Prediction is a risky business. Few experts could have predicted the challenges faced by all businesses in the coming year at the end of 2019. Mega business trends like regulatory compliance, government restrictions, supporting employee wellness, providing safety for consumers and adjusting to shifting consumer preferences are being felt across many industries. The beer business is certainly no exception to those trends. There have been many disruptions and changes but savvy businesses adjust, adapt and find opportunity in disruption. While there is definitely some weariness with the ongoing situation, the trends that emerged in 2020 aren’t likely to sharply change going forward.
For the past few years a model used by many small beer producers was to concentrate on taproom sales supplemented with some local distribution resulting in a large segment of the craft beer volume being highly local either within a state or sometimes even regionally within a state. This year the on premise business model has been facing pressure nationally and craft producers relying on tap room business are no exception. With consumers displaced from their local favorites in specific craft styles, larger national and regional craft producers have benefited. People are familiar with the larger names and can find a style they like from those producers. Shoppers are limiting time spent making purchase decisions and so they can grab something the like from a larger craft and be satisfied.
The same default to comfort in purchases has helped large suppliers and national brands too. With economic pressures value as a segment has seen dynamic growth. Shoppers have shifted from single serve packages to multi packs. Keg sales are off and multipack can package sales are growing. As a result there is a considerable strain on the capacity of can manufacturers to keep up with demand which has led to shortages in can packs for every major supplier. Suppliers have responded by purchasing additional can stock from Europe but this is very expensive with shipping. Since cans are being made at capacity now and capacity is difficult to bring quickly on line, shortages may be a reality for the coming months. Suppliers may respond by offering discounts on bottles and other packages to lure customers from cans. Where time and money isn’t exceptionally limited an opportunistic retailer may track brands and packages experiencing sales growth and attempt to find ways to increase inventory in case a popular package is not available at each delivery window. One good piece of news is that for most operators’ beer is under displayed due to the perceived lower margins. This does not account for either lift or the contribution to sales provided by beer. If possible making a warm stack into a display with advertising provides inventory cushion and opportunity.
Similar to can supply difficulties challenges remain on the long supply chains needed for import beers. Regulatory and health concerns can plague a long supply chain from another country to a higher degree than a major brand serviced by regionally located domestic breweries. Beyond beer offerings, seltzer (see our blog on the topic) and hybrid mixed spirit offerings can make a difference in profitability. For on premise operators reduced capacity, higher costs related to gaining traffic through confidence can be offset by increasing tabs through premiumization of offerings and tap features. It’s tough to see the future and there are no guarantees based on past trends. However, opportunity is always present, and good ideas and smart advertising and promotion help all businesses.