As the pandemic hit last spring, forcing the hospitality industry to cull staff and rework business plans, Matt Cole, owner of Fat Heads Brewery, stepped away from his desk and back into his brewing boots.
While Cole enjoyed returning to his roots slinging barley in the brewhouse, the situation was bittersweet.
Cole laid off 60% of his 330-person workforce — including 100 just in the restaurant at his massive Middleburg Heights mothership, which is bringing in just 45% of what it used to — as COVID-19 pushed Ohio into lockdown and cash flow slowed. He stepped in to pick up the slack in the brewhouse.
Many of those employees have returned since, but not all. From staff to menus to beer offerings, the operation overall is much leaner today.
"It was a survival mode kind of thing we fell into," he said. "It kind of forced us to run more efficiently. We had to tighten things up, watch our spends. And that's a good thing. But the most painful thing for me has been the restaurant and our staff there."
This past year was the most challenging the booming craft beer industry has faced as on-premise sales — where brewers make their best margins — nosedived.
With losses partially offset by strong grocery sales and government stimulus, the reality, however, is not as quite as bleak as it may seem.
Despite frothy headwinds, craft breweries closed in 2020 at a comparable rate to 2019. Various others opened or remain in the planning stages. That includes several in store from Columbus' North High Brewing, which is expanding across the state to Cleveland and beyond, and smaller brewers coming online.
There's much hope in the industry riding on the pandemic winding down as vaccines become widespread and revelers break out of hibernation.
"As infection rates and case numbers decline, people will start to feel more confident in public places again and start visiting brewery taprooms more frequently," predicted Justin Hemminger, deputy director of the Ohio Craft Brewers Association (OCBA).
In the meantime, winning a share of off-premise sales will remain key for breweries looking to do more than just survive.
"We are still forecasting on-premise to be down 38% compared to 2019, which is devastating," said Mark King, CEO of Great Lakes Brewing Co. "But we think we can turn this around and not only beat 2019 with bad on-premise, we think we can get close to 2018's volume. We're going to have the biggest packaged beer business in Great Lakes history."
There are about 360 active craft breweries in Ohio today, compared with 328 at the start of 2020, according to OCBA figures. The state saw 47 openings and just 15 closings in 2020. Those rates are similar to prior years, despite the pandemic. There were 55 openings and 11 closures in 2019, and 50 openings and 10 closures in 2018.
With another 55 breweries in planning stages, there's a chance Ohio could surpass 400 brewpubs by the end of the year.
There is a lot of variation in how breweries came out of 2020, said Bart Watson, chief economist for the Brewers Association. But it has been a harrowing year. Even with stimulus money from the Paycheck Protection Program, total employment in the craft industry was down by about 15% in February, Watson said.
Craft breweries heavily reliant on draft sales, which dried up with restaurants and taprooms closed or reduced in capacity, were hit harder than those already packaging beer for stores. This prompted more canning of brewed beer to put on grocery shelves, further increasing competition off-premise and contributing to an aluminum can shortage.
While alcohol consumption spiked in the early days of the pandemic, drinking somewhat leveled out the rest of the year. And imbibers weren't just buying up beer. Wine, liquor and hard seltzer, especially via e-commerce sales, seemed to slant hard toward non-beer booze.
Watson estimates there may have been just a 1% increase in U.S. alcohol consumption per capita in 2020. Plus, there are more alcohol brands jockeying for those off-premise sales than ever. Some estimates have projected an 8% decrease in global alcohol consumption in 2020.
In total, Watson, who is finalizing the BA's annual economic report, said industrywide volume of craft beer produced was down 8% to 10% in 2020. Average revenue lost would be much more than that.
"When grocery sales are up 10%, it's because restaurant sales were down 50%," Watson said.
Nationwide, there were approximately 700 brewery openings in 2020, according to the BA, compared to 1,000 in 2019. There were about 300 closings last year.
That's far from the worst-case scenario that could've played out.
"But I don't want to imply your local brewery is doing great," Watson said. "People are definitely hurting. And maybe not dying doesn't mean you're healthy. We might still see in 2021 a lot of people holding on for dear life, and maybe 2021 is what finishes them off."
"As things get more competitive," he added, "the buzzword is differentiation."
For Fat Heads and Great Lakes, differentiation means product innovation. Both are leaning hard into variety 15-packs to appeal to consumers making fewer trips to the store, for example.
Great Lakes also is benefiting from an aesthetic redesign and having beers in cans. Revamped marketing, a new canning line and a restaurant renovation were costly investments made as King settled into Great Lakes, but they're rooted, he said, "in turning this business back to growth."
A 30-year-old brand that had been declining the past seven years, Dortmunder saw off-premise sales spike 30% in 2020 thanks to its new look and aluminum packaging. And while low-calorie IPAs are trending up, King looks to have Great Lakes stand out with a low-calorie citrus wheat called Crushworthy.
"We are creating noise, new brands, new colors. We are back in the conversation among young consumers again," King said. "It's been a big challenge, but we need to do that."
He added, "Winning off-premise is going to be a major battle cry for us this year."
Yet, the expectation is on-premise will rebound as the pandemic restrictions lift. Those opening or expanding are counting on cabin-fever-stricken guests to return to local brewpubs. They range from small neighborhood operations, like Birdtown Brewery, which is under construction in Lakewood, to international outfit BrewDog, which is scouting locations in Cleveland from its U.S. base in Columbus.
No one in the state may be more bullish on taprooms coming back than North High Brewing co-founder Gavin Meyers.
The 10-year old brewery is preparing to open a number of new locations in partnership with COhatch, a self-described "coworking, meeting and lifestyle" company working to open a slew of locations in Ohio and elsewhere.
Meyers said North High will be a tenant in 14 new COhatch locations in the U.S. A couple North High + COhatch locations have already opened in Dublin, near Columbus, and Hyde Park in Cincinnati. All concepts feature some kind of brewhouse and restaurant component, with a menu tailored to the respective market.
Two others opening in the coming months will be in Ohio City and Beachwood.
The Ohio City location will have a small pilot brewing system. Beachwood, however, will feature a facility dedicated to hard seltzer.
Meyers estimates that by year-end, his company will grow from about 45 employees to somewhere between 200 and 250. He plans to be involved with 25% to 50% of all COhatch locations opening.
With COhatch selecting sites and managing the real estate, North High can open these locations for 30% to 60% less than it would normally take in startup costs.
"We are really excited about Ohio City and Cleveland in general," Meyers said. "It is our second-best market in Ohio since we went statewide six-and-a-half years ago. This is a great way for us to not only partner with a growing real estate business but also strengthen our brand presence in the markets we've been serving."
Following a tough 2020, Meyers said he "has every bit of faith we come out of this pandemic stronger than we went in."
Other brewers share a similar sentiment.
"I think I've aged a bit and grayed a bit more. It's not another year I'd like to go back through. It's been an emotional roller coaster ride every day," Fat Heads' Cole said. "But on the production side, things are full tilt and stronger than they've ever been. I have confidence in our ability to grow and not just stay flat."
Watson said: "It's going to be a better year than last year. Craft took a hard hit in 2020 and I think it partially rebounds in 2021. By 2022, craft is going to be back on its feet."
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Craft breweries hope to come out of pandemic stronger with eye on grocery sales, on-premise rebound - Crain's Cleveland Business
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