The Supply Side: Beer, alcohol sales rise as stay-at-home orders persist

Alcoholic beverage sales shot up in March as stay-at-home orders were issued, and many bars and restaurants had to close for dine-in service to enforce social distancing measures. That sent consumers to liquor stores, Walmart and even local taprooms trying to stock up on craft beer and spirits, just like they loaded up toilet paper and hand sanitizer.

Market research firm Nielsen said total beer dollar sales in off-premise retailers rose to $791.9 million, up 14% the week of March 14, compared to the same week a year ago. Beer category dollar sales are down from the peak stock-up week of March 15-21 when sales increased 42% to $967.1 million. In the last week of March, Nielsen said beer sales rose 17% to $817.8 million compared with the year-ago periods.

For the week ending April 4, dollar sales of total craft (up 15.3%) and independent craft (up 15.8%) beer were nearly identical, Nielsen reported. Looking at craft beer sales only, Nielsen says sales rose 21.1%, noting many breweries are down overall in sales since the majority of the revenue comes from the tap and on-site consumption.

Nielsen said online sales of liquor continue to set new records, rising 42% year-over-year in March. Grocery retailers report mid-March as the most significant stock-up time for consumers with wine sales increasing 27.6% and the sale of 3-liter boxes of wine rising by 53% from the year-ago period. Malt beverages rose 14%, spirits sales were up 26.4% and 24-count cases of beer saw sales up of 24% in March compared with the prior year.

Jeff Charlson, founder and co-owner of Bike Rack Brewing Co. in Northwest Arkansas, said his beer business is down substantially because the majority of revenue comes from taprooms and sales through restaurants that are closed. Bike Rack operates three taprooms in Northwest Arkansas, a brewing operation in Bentonville and a wholesale business that supplies Walmart, Sam’s Club and other retailers with the canned product. The company also provides restaurants and bars in Northwest and central Arkansas with beer on-tap.

“It’s been an interesting time for us. We have seen a real dramatic change in our business overnight. With the loss of the restaurants selling on-tap, we had to try and quickly revamp our business to protect our brand equity,” Charlson said.

Charlson said the business had an abundant supply of cans on hand, so it began to can the product. It’s now selling it online through a partnership with Hawk Moth, another local brand. He said the Arkansas Beverage Commission relaxed the law to allow for home delivery. Hawk Moth and Bike Rack have teamed up to deliver online orders for their products. Consumers can order beer at nwabeerdelivery.com. With a $30 order, delivery is free.

Charlson said customers are also calling up the taprooms and asking to pick up six-packs and growlers, and the sales of Bike Rack beer at Walmart and local liquor stores also are up. He said Walmart and Sam’s Club sell lots of beer for the startup. Still, the majority of the company’s revenue streams come from its taproom and restaurant business, which is temporarily suspended as social distancing protocol is mandated by health and government officials.

Bottling or canning craft beer has a much higher cost than serving on-tap, Charlson said. He said wholesaling a six-pack of beer to a retailer and selling pitchers of beer on tap each garner the company about $5, but the operating cost for canning or bottling is much higher than serving beer in a pitcher from the tap or keg.

“We have also been hearing from restaurants who, through distributors, purchased kegs of our beer they cannot sell now,” he said. “So there is the question as to how it takes that loss if that beer is not moved. Right now, our business is about one-fifth of its average volume, and we don’t know how long this is going to last. We were able to get the SBA loans, and that has afforded us to keep our 30 employees working. That said, work looks different now. Everyone is doing what they can to keep the brand name relevant.

“We will survive this, and the federal loan is a big help. But not all craft breweries will likely make it if this lingers much longer,” Charlson said. “Walmart has reached out to the craft breweries and said the 15 local stores in Northwest Arkansas are going to feature the local beer with new signage and prominent placement in the coming weeks as they understand the importance retail sales have become for us since this shutdown.”

In the past couple of years, Walmart has increased the number of craft beer products it carries and ushered in a full line of private branded wines, according to Andrea Albright, senior vice president of snacks and beverages at Walmart.

“As a store of the community, Walmart remains focused on offering customers those homegrown brands they love. This is a challenging time for many small businesses, including restaurants and local breweries. One way Walmart is helping support local breweries in Northwest Arkansas, as well as those from Seattle to Albuquerque, Milwaukee, Cleveland, Ithaca and dozens of cities in between, is by accelerating expansion of our assortment of popular local craft beers. It’s a win-win-win for local communities, local businesses and our customers,” Albright said.

Walmart said in Northwest Arkansas, shoppers will see products from Bike Rack, Ozark Beer Co., Bentonville Brewing Co., Core Brewing Co., New Province Brewing Co. and Black Apple displayed on end caps and in coolers with signage featuring the local brands.

Charlson said craft brewers like Bike Rack need the retail sales to help promote their brands to the mainstream public. He is grateful for that revenue stream but said the highest margins and the essence and core of the brand occur in the taprooms.

“It’s a perfect storm for the craft beer business,” said Laurent Grandet, an analyst with Guggenheim Partners.

Grandet said as much as 70% of craft beer brewers’ revenue is derived from taprooms or bars. He also warned as more consumers are impacted by layoffs and furloughs, spending on craft beers and other nonessential goods could slow.

Nielsen said it would watch beer sales in the coming weeks to see if there is a “new normal” for consumers sheltering in place. Nielsen expects sales of alcoholic beverages off-premise will remain elevated as consumers are sidelined at home.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.