Corona and Breweries, Part I

This is part I of a hopefully not too long series of how the corona virus is affecting the world of Dutch breweries. Starting with the breweries, I will also discuss how it influences bars and shops.

It has been over a month now since the bars and restaurants in the entire county closed. Everyone involved with beer has been hit hard. The bars are of course completely closed and they try to make a bit of money by selling beer and food for takeaway. Shops other than supermarkets have in some cases seen losses of 50% or more. But hardest hit seem to be the breweries.

Breweries have lost most, if not all, of their primary sources of income. The bars are completely closed, the sale of kegs down to 0. Sales of bottles have gone down as well to the specialty stores. Only those selling to supermarkets seem to be doing ok but tanks are empty, in many cases for the first time in years.

Times like this ask to be inventive. Many breweries have started selling beer directly at the brewery. Something that in normal times is not allowed but this government has decided not to interfere in most cities and counties. But you can only sell so much, and only to people who really want it. It doesn’t make up for all the other sales. Often it is the only way to generate at least some income. Sure, it might take a tiny bit away from the shops, but most people buy one bottle from a brewery together with bottles from other breweries. Here the brewery can sell a box of beer at once. These small sales though can only recoup about 20% or less or regular sales. Yes, you read that correctly, many breweries have lost 80% of their income.

Government Help

The government is providing some help, but this is not reaching all the breweries. The government works with a list of business that they deem need help in this crisis. Breweries at the start were not on that list. They will get some deferrals for income taxes and the government can pay a large chunk of the salaries if employees cannot work anymore, this up to 90% if a company has lost 100% of its business.. But this is not including other parts of the salaries like labour costs, pensions and paid vacation. These costs keep adding up.

Restaurants and bars are on the list. Brewpubs in most cases are not. If your entry into the Chamber of Commerce mentions a brewery first and a brewpub second, you are not on the list so you don’t get the money a restaurant would get. It was only on the 28^th of April that it was decided that businesses could get help (a one time sum of € 4.000) for their second type of business, like a brewpub/restaurant.

Bars and restaurants have closed, meaning nearly 100% of all kegs from breweries are not being sold at the moment. The distributors of this beer are getting government support, breweries luckily now get some as well. But the distributors don’t get paid anymore by the bars, so they cannot pay the brewers, leaving the breweries without money from that side.

Deferral

Income tax has been postponed for a while so breweries don’t have to worry about that just now. But that doesn’t mean that it doesn’t have to be repaid. There’s a big chance this will have to be done again when the bars and restaurants are up and running again. The question for the government now is how the breweries are going to repay it and in what time period. With a looming recession we don’t really know if people will start going to bars and restaurants again like they did before.

The Catch-22 of bank loans

If you were a healthy company before corona hit you can get a loan. But because the economic outlook at the moment is not great they are hesitant to just give you a loan, unless you hook up with a company that offers loan but against staggering interest. And the costs that are not being paid right now (taxes for example) will have to be repaid later, adding another figure of money a brewery won’t be able to pay back. The government is pushing the banks to offer loans, the banks say ‘but they cannot pay it back’. The government and brewers say: ‘yes dear banks, that’s the problem and that’s why they need the loans’. And so the cycle continues. Breweries in most cases also have nothing to put up for the loan, another reason banks are hesitant.

Rent

Big breweries often also lease properties in exchange for their beer being served there. These bars are trying to get discounts on rents. In some cases this has already gone down 50%, in other cases breweries (like Haacht) have decided not to ask for any rent during this period. Smaller craft breweries don’t have constructions like this and will have to pay the rent of the brewery space.  So the small brewers are not helped in this scheme and breweries with brewpubs are doubly hurt.

The brewery landscape in one year

It is undeniably true that some breweries won’t be able to come through this. CRAFT, (the organization where all craft brewers are part of) issued a statement that 50% of all breweries are in grave danger.

Michel Ordeman of Jopen, also the head of CRAFT, says that small breweries provide a lot of work as well. Not only in the breweries but also in the brewpubs and restaurants.

First of all we don’t know yet how long bars and restaurants will be closed. So far until at least May 20, but it could be longer if we as a nation decide to go outside en masse again and not stick to social distancing. And if everything does open again nothing is sure as well. Some breweries are going to offer free beer or heavily discounted beer to bars. This could lead to a new price war and might force some breweries who cannot afford this to fold.

50% of all breweries left after all this is over? A shakeup was bound to happen, but like this? The beer shops, bars and festivals will look very different in a year.