Beer 511

Exploring Craft Beer and Homebrew in Peru (Country Code 51) and the USA (Country Code 1)

Category: Commentary

Not All is Yet Doom and Gloom for Craft Beer

When the pandemic hit, spurring the ensuing (and necessary) shut-downs, there was no dearth of articles predicting the doom of craft brewing, with titles such as “Coronavirus Could Kill Craft Beer” or “Will Craft Brewing Survive?” And, indeed, a survey conducted in April by the Brewers Association revealed a marked decrease in category sales, massive furloughs and layoff, and looming closures. The median drop in sales was of 75%, with an average drop of 65%.    Seventy percent of responding breweries said the would be forced to close within 6 months, and 45% said they could only hold out for 1-3 months.

Now, the virus is surging all over the country, prompting renewed shut downs and bans on indoor service, just as the weather turns cold and the winter dark looms ahead. 

The Independent Restauranteurs association estimated this past week that if things don’t improve and without government assistance down the pike, 70-80% of independent restaurants won’t make it to spring.   Breweries and taprooms face many of the same dynamics as restaurants, so as one goes, so likely goes the other.

It’s could be a long dark winter faced by our friends in the industry.

But … and this being 2020, there is a but… it may surprise one to think that there is a silver lining to the pandemic when it comes to the beer scene, but if we look closely, we’ll find one.

On the one hand state, county, and local governments responded by liberalizing alcohol regulations, permitting outdoor seating, allowing breweries and taproom to take advantage of restaurant exemptions in order to keep operating.  Another key were customers, who switched to to-go only ordering without batting an eye, and who’ve made it a point to support their local brewers and taprooms.

On a federal level the CARES (Coronavirus Aid, Relief, and Economic Security) Act and PPP loans also helped breweries and taprooms to survive through the spring.

Thus, while the industry has indeed been hurting, happily we’ve not seen the massive wave of closures that we might have, had nothing been done.

Have there been closings?  Certainly, and specially in the last couple of months, it seems that every other day brings the sad news of a venue shutting its doors, but alongside that we’re seeing a smaller but notable string of openings, between expansions of already existing businesses, new brewers taking over an existing brewery space, or projects long in the works that would be delayed no longer.

(There has also been an increase in interest in homebrewing, which is always a good thing.)

Commercial brewers have also pushed out and gotten their beers onto stores shelves and coolers, and in some cases, they’ve even managed to expand keg sales -no mean feat given that pretty much everyone had, at least initially, reduced the number of taps running in the face of declining sales volume.

Many have stretched to find ways to get the beer out, be it by starting to can or bottle their beers, or by offering pick-up sales, delivery, and even shipping.  This has permitted many a brewery which had previously relied on tap room-only sales to get their beer out and gain exposure over a wider geographical area; and, crucially, to make sales.

In other instances, the stretch has been in infrastructure and equipment; whether it be in building or improving patio spaces, investing in an in-house canning line, or delivery staff and vehicles.

In other words, immediate needs raised by the pandemic have prodded many of our friends to make investments and changes that will pay dividends in the long term, when this mess is all over and done with.

Thankfully, we can say that reports of craft brewing’s demise were a bit premature, to say the least.

The CO2 Shortage

On April 7th the Brewers Association, along with the Beer Institute, and several other industry groups, including the Compressed Gas Association, signed a letter to Vice President Mike Pence expressing “strong concern that the current coronavirus (COVID-19) pandemic creates a significant risk of a shortage in carbon dioxide (CO2).” The letter further noted that “A shortage in CO2 would impact the U.S. availability of fresh food, preserved food and beverages, including beer production”, and requested emergency federal assistance to forestall a CO2 shortage.

The Brewers Association’s concern is understandable. Carbon dioxide gas is an essential component of beer manufacture and dispensing. It is also a byproduct of fermentation, but fewer than 10% of craft breweries have CO2 capture technology in place. Most simply don’t have the resources to invest in the costly technology, so they must rely on commercial suppliers of CO2 for their production, packaging, and dispensing needs.

Normally, about 40% of US supply of CO2 is derived from ethanol production, 15% to 20% comes from refineries, and the remainder comes from fertilizer production or from geological sources. According to Independent Commodity Intelligence Services, about 1/6 of US production of CO2 is used in the beverage industry. Among the Brewers Association member breweries, about 44% of their CO2 needs are met from ethanol-derived sourcing.

Due to lowered demand for ethanol brought about by reduced travel due to the COVID-19 pandemic, 33 of the US’s 46 CO2-selling ethanol plants had been idled or had cut production by the end May, according to gases industries reports. At one point, more than half of the US ethanol industry’s capacity was shut down.

By late April overall CO2 production for resale was down 20%. By the end of May it was down by 30% according to the Compressed Gas Association. Normally, US production of CO2 is approximately 1 million barrels per day, since April it has mostly been in the range of 700,000 barrels per day.

So, there has definitely been a shortage. However, due to the high freight cost associated with it, sourcing of CO2 is relatively local, and because of differences in sourcing the shortage can be fairly regional in its effects. In Michigan, for example, Bell’s Brewery, the US’s 7th largest craft brewer, has said that they’ve not experienced any issues with their CO2 supply. In other places there have there have been reports of customers being able to get only 50% of what they usually contracted for. Overall, prices for CO2 have been driven up by as much as 25%.

It has been enough of a concern for the American Homebrewers Association to open the July/August issue of its journal, Zymurgy, with an editor’s commentary on the CO2 situation. The supply issues have also led the Brewers Association to warn its member breweries against the risk of lower-quality CO2 gas entering the supply chain.

Food-grade CO2 must be at least 99.9% pure. The remaining 0.1% could consist of water, oxygen, nitrogen, and even hydrocarbons – some of which we can detect with our senses of smell and taste. In a letter to its members, the BA noted that 0.1% equals 1000 parts per million, which is as much as 4 times the concentration at which we can sense some flavor-active components in hops.

Fortunately, according to gases industry reps the situation is returning to normal albeit with some “ongoing allocation” issues.

One thing that may have helped prevent things from getting worse overall, was the Federal Government sensibly declaring the production, warehousing, transport, and distribution of “medical gases” an “essential industry”. Another, likely has been the partial “re-opening” of economic activities across the nation that followed upon Memorial Day weekend, which has meant an increase in driving, transportation of goods, and travel.

As for California, we might have been helped by the fact that in May, industrial gases manufacturer Messer Americas brought online a new CO2 production facility in Keyes, that can produce 450 tons of CO2 per day, including food-grade CO2 .

At any rate, as long as the pandemic continues to spread pretty much unchecked, we may expect perhaps several cycles of shut downs and quarantine, with the attendant effects on fuel -and thus of CO2– production.

Breweries can adjust by investing in CO2 capture technology or by fine-tuning their existing CO2 systems to eliminate leaks and reduce waste. They can also expand their use of nitrogen gas in moving and dispensing of beer.

As for homebrewers, our smaller volumes do give us a bit of flexibility over commercial breweries. Not only are the volumes of CO2 that we require much, much smaller, but it is a relatively simple matter to use a bit dextrose or sucrose to naturally carbonate a few dozen bottles for a typical 5-gallon batch. The same can be done in a keg or a cask.

In the meantime, don’t let yourself be caught off-guard. Get your CO2 refills when you can. Preferably before you run out.

Illinois Brewery in Hot Water Over Owners’ Insensitive Posts

An small brewery in Illinois finds itself in the midst of a shitstorm thanks to its owners online postings.

The story was first caught by A Good Beer Blog, who preserved and tweeted the screenshots, and followed-up on by PorchDrinking.com. Following the story, one finds oneself bearing witness one big WTF? moment in a year already abundant in them.

It turns out that Natalie White is one-half of the team behind a place called Steam Hollow Brewing Co. in Manteno, IL., and that that post is but one of several in the same vein.

If that were not bad enough, a few days later, the couple proceeded to become involved in a verbal altercation #BLM demonstrators. In a since-deleted FaceBook post the Whites claimed that they “were trying to cross a busy road and had a car of people yelling behind us. A few quick seconds of conversation as the cross light changed, we were called racist, etc.”, but admit to being “sarcastic”. The protesters, on the other hand, have argued that it was the Whites who started the incident.

To make matters worse, in defending themselves, the Whites doubled down on the conspiracy theories:

How could they even think that that could ever be counted as effective damage control?

Unsurprisingly, the backlash has been immediate. Not only are they being eviscerated pn social media, but as reported by PorchDrinking.com, even the Illinois Brewers Guild has been quick to put distance between themselves and Steam Hollow: “Steam Hollow is not a member and the views expressed by the owners do not reflect those of the guild.” BreweryFinder.org, an online brewery directory, has stated stated that Steam Hollow has been “permanently removed from our directory”, and even Steam Hollow’s distributor has apparently stopped doing business with them.

At a time when emotions are running high and even government officials and managers in large corporations are being taken to task for what they say in public -and even in private- , it boggles the mind that the White’s could think that the “private views” they stated on very public social media platforms would not rebound on to their business.

To paraphrase something I said regarding the similar case of 12 Rounds Brewing in Sacramento a few years ago:

At the same time I can’t but think what a rookie, dumbass move … when one is in a business that depends on making people feel welcome and included. And, especially in one in which so much depends on the brewers’ reputations and the customers’ relationship to them. In that sense, [they’ve] reaped what [they] sowed.

Two and half months into the shutdown …

Recently I came across a blog post which mentioned that Mexico’s Grupo Modelo and Heineken, who has stopped brewing on March 30th, were saying that, with Mexican federal guidelines coming out,  they were now ready to resume production as soon as June 1st.

Naturally, the brewing shut down in Mexico has hurt all sectors of Mexico’s beer industry. 

Despite some local booms in demand and price for craft brews, as the stock of Big Beer dwindled, it has been estimated that the crisis could cost Mexico 50% of its craft breweries.

The beer shut down in Mexico -just talking now about the big industrial sector- has also had significant effects upstream and downstream.  Downstream, there are the 600.000 jobs directly and indirectly tied to industrial beer, including those at countless bars and restaurants for whom beer sales accounted for 40% or more of their income.   Upstream, there are some 4.000 farmers who produce the barley.

And those ripples extend surprisingly far afield: Upwards of 75% of Idaho’s barley crop is destined to be malted, and most of that is destined for breweries in Mexico.  Breweries which are currently paralyzed.

With barley backed up on the farms and dropping in price, and uncertainty for what’s coming, it is likely that Idaho barley farming acreage will go down this year and next.  According to the Idaho Barley Commission, Idaho’s overall agricultural sector -potatoes included- could take “up to two years” to recover.

And, Idaho farmers are not alone in their predicament.  Southern Montana and Northern Wyoming’s barley producers have been informed by Briess Malt that it can guarantee purchase of only 50% of what it had contracted. 

And, of course, the worldwide slow-down has effects on other areas that are of concern to us a beer fans and brewers.

The NW hop sector had been planning on increasing acreage this year. Instead, Southwestern Idaho and Southeastern Oregon hop growers plan to cut back by 5% to 20% from a year ago, depending on the varieties.

And, we have yet to see what effect the economic downturn, cooling relations with China, and the slowdown in global shipping will have on equipment price and availability.  The brewing industry uses a lot of stainless steel, for example. The last time there a big trade dispute with China something as basic as a keg became pricey and hard to get.

The good news is that, bit by bit, the US economy is starting to reopen. 

One may feel that it is too fast or too slow, but for a lot of brewers it certainly can’t come soon enough.

Recall that at the end of March the Brewers Association surveyed US craft brewers and about six in 10 said that a 3-month closure could well drive them out of business.

We’re heading into that 3rd month. 

Even with to-go and mail orders helping out, most craft breweries have still seen drops of 60-90% in revenue.

And it’s crunch time in other ways too.

For example, many breweries are sitting on hundreds or thousands, of gallons of beer that has been aging for a month or two, or longer. They can package that beer and sell it, but they can’t be as confident of the shelf-life and sustained quality of that beer.  

The BA suggests monitoring the stock daily and pulling it if starts to taste off, and adjusting the best-by date on packaging to account for the time that the beer has already aged. It’s simple and reasonable advice, but it covers what could be some difficult choices for brewers:

Can they afford to invest in canning and selling beer that may be OK, but no longer tasting “on-brand”, that no longer represents what they’re about?

On the other hand, can a small brewery already facing financial hardship afford to dump all that beer, knowing that that may mean no product available to sell for a month, just when the economy is starting to reopen?

Of course, we -as consumers and beer supporters- don’t have to wait until the “Opening”, with a capital O, we can help right now by continuing to support our local and regional breweries and taprooms.

And don’t forget to tip the staff.

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