As 2019 was coming to an end, local breweries ramped up production for spring in anticipation of an expected uptick in sales. A seasonably warm March 2020 had Washingtonians shedding their winter coats, eager to drink outdoors. Fresh off a Nationals World Series championship, brewers were excited about the sales potential of having their beer available at District Drafts carts at Nationals Park. The beer festival season that stretches from March through November was about to kick off.
Last year was also supposed to be a big year for beer nationwide. According to the Brewers Association, craft breweries in the U.S. saw consistent growth in beer production starting in the early 2000s. Bart Watson, the national association’s chief economist, forecasted this trend to continue in 2020. He anticipated 3 to 4 percent growth nationally and 4 to 5 percent growth in the D.C. region. On-site taprooms became more popular. According to Watson, there were more than 2,900 in operation nationwide by the end of 2019. Taprooms position breweries to be even more integrated into their communities and tack on a new way to generate revenue.
Fast-forward to March 2020, when restrictions from the pandemic began to impact on-premise consumption at breweries. According to Watson, the pandemic severely crippled craft beer growth in 2020 and production is expected to have dropped by 7 to 8 percent once numbers are finalized. He also estimates that losses at D.C. breweries may eclipse national figures because of their already small production size and intense reliance on distribution to local bars and restaurants. According to 2019 data from the Alcohol and Tobacco Tax and Trade Bureau, only 26 percent of beer from D.C. breweries made it into bottles or cans.
D.C. first took action to slow the spread of COVID-19 in March. Any optimism about the future of the industry came to a halt when Mayor Muriel Bowser issued the city’s stay-at-home order at the end of that month. Breweries had to shift to to-go sales, which decimated the on-premise taproom sales they rely on. Distributors set up emergency meetings with brewers after restaurants and bars stopped ordering beer because they too were limited to takeout.
“Survive and advance” became the motto for breweries small and large. Brewers and owners have demonstrated their resiliency ever since, pushing the boundaries of creativity, whether that’s shifting their business models or collaborating with area distilleries to make hand sanitizer. City Paper checked in with several local breweries 10 months into the public health emergency to hear their latest strategies and gauge their overall shot of survival.
The pandemic forced breweries to shift their focus from filling kegs destined for restaurants to packaging in cans and bottles for on-site to-go sales or distribution to Washingtonians’ doorsteps. 3 Stars Brewing Company owner Mike McGarvey says they focused their efforts on canning. They also sought to find the most advantageous mix of beers to produce.
“The flagships have been somewhat consistent, but at a reduced volume,” McGarvey says, citing the Ghost White IPA and Peppercorn Saison as stalwarts. Speciality beers didn’t have the same sales potential. McGarvey says distributors have seen grocery stores shift their purchasing focus to beers that are approachable to a wider audience of consumers
“[Experimental beers] do sell very well on premise, so they’re important to our financials,” McGarvey continues. “Balancing the two has become very difficult. We’ve recently made major changes to our operations to adapt and hope it will allow us to get through this with the complete loss of the draft beer market.” McGarvey is making these decisions as the sole owner. Co-founder Dave Coleman recently split from the brewery.
Julie Verratti, co-founder of Maryland-based Denizens Brewing Company, says her brewery also prioritized packaged beer. “Our sales mix has shifted dramatically this year to about 85 percent to 90 percent packaged beer,” she says. “We were selling only about 30 percent in packaged beer prior to the pandemic.” Growler sales increased, which helped the brewery move through its kegs. “We will continue expanding our bottling line-up in 2021, which takes some of the pressure off of cans and allows us to be more creative in our small-batch offerings,” Verratti says. “Our main avenues of moving packaged beer this year have been through home deliveries and distribution to retailers throughout Maryland, D.C., and Virginia. I don’t expect that to change in 2021.”
Acquiring shelf space at D.C. bottle shops and grocery stores was already competitive. Now it’s an arms race. McGarvey from 3 Stars says he’s “seeing less specialty craft moving into retailers in exchange for bigger brands with ‘longer code dates.’” (Code dates are a quality control measure that breweries use to tell consumers if their beer is fresh.)
Local brewers also remain frustrated that breweries outside the District can directly import their beer to retailers for a very small fee and do not need to ship it using a distributor. Importing breweries only need to cough up a $5 permit fee to ABRA, plus tax on the beer they are importing, which doesn’t amount to much. With the barriers to entry being very favorable to out of market breweries, many capitalize on the opportunity. On the flip side, D.C.-based breweries that ship outside of the District face higher fees and often need to partner with a distributor, which involves complex contracts and diminished returns.
The pandemic threw D.C. breweries another nasty slider—a can shortage. Like 3 Stars and Denizens, breweries across the country doubled down on can packaging. “With everyone at home buying more things in 12-ounce and major non-beer brands also launching new 12-ounce products there is a definite shortage,” McGarvey says. “We’ve been able to work through the supply issues up until now, but things are looking worse as we go into 2021.”
Thor Cheston, who co-owns Right Proper Brewing Company in D.C., says the price of standard beer cans (known as 12-ounce brites) has increased by roughly five cents per can. While that’s just a nickel, it adds up. “We are looking at a cost increase of $504 for every 30-barrel tank packaged,” Cheston calculates.
Hellbender Brewing Company faced similar supply chain challenges sourcing both 12-ounce cans and crowlers. “We sold every drop from the kegs overcrowding our cold rooms via crowlers in the first few months of the pandemic,” says Ben Evans, who owns the D.C. brewery. “We ran out of the 32-ounce crowlers a couple of times.” He ticks off other escalating issues he encountered: “Can label material for our 12-oz cans has been slightly delayed over the past couple of months, and shipping is more expensive for hops, grain, and cans with substantial delays.”
Faced with adversity in 2020, local brewery owners are trying to squeak by with the help of their hourly employees. These individuals put their health at risk simply by coming to work. “With the right people in place, we can push boulders up mountains,” Cheston says. “If it were not for Justin Larson, Tommy Peters, and Gianna Verri, who showed up every day and get the job done under very scary, uncertain circumstances, Right Proper’s Brookland production facility would not be in business.”
All those interviewed relayed that the biggest key to their success is keeping workers employed and wearing masks to protect themselves and their coworkers. In order to do so, some breweries successfully applied for Paycheck Protection Program loans, which prioritized covering payroll expenses. In general, breweries devoted more employees to operating their canning lines and packaging beer inventory that had already been brewed before the pandemic hit.
There was collateral damage in the form of layoffs as the reality of the pandemic began to take shape. “We were not able to retain our sales person as his salary was commission-based, and we did not have enough work to give him extra hours,” Evans says.
“We took a long-term look at the problems we were going to face financially due to the pandemic and were forced to furlough employees to reduced hours,” McGarvey adds. 3 Stars received a PPP loan in April, which helped them retain employees for several months. It wasn’t enough to prevent further layoffs when aid dried up. “We’ve recently had to let our distribution sales force go,” he says. “We were hoping we could avoid that, but the necessary assistance for small business isn’t coming fast enough.”
With the start of a new year, local breweries are looking to the future. Cheston, for one, is adopting new strategies based on lessons learned from the year one of the pandemic. “The development of online sales and at-home delivery are here to stay, as well as Senate Beer’s place among our core beers,” he says. The Christian Heurich Brewing Co. Senate Beer brand, an American-style light lager, is the revival of D.C.’s iconic historic lager that was originally produced from 1890 to 1955. Senate Beer will always be exclusive to the District, according to Cheston.
He’s also dividing beer production between Right Proper’s two properties. “The splitting of our brewery programs is new due to the pandemic,” Cheston continues. Brookland will focus on producing Raised by Wolves, Li’l Wit, and Senate Beer, while the Shaw brewpub will become “the creative outlet” for experimentation.
Right Proper invested in equipment to achieve its new goals. “We just installed a brand new four-head Wild Goose canning line,” Cheston explains. “This gives us a lot of flexibility with our production. We no longer have to rely on outside companies to bring equipment to our facility, which is a big cost savings.” They’re also installing new tanks that will allow them to keep up with the production of their core beers this spring. The brewery is hoping to introduce new beers to D.C. in 2021, including up to 18 “weird beers” packaged in 16-ounce cans.
3 Stars is also exploring new opportunities in 2021. “We’re going to experiment some with a [hard] seltzer, but the low-cal[orie] IPAs are a bit more interesting to me,” McGavery says. Washingtonians can also expect plenty of new sours produced in what the brewery calls its Funkerdome. “Our brand has always been about experimentation and new flavors, so we’re going to double down on that.”
McGarvey is eagerly awaiting the time when most of the population is vaccinated and the pandemic is a thing of the past because 3 Stars made major improvements to its facility in recent years. He has a vision for his brewery being a true “destination” with its new beer hall that doubles as an expansive private event space.
Denizens’ plans for early 2021 include releasing a new bottle series called Hike the Alps. “These beers are inspired by traditional breweries along the base of the German and Austrian Alps that [brewer and partner] Jeff Ramirez fell in love with when he was finishing up brewing school in Bavaria,” Verratti says. “We are also going to bring back a couple of beers we haven’t brewed in a few years—our Short Session Triple IPA and Ill Padrino, our Belgian-style quadrupel. Be on the lookout for some new seasonal MoCo Hard Seltzer flavors as well.”
While local brewers are moving forward with cautious optimism for 2021, they say federal aid is still required for them to regain their footing. Without more support, Cheston predicts pandemic-related closures or mergers. “Breweries with a strong brand presence but limited resources may be absorbed by large breweries that need to diversify. I would not be surprised to see this between small-scale, hyper-local breweries where before it was more common on the regional and national level.”
Watson, the economist from the Brewers Association, says his organization is advocating for craft brewing needs at the federal level. He points to getting the Craft Beverage Modernization and Tax Reform Act passed in December 2020. It permanently reduces the excise tax on beer, wine, and distilled spirits.
He also offers predictions for 2021. “Things like to-go, delivery, and e-commerce sales got a bump that probably isn’t going away,” Watson says, echoing Cheston. “Consumers are going to have different shopping and visiting habits.”
These operational pivots and legislative changes won’t be enough to sustain all breweries. “I’m forecasting growth in 2021, though not back to 2019 levels,” Watson continues. “Some breweries are likely going to rebound well in 2021 based on a combination of new strategies and a market that should hopefully recover, particularly in the second half of the year. That said, many small businesses have taken sharp hits, and as they see the size of the hole they now have to dig out of. I do think we’re going to see more closings.”
The author of this story previously served as a brewer at Right Proper Brewing Company.