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Breweries, Restaurants, and Retailers Pivot and Plan

For beer lovers in DC, the past decade has meant tremendous growth. On top of quality DC-made beer, steady streams of specialty beers have entered the District for DC Beer Week, SAVOR, and the Craft Brewers Conference, often via excellent beer programs at local bars and restaurants.

However, with a looming recession and a pandemic it’s becoming more difficult for brewers to produce new beers. Breweries have laid off or furloughed employees, three district breweries have closed (Bardo, District Chophouse, and the Public Option), and brewery partners continue to close.

Deliveries and to-go orders help

“We’re doing what we have to do right now to survive,” says Greg Engert, beer director and partner at Neighborhood Restaurant Group (NRG), owners of Bluejacket.

Beer, wine, and liquor to-go at Bluejacket
Beer, wine, and liquor to-go at Bluejacket

“From the start we were concerned with the safety of our staff, and guests, and trying to keep as many people employed as possible,” Engert says. Twenty-two restaurants became seven open for carryout and delivery, three of which are hubs for Neighborhood Provisions, NRG’s food and goods delivery service.

Erika Goedrich, owner and founder of Craft Beer Cellar DC on H Street, mentioned a common misconception amongst shoppers. “Our shelves are a bit more bare than normal. People see that and say, ‘Wow, you got wiped out this weekend!’ or ‘Business must be booming with all these empty shelves.’ The optimism and hope in those statements are great. But it’s not as simple as that. I try to explain that many breweries have had to let staff go so they’re focusing on core products and not producing all the limited and one-off beers…and everyone, including us, is being more cautious in their ordering, as it’s really unpredictable what a day or week will bring.”

Craft Beer Cellar shelves are more empty than they were before the pandemic, when this photo was taken.
Craft Beer Cellar shelves are more empty than they were before the pandemic, when this photo was taken.

Goedrich has noted a shift in consumer habits from mid-March. A steady stream of customers began buying beers they knew and loved, flagship beers, and beers in packs. That’s turned into more singles, one-off, and specialty beers. Maintaining the policy of no more than four shoppers in the store at a time, the willingness for customers to buy just one beer, or a beer from a brewery they’ve never had before signals a return to some of the behaviors she was seeing before March.

Engert believes delivery will continue going forward. He cites the ability to use Neighborhood Provisions to buy Bluejacket cans, get a bottle of whiskey, cocktails, mixers, and pantry items like hand sanitizer or toilet paper, but also to buy someone in need a meal or get them groceries for a week. “This is something we’ll fully continue after we get our bars and restaurants back to operating,” Engert says of the one-stop shop. (Bluejacket’s patio is now open again.)

In addition, NRG has a goal of providing 400 meals a day, or 2,800 meals per week for COVID-19 patients, the economically vulnerable, and frontline hospital workers.

Michael Uhrich, founder and chief economist at Seventh Point Analytic Consulting, writes, “styles that drinkers are favoring haven’t changed that much – IPA is still three times bigger than the next largest craft style. But the trends towards variety and value that we were already seeing before the pandemic have intensified. Drinkers are buying bigger packs more than ever, and they are seeking out variety packs more than ever, too.”

Uhrich notes that the state of the world is going to affect consumers’ spending habits. “Recessions make people less able and less willing to spend…Turning that around is going to take a lot of time, but it’s time many brewers don’t have because they have bills to pay.”

Breweries turn to new models

According to Mike McGarvey, co-founder and head brewer of 3 Stars Brewing Company, the shutdown of their taproom and the closure of bars and restaurants across the region meant that 3 Stars “immediately lost more than half of our business. One of our biggest challenges in distribution is that it has been limiting on the number and types of beers we produce and as a brewery we pride ourselves on creativity.”

Bolstering creativity, 3 Stars began offering a CSB, or community supported beer program. “We wanted to use the CSB as a way to engage with our customers to give them access to all of our releases and projects directly. We chose a model similar to a farm CSA [community supported agriculture] because it’s flexible in nature and members of a CSA understand that what’s fresh and available one week may be gone the next…we’re trying to create a curated beer experience…including add-ons from other local DMV businesses.”

3 Stars is delivering beer and other items in their "CSB" as breweries turn to deliveries.
3 Stars is delivering beer and other items in their “CSB”.

McGarvey notes, “best margins are achieved in our onsite tap room. We had to find a new way to quickly provide a way for customers to order and receive product without leaving their homes.”

Like Bluejacket, 3 Stars has opened a socially-distanced patio for customers ready to enjoy a beer outside of their homes. Even though 3 Stars and Bluejacket pivoted meeting customer demand, there is still the issue of margins and cash. “Our business model was not built on can sales, it was built on draft sales,” says Engert.

“In most cases, draft beer gives much higher margins than packaged beer…for a packaging brewer, even if you could make up lost volume from bars and restaurants in grocery and package stores, you still wouldn’t be making up the lost margin,” Uhrich notes.

Writer and passionate beer consumer Phil Runco says he’s been buying “a good bit more than I would normally.”

“With the exception of a few mail orders from out of town and a few visits to Craft Beer Cellar, the vast majority of purchases have been direct from DC-area breweries. If I buy beer from outside the DC area, I feel guilty.” According to Runco, where you spend your money buying beer is a statement.

March was a historic month for beer sales. In terms of dollar sales, Sierra Nevada, Samuel Adams, and New Belgium products cleared $16 million more in stores in March 2020 than in March 2019 according to IRI, a data analytics and market research company. $16 million is small peanuts compared to what Constellation Brands (owners of Modelo and Corona) raked in, gaining $76.5 million more this March than last March.

Many District drinkers are fiercely loyal to local brewers. “It’s been at least a half decade since I bought a pack of Sierra Nevada, Samuel Adams, or Modelo,” Runco relays.

Raman Santra, creator of Barred in DC, is also supporting local brewers. He’s bought 3 Stars, DC Brau, Silver Branch, Brookeville Beer Farm, and Manor Hill from the Craft Beer Cellar in addition to receiving deliveries from Atlas and Bluejacket and pickup from Red Bear, Right Proper, and Hellbender. He’s gone to Port City, Aslin, and New District in Virginia to buy beers to-go at their breweries. He’s also purchased to-go beer directly from Waredaca, Elder Pine, and Lone Oak in Maryland.

Santra estimates he’s saving money monthly in that he “used to eat probably 8 meals a week out including lunch everyday at work,” and now with those meals closer to 4-5 times a week, he’s primarily ordering takeout from H Street restaurants. And with no travel spending, he’s supporting small, local breweries.

But not all beers are created equal. And while Runco wishes every brewery would survive the recession, “Ocelot makes the best IPA I’ve ever had. Period…So, when I joke ‘protect Ocelot at all costs,’ I mean that I am going to do what I can — namely, buy at least a case every two weeks and offer to pick up its beer for DC friends — because I don’t want to imagine my fridge without Ocelot. That’s also how I feel about some smaller, younger breweries already making incredible beer. Protect Astro Lab. Protect Wheatland Spring. And while it’s not small or young, Bluejacket should be protected, too. I’d rather spend a hundred bucks at one of these places than $20 at five places.” Runco also lists Right Proper as a brewery to “protect at all costs.”

According to ReOpen DC recommendations, bars and nightclubs would be a phase 3 interior opening; breweries and their taprooms are not specifically mentioned as part of the plan. There’s a chance breweries will be allowed to let people sit inside at tables with prepared food at a 50% capacity in phase 2, just as restaurants may be. But all of this is speculation until further announcements from the Mayor’s office.

Based on surveys, the Brewers Association’s economist Bart Watson writes, “there has yet to be a massive surge in brewery closures,” and that’s most definitely a good thing.

Still for those who keep their lights on like 3 Stars and Bluejacket, innovation continues to occur not just with beer styles but with business models. Engert says, “We’re going into a brave new world but it’s going to be one…that takes all of the initiatives created out of necessity…during this difficult time and keeps a lot of some really positive stuff that’s happened.”

It is unlikely that in the next ten years metropolitan DC will see another dozen breweries open. One key takeaway from the Brewers Association data shows “revenue weaker than volume sales” which begs the question: if the BA survey data shows weakening revenue, how long can metro DC breweries stay open? Is it inevitable that there will be a contracting of the number of local breweries?

The future of beer in DC is unwritten. The next chapter will be marked by those who can push their breweries into new business models and tap into the consumer desire for both something familiar and something creative and new.

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