Covid-19 & Craft – Brewers Coming Back Stronger

Many industries have been affected by Covid-19. From the multi-billion-dollar soccer industry to shoe-shines working on the street and everybody in between. Today though; we talk about “Covid-19 & Craft”.

With the brewing industry reports suggest as many as 45% of US breweries could close due in part to Covid-19. The US craft brewing industry was already struggling with 300 reported brewery closures in 2019.

The figures for brewery closures for 2020 were predicted to be greater still but pushing into spring this year; disaster struck and we soon found ourselves in a world-wide pandemic.

Cov-19 world wide pandemic — Cov-19 World Wide Pandemic

It isn’t just the US who have been affected. I am a brewer based out of China, where the lockdown has hit the brewing industry hard. The same could be said for every beer market on the planet.

In China we first knew about Covid-19 in December but not how serious it was going to be. We went into Chinese New Year where everyone goes home and most businesses shut down for a week or so without realizing what was happening.

Chinese New Year became a 3-month pro-longed shutdown. This proved hard for small businesses which required continuous cashflow to stay open. It’s safe to say Chinese craft breweries have been severely affected.

Craft Brewing – Not A Cheap Endeavor

We all know setting up a craft brewery is expensive. It requires a huge capital investment up font and you’re lucky to break even after 2 years of operation. The joke is, you budget for a brewery and then triple it for unforeseen expenses.

Once open, a brewery is a cash-flow business; requiring running capital to keep the brewery going. You need to pay for your building (most breweries don’t own their building), pay wages, pay taxes and keep raw material stock.

Breweries making money often re-invest at least some part of the profits back into the business to expand/upgrade in the hope of selling more beer, invest in their workers (training) or improving their product.

Chinese Craft Breweries — A Brewpub Brewer

I know it’s not every brewery; but most craft brewery owners care about the workers, love their jobs (although they do like to grumble) and care about the product/experience they give the customer.

Of course, breweries want to be profitable and make money but it’s a labor of love for many too. For brewery owners Covid-19 has been rough and hearing about the experiences has highlighted this to me.

Covid-19 & Craft: Still Outgoings but Little Coming In

Craft brewing be it a production facility or brewpub is a cashflow dependent business. Breweries have many outgoings that we’ve mentioned and selling beer is the major source of income.

So, when Covid-19 hits, business weren’t allowed to operate, people were in lockdown as well as having to social distance…thus impacting the brewing industry directly.

Breweries have to still pay wages; pay rent and are holding stock (beer in tanks and raw materials) that isn’t going to be used or sold. Many breweries do have some reserves but for reasons explained above extended periods with little income are hard to endure.

We’ve already seen breweries fold, with Joseph James Brewing Co. out of Las Vegas being one of the latest to cease operations. In China, one of my old breweries Bad Monkey in Yunnan closed which was deeply saddening. They will be many more to follow. So, what can breweries do?

Covid-19 & Craft – What I’ve Observed About Successful Breweries

In China we have come out of the lockdown and I have observed a few things. Some breweries are continuing to struggle with 30-60% of the business for April 2020 compared to the same time last year.

Yes, the lockdown has finished in China, however, some people are still taking care when it comes to gathering in numbers although bars and restaurants are open. Still, I have noticed that some breweries are doing better than others.

During the lockdown many breweries set-up online shops to sell their wares. Yes, the volumes involved were much lower than usual but every little helped. However, most breweries should have had this revenue stream already available before Covid-19.

I believe sometimes our industry especially the craft beer sector isn’t as creative as it should be. Yes, we can make some cool beers but when it comes to business we often think “if it isn’t broken why should we fix it”.

The breweries I have observed coming back the strongest after the lockdown in China didn’t spend their time in lockdown worrying about how they were going to survive. They actively went about reevaluating their business and how they could improve their position when doors were allowed to open once more.

How Breweries Made the Most of the Lockdown

Many breweries did sit and wait out the lockdown in China, fretting out about how they were impacted by the virus. Worrying even if they had a business to go back too. I get that it was a stressful time, with not only your business but your staff to take care of.

However, I have inspired by other craft breweries that used the 3 months to see how they could improve their business. So, when the lockdown was lifted, they were motivated and ready to take action as soon as the green light was given.

Craft Head in Shenzhen

I have over time become friends with the owner of Craft Head in Shenzhen, China. Nic, is a no-nonsense Kiwi (from New Zealand) who should be an inspiration to many craft breweries in Asia.

He started out with a brewpub making good beer and cider. Then used the brewpub as gateway to increase production (to larger scale brewing in Shanghai) so he could brew Craft Head cider for distribution across China.

Even with running two operations he never took his eye of the ball. He used the lockdown to look at his business. When the doors opened, he was one of few breweries that I know of China who saw similar sales for April 2020 when compared to 2019.

What Did Nic He Do?

Well he decided to re-invent his menu (I know some people say don’t change too much as it can hurt business). However, if you’ve been in lockdown for three months where are you going to go? A place that opens up exactly the same or somewhere you can try something new.

He also started up a brewing school; giving his customers more knowledge about beer. What does that do?

It gives your customers greater appreciation of your beers (but controlling the knowledge for Nic’s own sanity, and also in the best interests of his customer too – “not just this beer tastes bad…I know beer!).
Brewing is cool right? Spread some that coolness to the customers too. They’ll know more about beer than their mates, which leads too…
These people becoming your brand ambassadors. They tell people about their experiences and Nic’s beer in a natural way…spreading the word organically.
Also, it is another revenue stream. The more streams you have the better.

Covid-19 & Craft: Marketing…

Nic, also looked at his marketing (which the brewing school was one off-shoot of) to see how best he could reach customers.

As I say Craft Head is now distributing cider throughout China. So, another way to get his message across was to start doing some collaboration brews. Yes, they are fun but also a good way to get your brand across too. “Hey everyone, Craft Head are in town making beer with us”.

You get instant recognition by brewing with the local cool brewer. Whilst the local customers are also asking who Craft Head are. Craft Head? Oh, they’re making cider that you can get in places X, Y, Z.

So Nic is having fun, exchanging ideas, raising awareness of his brand plus maybe learns something new which he can share back to his brewing school.

Other things Nic did were:

Pilot brewed Kvass
Brewed a proper hard seltzer
Cold pressed coffee
Brewed Kombucha
Distilled some gin

The hard seltzer and gin have will be commercially scaled up this month. Adding more products to the Craft Head Brand as well as additional revenue stream. The cold press coffee has on-going trials with the hope to scale up to commercial size for the summer.

Nic did more which you can see it in the video below (fun promo vid). That’s why I see Craft Head as an inspiration, they were willing self-evaluate, to make improvements and now hustling to make it happen.

I’d like to also give some other examples of inspiring industry colleagues who have also used their lockdown time wisely.

David, Fat Fat Beer Horse and Xiamen

I’d like to introduce David; he is a German brewer with his own brewery Fat Fat Beer Horse in Xiamen. David has a bar, production brewery and craft distillery.

He believes in being local and has a delightfully imaginative mind. I call him the mad brewing scientist of China (in a good way).

For example, he recently brewed a Saison with 35% famous local sweet potatoes in the mash. He was willing to nurse through his sparge (more patience than me) so he could make something new using local ingredients.

It was worth the patience; ending up with Six Rocks Saison a 1.9 Plato final gravity beer that’s full-bodied because of the sweet potato and something I’ve not seen elsewhere in China.

David is trying to increase beer production (expanding operations) whilst also entering the tough world of spirits after investing in a craft still…all the while dealing with the lockdown too.

To get your spirit to market in China is isn’t easy it requires a lot of investment in marketing. So, when the lockdown hits and your marketing capital is eaten up to pay ongoing expenses. It is time to get creative…

Selling Spirits in Bulk

So, we all know most spirits come in 0.75 or 1L glass bottles predominantly. But David got inventive …I’ll let him tell it is his own words:

Special Times need special measures!!!

For “AXIS”, the famous nightclub in the Metropolis of CHENGDU, we developed a sustainable, cost effective and we think BOLD solution for supplying a high-volume bar with our BALANG DISTILLED DRY GIN!

With our private branded 5L tanks we keep transportation costs and environmental impact as low as possible.

I think 2020 is the right time to start selling spirits bold and honest!

#bar #bartender #drinklocal #bartending #spirits #gin #cocktail #bold #honest #balang

So Balang is David’s spirit brand and the bar he is supplying, Axis uses 5-10 liters of gin per night so using bulk 5 liters packaging makes sense:

Easier to fill than 1-liter bottles
Lighter packaging
Smaller packaging footprint so better for the environment
Less work and no labelling

Balang, can sell for cheaper (price per liter) passing on some of the savings to the client from packaging too. A win-win; David can shift volume of his gin, whilst the customer gets craft gin at a competitive price.

What Else Did Fat Fat Beer Horse Do?

For the bar side of operations, it all about getting customers back through the door. They worked on their social media and web presence to explain what Fat Fat Beer Horse were going to do after the lockdown which was:

Free flow nights (all the beer you can drink for 99RMB [US$14])
Filling cans for take-away and deliveries to the home
Cross promotions with other bars to promote their beer and spirits brands

They took a personal approach to the bar. David and his wife Ting Ting took time to be at the bar to interact with customers bringing back old patrons and making new friends. As the lockdown receded, they wanted to retain and add new customers with their personal approach.

In Xiamen, Fat Fat Beer Horse historically had lots of business from tourism and university students. The lockdown has finished; but tourism has yet to rebound and universities aren’t back yet. It was about creating an atmosphere that people wanted to come too leading to repeat custom.

David and Ting Ting spent nights in their bar sending time with customers old and new. It worked and only yesterday David was telling me he had to go into a brewing frenzy next week as he was low on beer.

Back to the Balang Gin

Previously we spoke about how David went into bulk containers for his gin. He also went very small too. As I said the spirits market is competitive. To get your spirits into bars and used in high-end cocktails isn’t easy.

The fact is 98% of the population don’t go to these types of bars anyway. Why concentrate on competitive markets when you can pick at lower hanging fruit?

Balang went for 50ml bottles; I know this isn’t a new in packaging. However Fat Fat Beer Horse are selling them at the bar and online. People can try different flavors, take home to drink at their leisure or share with friends.

David and Ting Ting wants to bring Balang spirits into people’s homes as well as enable people to try the full range of spirits without breaking the bank.

By going big and small it has allowed David and Ting Ting to sell larger volumes of his spirits than all his local competitors, whilst spending little money on marketing.

Covid-19 & Craft – The Power of Tiny Gains

David Brailsford was once one of the most respected coaches in sport with the athletes he trained winning some of the biggest races in cycling. He talks about the power of tiny gains making his cyclist the best in the world.

When you read this article maybe you think some of the examples, I have highlighted are not such a big deal. You may be thinking, I thought of that or could implement some of these examples easily. David and Nic are always bouncing around ideas and talking them through.

A lot of it is dismissed; but some ideas are implemented, some working out better than others. They are both happy to listen, exchange ideas plus open to people’s suggestions.

This article kind of wrote itself…I wanted to highlight how a few of my friends were doing well after the lockdown plus how they went about it. As I was writing it other people still in the lockdown said they were interested in what brewers/distillers in China were doing coming out of the lockdown.

I hope it is of interest to some people and shows that small ideas can lead to bigger wins. Be open, see what others are doing, take advice and try something new…it just might help you come out the lockdown stronger than when you went in.