Higher sales, lower revenue: how the COVID-19 pandemic drained Oregon’s beer industry
Some industries are considered “recession-resistant”: when people have less money to spend, certain sectors — like grocery and funeral services — remain strong. And some — like cosmetics — actually do better, as consumers look for cheaper ways to treat themselves.
Historically, alcohol has been one of these industries, and the pandemic recession has been no exception: according to a June report from International Wine and Spirits Record (IWSR), sales of alcohol in the United states saw a record spike in sales in 2020, with an overall increase of 2%, the largest since 2002.
So what gives?
According to state economist Josh Lehner, the drop in on-premise sales of draft drinks and rise of grocery store sales have been “brutal” for microbreweries that rely on onsite and restaurant sales of alcohol as their main revenue source.
“Most Oregon breweries do taprooms, brewpubs and distribution to bars and restaurants,” says Lehener. “Grocery store sales did well, but that’s a mix of some local beer, but a lot [more] national beer.”
Ninkasi Brewery in Eugene expanded its taproom restaurant space in January of 2020, but the onset of the pandemic forced the brewery to shut down its new facility and pivot its business model to more online to-go sales.
Jaclyn Rudebeck, Ninkasi’s chief operating officer, says that her company’s existing presence in grocery stores prior to the pandemic helped to soften the economic blow. But even though retail sales sell more alcohol by volume, the brewery’s profit margin in grocery stores is significantly lower.
“We saw an increase in our package sales for sure, especially in our early months, but the challenge is that the products that saw the biggest increase in sales are the ones with the lowest profit margin, like mixed variety packs,” says Rudebeck. “Our draft sales really took a hit.”
Ninkasi has seen slow but steady growth in draft sales since indoor dining reopened. Grocery sales are not as high as they were in 2020, but Rudebeck expects 2021 grocery sales to be strong compared to 2019.
Lehner says he expects beer sales to “pop back up nicely” for Oregon breweries in 2021, and that Oregon’s growing distillery ecosystem has benefited where microbreweries have struggled.
“Liquor sales are up. The sales at liquor stores directly to customers more than offset the drop in sales to the bars and restaurants,” says Lehner.
Increasing trends in e-commerce will also be something to watch as the industry regains its footing. The IWSR also reports that sales of wine and spirits have increased drastically Drinks Market Analysis, a 42%jump, allowing the United States to overtake China as the country with the highest online liquor sales.
As Oregon’s iconic craft beer industry recovers, Oregon’s alcohol industry could emerge stronger than before, as Oregon distillers have had the opportunity for growth. But there is still reason for caution, especially for the state’s wine industry, which has suffered despite increased demand — due to wildfires, inconsistent weather and other climate-change impacts.
If grocery store sales remain strong, it could portend a permanent shift in consumer buying behavior, which might mean draft sales never recover fully — at least in restaurants.
If that is the case, it will be up to breweries to find new ways of delivering draft to customers, like Goose Island’s roaming beer ice cream truck.
“We have really been working to reinvent the draft business, but also being aware that retailers and distributors have changed,” says Rudebeck. “Everybody’s a little more risk-averse now.”
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