THE WAKKER WEEKLY
Issue #1521 – Posted on: 23-March-2020
Editor’s note: Hello everyone. This is our “Last Call” for now. We will be closing indefinitely effective immediately. No takeout food or beer service will be offered moving forward. We have been closely monitoring the mandates dictated by our provincial health and government officials. Although we may be permitted to continue operating with limited service for a while longer, and would love to keep as many of our employees working as long as possible, we will now seek shelter from this storm and like you, will re-emerge when it is safe for us to do so. When this global storm has passed and people begin to slowly re-emerge, we will also re-emerge. We don’t know when that will be or what the landscape will look like at that point, but we do know there will be significant and long-lasting changes. Recovery will be slow but our need for face-to-face reconnection will be strong. Bushwakker will be here with incredibly well-aged delicious beer, fresh food, a warm welcoming smile, and our one-and-only television will remain turned off. We suspect you would have had your ample fill of screen time and will benefit from sharing stories with friends and neighbours. Facilitating that opportunity for real human reconnection is what we intend to provide. Hopefully we all will grow positively from this global experience and have a greater appreciation for what is truly important; health, happiness, security and friends. Thank you for your understanding and enduring support. We’ll meet again.
The annual Prairie Dog Magazine “Best of Food” Regina reader’s poll is back! Deadline to vote is April 7th! We are pleased to announce that you have nominated your Bushwakker in a record- breaking 23 categories in this year’s contest! Thank you for your incredible support! Those nomination categories include Regina’s Best: brewpub, pub, restaurant,pub server (both Cheryl and Rayna), nachos, appetizers, soup, salad, pub pizza, gourmet pizza, wings, dessert, business lunch, lunch restaurant, sandwich, local burger, chicken burger, veggie burger, local fries, restaurant for a first date, restaurant for a budget date, restaurant for a party AND restaurant for a fundraiser!
Visit the voting site at https://prairiedogmag.com/best-of-food-2020/#// before April 7th and turn those nominations into victories! If you vote in at least 20 categories, you have a chance to win a $500 prize package from the Prairie Dog.
The Coming Economic Challenges Facing Craft Brewers
By Bart Watson
The novel coronavirus (COVID-19) is going to have numerous reverberations around society and our economy. You can find general resources that may be helpful to your business in our Coronavirus Resource Center, but the point of this piece is to delve into some of the potential short-term and long-term economic impacts.
As a member of the craft brewing community, we want to know how the COVID-19 pandemic is impacting your business. Take our Coronavirus Impact Poll to help us understand how we can our community through advocacy and education.
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Before I get started, I want to stress the word “potential.” What’s going on right now is unprecedented in recent history, and so it’s hard to model what the effects will be. There’s also a great deal of uncertainty; both in terms of how the pandemic will unfold, and how individuals, individual businesses, and local, state, and federal policymakers will respond. All of these decisions will shift what is written below. I normally write posts and leave them. This post will be updated over the coming weeks and perhaps months as we get more information.
Short-Term: On-Premise and Own-Premise Sales will Dip, Regardless of Forced Closings or Not
Let’s start with the short-term impacts. Sales of beer in taprooms and other on-premise establishments are certain to fall. Some of this will be supply-side with breweries shutting their doors for health and safety concerns, and some of this will be demand-side as beer lovers simply venture out less. As we saw yesterday, several states are taking the unprecedented step of closing bars and either closing or limiting the capacity in restaurants.
How Big Will the Impact Be?
It’s hard to measure these types of big and fractured events in real-time, but we’re getting a picture from some data providers. OpenTable, a leading restaurant reservation website, is posting daily year over year (YoY) reservation data on their site.
The numbers aren’t pretty. As of March 14, reservations in the cities they are showing range from -22% down (Honolulu) to -64% down (New York and Boston). That’s every city significantly down, whereas many were up only a few weeks ago. Seated dining isn’t going to a brewery for a pint, so things may be better for some brewers, but even if you’re not in a state currently with mandatory closings, I’d prepare for those types of drops in your businesses. I’d also prepare for the eventuality that you may be forced to close for a period of weeks. When those states that have seen mandatory closings come out of those closings, it may be to numbers that look like these.
For taprooms and brewpubs, there is some hope that those drops might be partially offset by to-go sales or even delivery. If your taproom or brewpub is still open, you’re probably thinking about a plan to make your to-go sales program more robust. As we gather more data about what those sales look like, I’ll plan to update this post.
Short-Term: Off-Premise Sales
For packaging breweries, the short-term effects may be more mixed.
Some consumers may actually buy more beer as they prepare to self-isolate. That said, beer is a luxury, and so others may buy less as they stock up on other goods. We’re hearing reports from members who distribute in the Pacific Northwest of distributor orders being cut by 20% in the Seattle region. Nationally, we only have scan data through March 8, 2020, and if the OpenTable data is accurate, the next week (through March 15) will give a different picture when it is available.
That said, sales the week of March 8 are currently much more positive than the year as a whole. For all beer, sales were up 3.2% versus a year ago in the first nine weeks of the year. They were up 6.4% the week before March 8 (trend +3.2%). Same thing for Brewers Association (BA) craft. The first nine weeks showed a slight dip YoY, with volume sales off -0.3%. But the week of March 8 sales were up 3.7% versus the year before (trend +4.0%). One week is a small sample that I typically don’t like to show, but these are unusual times. I’ll update this post once we have March 15 data and also dig into pack size, since I wouldn’t be surprised to find larger pack sizes doing better if people are stocking up.
Longer-Term: Recession Looming
These short-term shocks are going to be important for any small business, but the longer-term impacts to the economy will also matter. I’d again stress the speculative nature of what is below. We aren’t in a recession and the fiscal and/or monetary response from policy makers will be critical in what economic growth looks like over the next months and years.
That said, there is a growing consensus amongst economists that we’re heading for a recession – many thought so even before this unprecedented shock. Here is the latest from a panel of expert economists.
Both of these questions matter: 1) Are we headed into a recession, and 2) Will the novel coronavirus disrupt supply or demand more. The first shows consensus on an economic slowdown coming. The second suggests that it’s probably going to be demand-driven (related to consumer spending) moreso than supply-driven (related to problems with supply chain as workers get sick and businesses shutdown). For both, however, there is a lot of uncertainty.
Given that level of uncertainty, I’m not going to weigh in on what a recession might look like, but more generally going to talk about how beer performed as a category during recent recessions. The good news is, although beer on average has performed slightly worse during recessions than during periods of economic growth, the differences aren’t huge. My oft-repeated phrase on the subject is “beer isn’t recession proof, but it’s recession resistant.”
Before going further, I’ll again stress that what we’re facing might be pretty different than past recessions. I’m not sure how much time you spend on #econtwitter, but there are real disagreements among economists about how to respond to any potential downturn, mostly because we have no idea what it will look like, how long it will last, and what other policy responses will be in place. Comparing a recession brought on by a novel virus pandemic to one brought on by bankers taking huge risky bets on the housing market isn’t taught in Econ 101.
The periods of growth and recession don’t show huge differences. The 10 quarters that were covered by recessions average 0.08% growth, and the 88 covered by growth average 0.27% – so growth quarters were better, but that difference isn’t statistically significant. You can see that beer did decline as the great recession wore on, but that’s also the period where Anheuser-Busch was bought by InBev, MolsonCoors and Miller merged, and the price war that had been raging ended – so that’s a partial explanation for the decline.
What about sub-parts of the beer business? I often get asked if on-premise impact is softer than off-premise during recessions. I unfortunately don’t have quarterly draught beer sales numbers with significant time series, but from 2002-2019, draught sales have averaged 0.73% growth. The great recession covered the fourth quarter of 2007 through the second quarter of 2009. Draught growth those three years was 2.22%, 0.99%, and -1.45%. If we use a weighted average of those three, the growth ends up at 0.47%. So a similar drop as we see (loss of 0.2-0.3 points of growth), but not a sharp drop off.
Again, I’d say that we typically see a bit of slowdown during recessions, but not sharp drops – note that draught sales were down -2.35% in 2019, so any drop comes on an already weak number. Will this be a typical recession? Who knows. The last recession hit those at the bottom of socio-economic spectrum hardest, a group that is also less likely to drink. If there is a recession coming, all signs point to it being broad-based, but we’ll have to wait and see. I’ll continue to update this post as we get more data and a better sense of what the economy will look like through 2020.
Once upon a time, there lived a man who had a terrible passion for baked beans. He loved them, but they always had an embarrassing and somewhat lively reaction on him. One day he met a girl and fell in love. When it was apparent that they would marry, he thought to himself “She’ll never go for me carrying on like that,” so he made the supreme sacrifice and gave up his beloved baked beans, and shortly after, that they got married.
It was his birthday a few months later and, on the way home from work, his car broke down. Since they lived in the country, the man called his wife and told her he would be late because he had to walk. On his way home, he passed a small cafe and the wonderful aroma of baked beans overwhelmed him. Since he still had several miles to walk, he figured he could walk off any ill effects before he got home. So he went in and ordered, and before leaving had three extra-large helpings of baked beans. All the way home he ‘putt-putted’. He ‘putted’ down one hill and ‘putt-putted’ up the next. By the time he arrived home he felt reasonably safe.
His wife met him at the door and seemed somewhat excited. She exclaimed, “Darling, I have the most wonderful surprise for you for dinner tonight!” She put a blindfold on him, and led him to his chair at the head of the table and made him promise not to peek. At this point he was beginning to feel another one coming on. Just as she was about to remove the blindfold, the telephone rang. She again made him promise not to peek until she returned, and she went to answer the phone.
While she was gone, he seized the opportunity. He shifted his weight to one leg and let go. It was not only loud, but ripe as a rotten egg. He had a hard time breathing, so he felt for his napkin and fanned the air about him. He had just started to feel better, when another urge came on. He raised his leg and ‘rrriiiipppp!’ It sounded like a diesel engine revving, and smelled worse. He tried fanning his arms awhile, hoping the smell would dissipate. Things had just about returned to normal when he felt another urge coming. He shifted his weight to his other leg and let go. This was a real blue-ribbon winner; the windows rattled, the dishes on the table shook and, a minute later, the flowers on the table were dead.
While keeping an ear tuned in on the conversation in the hallway, and keeping his promise of staying blindfolded, he carried on like this for the next ten minutes, farting and fanning them each time with his napkin. When he heard his wife saying goodbye (indicating the end of his loneliness, and freedom) he neatly laid his napkin on his lap and folded his hands on top of it. Smiling contentedly, he was the picture of innocence when his wife walked in.
Apologizing for taking so long, she asked if he had peeked at the dinner. After assuring her he had not, she removed the blindfold and yelled, “Surprise!!” To his shock and horror, there were twelve dinner guests around the table for his surprise birthday party.