NEW YORK, NEW YORK – DECEMBER 16, 2020: A Cafe Luxembourg employee shovels snow in front of an empty … [+]
Two weeks ago, the beer and spirits business contributor to Forbes began her annual year-in-review article by noting that 2021 had not grabbed headlines for merger and acquisition activity. Then 2022 promptly began with a succession of newsworthy mergers and acquisitions. The new shape of these transactions suggests the industry had better buckle up for a year of unprecedented transformation at the ownership level.
The year also started with the bittersweet story that the founder of a major global craft brewery had finally buckled under pressure and admitted to tolerating an abusive culture for women months after widespread allegations of toxicity at his workplace had gone public. As the #MeToo movement in beer enters its second year, the reckoning has far from quieted. But along with accountability, the impending judgments hold promise for far more tangible — and some argue, productive — relief.
2022 threatens to thrust beer drinkers and industry stakeholders into their third painful year of reckoning with the COVID-19 pandemic, as government lifelines run short, the supply chain continues to render predictability an impossibility, and a labor force in short supply upends predictable business hours and renders business as usual a thing of the past.
Meet the New Boss, Not the Same as the Old Boss
Monster Beverage made a monster play into the beer space by announcing its $330 million cash purchase of the Canarchy Craft Brewery Collective this week. According to Brewbound, the deal gives the energy drink maker seven domestic brewing facilities and a ready-made national distribution footprint – plus outlets in 20 countries – for a hard seltzer it plans to produce along with some spirits and ready-to-drink cocktails executives intend to explore.
Brewbound notes, “Monster’s acquisition of CANarchy is the most recent in a string of joint ventures and other collaborations between non-alcoholic beverage companies and beverage alcohol makers. Last week, Constellation Brands
This, however, appears to be the first outright purchase of an American beer company by a beverage brand outside the alcohol space. The Brewers Association put out a statement clarifying that Canarchy – the sixth largest craft brewing outfit in the US – still meets the trade organization’s definition of “independent” because Monster does not count as a “beverage alcohol industry member that is not itself a craft brewer.” The sale could, however, trigger another evaluation of who gets to carry the “craft” moniker – a debate surely no one has the appetite for given previous naming controversies and more pressing considerations at the association (see: 2022, everything).
Brewbound points out that on a conference call for investors top Monster executives did not mention several of the smaller – and most historic – pieces of Canarchy’s brewery pie, calling into question their intention to keep them open. Just three days earlier, Molson Coors shuttered San Diego’s St. Archer Brewing, which it acquired in 2015, explaining that the small beer manufacturer had not proven an effective investment.
Just as the aforementioned Forbes contributor cautioned in 2016, Good Beer Hunting observed in its coverage of the closure, “While craft breweries were darlings of the beverage alcohol industry just a decade ago, investors are no longer patient with them beyond typical investment timeframes. Like companies in any other industry, an infusion of money from private equity or multinational conglomerates still means someone is watching the clock.”
On the same day, news broke – and failed to stir much surprise – that Utah’s Uinta Brewing had changed hands for a third time to a third private equity firm. And not too many people blinked when January 10 delivered even more M & A announcements: the world’s largest cannabis company had picked up San Diego’s long-troubled Green Flash Brewing and its spin-off, Alpine Beer, and added it to its portfolio alongside of its previous purchases of SweetWater Brewing and Breckenridge Distilling.
The Bell Tolls for Thee
After eight months of denials and blaming his victims for trying to ruin his business, the Danish founder of the former brewery darling Mikkeller did an about face by acknowledging and apologizing for the rampant harassment, discrimination and abuse he’d allowed to persist at his international business for years.
“I acknowledge, with sadness, the experiences we have come to know about Mikkeller´s workplaces during my time as CEO. I take responsibility for that, and I am sorry to each and every person impacted,” Mikkel Borg Bjergsø wrote in a statement to announce that the brewery had retained counsel and hired an outside HR firm to process legal claims and begin a process of reconciliation for the accusers.
If he’d thought he could outlast the accusations that grabbed a spotlight once the #MeToo movement burst into craft beer in May 2021, he was wrong. In June, activists installed protest art outside Mikkeller’s Copenhagen headquarters. In October, dozens of breweries pulled out of its annual festival. And in November, Indiana’s 3 Floyds Brewing dissolved the six-year-old Warpigs partnership that had the two breweries sharing a beer brand and a brewpub.
Elsewhere, the ignominy continues as well. The owner of an Illinois brewery was removed in December after admitting to inappropriately touching a female employee. A Tampa brewery facing allegations of sexist behavior was identified by the press for what seems to be the first time at the end of November. And accusations against named breweries continued to pour into social media accounts set up for the purpose throughout the fall.
Fortunately, most of the fallout is turning toward the solution side of the equation, as an increasing amount of traditional and social media coverage is now focusing primarily on arming readers with an exponentially increasing quantity of ongoing resources like active bystander trainings, podcasts about human resources, and agencies offering emotional support and legal counsel.
Breweries across the globe have been put on notice. Many victims will stay quiet no longer. So places of business without formal codes of conduct and solid HR structures have a choice to make: spend this year sorting out and implementing best practices for workplace emotional safety or risk having their reputations ruined the next time one of their employees becomes a victim.
More Pandemic Problems
No thanks to the 15% of American adults who remain unvaccinated, COVID-19 is settling in for the long haul. Though far fewer breweries closed in 2020 and 2021 than expected, business owners shudder this could be the year that breaks them.
Even if another round of restrictions – imposed everywhere from San Juan to Los Angeles to combat the Omicron variant – don’t limit taproom capacity directly, retailers from Broadway to the corner bar don’t buy nearly as much beer in any environment that has the COVID-cautious safely staying home. The Independent Restaurant Coalition (IRC) reports that 58% of independent US restaurants lost more than half their business in December because of Omicron.
Many beer-dependent businesses have so far survived the pandemic with a huge helping of help from two mostly temporary lifelines: stopgap federal funding and relaxed local rules on outdoor seating and alcohol-to-go and delivery. The status of all three is precarious at best.
On December 21, 2021 the IRC posted on its Instagram page, “The reality is that our industry is in worse shape than we were during the first shutdowns in 2020. There is no more PPP, EIDL is expiring, and there is no federal relief for restaurants and bars. For the thousands of restaurants who were denied Restaurant Revitalization Fund (RRF) grants, the latest variant will be the last straw.”
The organization is still calling on Congress to refill the Restaurant Revitalization Fund (RFF), which offered $28.6 billion in grants to restaurants last year but left an estimated $168 billion worth of needs unmet. Beer trade organizations successfully fought to include breweries in the fund, and the BA reports that approximately 1,600 breweries received more than $450 million in grants.
These organizations, along with the IRC, support the Restaurant Revitalization Fund Replenishment Act. This bill seeks to add $60 billion to the RRF, thereby, writes the BA, “Providing critical funding for the recovery of small hospitality businesses who did not receive funding in the first round of RRF grants.”
The IRC notes that 86% of independent restaurant owners worry they’ll have to shut down without a grant.
Breweries, bars and restaurants are also looking to their local leaders for legislative relief. While 16 states permanently legalized to-go sales of alcohol during the pandemic, some of the emergency regulations that allowed take-out, streeteries and home delivery are set to expire this year. Though lawmakers face pressure to make permanent these popular provisions, they also face opposition from the liquor store and temperance lobbies in their districts.
The Distilled Spirits Council of the United States (DISCUS) reported at the end of December that of the 31 states that enacted temporary alcohol to-go laws at the beginning of the pandemic, half have made them permanent – hence normalizing the idea of a “roadie” – and half have extended them by two-to-five years. Some lawmakers are confronting these questions this month as they return for winter sessions, while the states that passed two-year extensions on short-term orders originally enacted in March 2020 will be forced to grapple with them as early as this summer or fall.
Meanwhile, short staffing is making it difficult to keep doors open at regularly scheduled times. Beer businesses are reducing hours as Omicron wipes out swaths of the workforce and record numbers of Americans are quitting their jobs – particularly in areas that affect beer bosses acutely: food services, transportation and warehousing.
As the number of workers drops, the uncertainty of supplies and price of goods rise, with the retail price of beer almost certain to follow.
“Right now we’re in a massive CO2 crunch — they’re having distributing issues coming out of Canada with the rail lines and the lack of workers,” Wormtown Brewery brewmaster Ben Roesch tells MetroWest Daily News. “We’re on a 40% allocation of what we’d normally get.”
Sam Hendler, president of the Massachusetts Brewers Guild and co-owner of Jack’s Abby Craft Lagers, adds to the article, “From a consumer perspective, I’d expect to see cost increases in 2022. … You could see prices go up 20%, 30%, 40% on the shelves with the pricing of raw materials we see right now. It’s wild. We’re used to seeing a 3%, 4% or 5% increase every year, and now we’re seeing 10% to 50% increases.”
Brewers expect a critical part of that pinch to come from the so-called “Candemic” worldwide shortage of cans. Though it can’t necessarily be blamed on the labor shortage, it does present a unique and extraordinarily stressful new fact of life for consumer packaged goods.
Citing a massive supply/demand deficit that started with a 10 billion-can backorder in 2020 – in the United States alone – the largest can manufacturer in the world predicts shortages to last into 2023. Ball Corporation
According to Westword, that increases the minimum order by approximately 800,000 cans – from the current 204,000 to more than a million.
“It triples our expenses,” Denver Beer Co. co-founder Patrick Crawford tells Westword. “It would be cheaper to buy five truckloads of cans and send four of them back to the recycling plant. … And it means that breweries are going to have to raise the price of a six-pack by 30 percent just to be able to stay in business.”
Source: https://www.forbes.com/sites/taranurin/2022/01/17/prepare-for-sticker-shock-at-the-beer-shelf-plus-more-predictions-for-the-year-in-beer/