual business/distribution plans and look to historical (i.e., 2020) figures. It would be a shortsighted approach for either the brewer or distributor to rely heavily on 2020’s data figures as an outlier.

For breweries that have not already done so, now is the time to closely evaluate your relationships and shore up weaknesses wherever possible. This process could include entering new relationships, exiting current relationships or a combination of the two.

Effectively Utilizing Tech
Digital commerce will likely continue the trends seen in 2020. From the revival of QR codes to pre-order options to order beer through your platform, customers have become comfortable with purchasing and having product delivered within 24-48 hours. Moreover, COVID-19 has forced those less tech-savvy to quickly adapt to technology, while the generations that automatically gravitate toward tech interfaces and easy U/X comfortably shifted to online buying.

As these trends continue, brewers should evaluate their technology and the means of using it more effectively to drive sales. In doing so, it is equally important to ensure that the use of such technology complies with all applicable regulations – going beyond the obvious, such regulations would include protecting the privacy of customer information and ensuring that your website complies with ADA requirements.

One thing we can absolutely predict is that 2021 will also contain many twists and turns. As everyone knows, vaccines are coming and we appear to be closer to the end of the pandemic than the beginning. On one hand, the rollout of vaccines should be a boost to business and hopefully allow people to socialize more – but still in a safe way.

On the other hand, the distribution of vaccines is bound to be uneven and lead to frustration as we see localized outbreaks, which may prompt governing authorities to periodically tighten restrictions on businesses. Notwithstanding the uncertainty that 2021 is bound to contain, one of the strengths of the brewing industry has always been the ability to adapt and be creative.

As the clouds continue to part in 2021, it will be very important for breweries to lean heavily on these strengths.

This article was originally published by ColoradoBiz.

ABOUT THE AUTHOR

Jessica R. Hunter

Attorney

Craig J. Knobbe

Attorney