Many More Mandatory On-Premise Closings; The Rise of the Neo-Speakeasy?

Dear Client:

By now, over 20 states have all announced the closure of bars and restaurants in wake of COVID-19, while still allowing carryout and delivery. That list includes:

  • California
  • Colorado
  • Connecticut
  • Delaware
  • Illinois
  • Indiana
  • Kentucky
  • Louisiana
  • Maryland
  • Massachusetts
  • Michigan
  • Minnesota
  • New Hampshire
  • New Jersey
  • New York
  • Ohio
  • Oregon
  • Pennsylvania
  • Rhode Island
  • Vermont
  • Washington
  • And D.C.

Notably, some of those states mentioned above are offering up solutions to these on-premise establishments during this temporary shutdown.  As Wine & Spirits Daily reported yesterday, the Distilled Spirits Council is also “working with states to explore creative solutions for on and off-premise establishments, such as easing regulations in states to permit curbside pick-up and home delivery to adults of legal purchase age,” per a statement from the group. For instance, New York, New Jersey and Connecticut will provide a waiver for carry-out alcohol, effective 8pm tonight, per the governor’s office. 

[Ed. Note:  Will the easing of those regulations return to normal when this is done?]

BAY AREA HANDS DOWN “STRICTEST ORDER” YET 

But some areas are levying stricter curbs than others.  Yesterday the San Francisco Chronicle reported that “six Bay Area counties have announced a ‘shelter in place’ order for all residents.” The stay at home directive, which “falls just short of a full lockdown,” will involve San Francisco, Santa Clara, San Mateo, Marin, Contra Costa and Alameda counties, “a combined population of more than 6.7 million people,” per report. The order went into effect at 12:01 a.m. this morning and is expected to “stay in place until at least April 7.”  It’s basically Martial Law Light. 

EVEN TEXAS STARTING TO SHUTTER ON-PREMISE  

More municipalities and counties are expected to issue mandatory shutdowns of bars and in-dining at restaurants in the coming days. But yesterday, Dallas and Houston, the two largest cities in Texas, mandated restaurants and bars close for in-dining for 15 days. San Antonio and Austin are expected to follow, as well as other larger cities around the country. 

[Ed. Note:  In my little community near the Pearl Brewery in San Antonio, two popular establishments are self-closing effective today for two weeks].

Indeed, from the feedback we’ve gotten around the country, restaurants and taprooms are weighing whether to create larger social distancing spaces (six feet between tables and stools), or closing altogether.  It’s a tough decision, but the tables seem to be tilting now toward closing, whether due to an abundance of caution or government mandate. 

FROM THE FIELD: PAINS AMID FUZZY CLOSURE MANDATES

We reached out to John Lane, operator of the popular Ohio sports bar chain, Winking Lizard Tavern, on what Ohio’s order to close all bars and restaurants means for him.

“….Tough decisions to make with our people. … I feel so badly for them,” he said.

“We can stay open for takeout and delivery,” he said, but there’s “no timeline when we can go back to normalcy which is frustrating.  

“Also the Governor basically gave us less than 6 hours to react. How in the world can we move over 1,200 employees in that short of time frame. Liquor control will pick up excess booze but no mention of beer? We will certainly have out of code beer by the time of reopening. Sad day in Ohio.”

John wasn’t the only one upset with the lack of clarity on closures. In California, California Craft Brewers Association executive director Tom McCormick described how the Governor’s office communicated “a mandatory closure immediately of all bars, taverns and brewery/winery tasting rooms,” while local media has reported it as “voluntary.” A promised statement from the Governor had yet to materialize, at least as of late morning.   

A NEO-SPEAKEASY BLACK MARKET?  

Yesterday I conjectured that one of the biggest casualties of COVID-19 could be the closures of local indie dive bars. But I have since reconsidered that notion. That’s how quickly things are moving.

One dive bar owner I know told me yesterday in very plain terms:  “I don’t care if they close us down, we’ll just lock the doors and let our regulars in the back door.”  I started to laugh until her cold gimlet eye told me she was dead serious: “I’m not letting my girls go,” she added as she turned to punch something into the Aloha POS system. And thinking of almost every other small bar owner I know, I would expect a similar response.

And that begs the question: Prohibition didn’t work last time, why would it this time? Particularly as she and thousands of other bar owners around the country know the cell phone numbers and/or Facebook names of all of their regulars? Instead of a secret password or knock at the door like in 1930s, it’s just texted or FB messaged to regulars and trusted ones.  

Now, given her regulars don’t travel much outside the county line — they aren’t running off to Coachella or skiing in Europe — she deems the risk is low. I think that sort of thinking — right or wrong — will be going on across the nation in droves, from Chicago to McAllen. I know I wouldn’t be turned away in half a dozen cinderblock bars around Texas. 

CONCERN FOR OUT-OF-CODE BEER 

Another distributor source in a mandated closure market says this could mean a lot of beer going bad (several have noted this issue). 

“Outside of the obvious health concerns for our employees the biggest issue is the inevitable spoilage for draft beer, particularly anything hoppy and has less than 90 day shelf lives,” they said. “Still trying to figure out how we handle all that loss.  Too early to tell if the off premise bump will make up for much of the draft losses. If the state puts a complete lockdown in place and off premise is shut down then it’s a completely different story all together. The ripple effect 60 – 90 – 120 is scary because it’s really the unknown.”

OUR TAKE.  Outdated beer was starting to be a problem even before this catastrophe.  This will undoubtedly make it much worse over the next months. But at the risk of sounding too Darwinian, in the long term this will also likely thin the ranks of lower quality and/or low sales beer on the shelves and in taprooms. It’s no secret there were many brewers barely making it work before. This will hasten them out the door and lessen the saturation in the marketplace.  

REPURPOSING DISTRIB ON-PREMISE REPS TO WAREHOUSE/MERCHANDISING WORK

But another multi-state distributor, with operations in at least one state that’s mandated on-premise occasion closings, struck a more optimistic tune.  

“In Ohio, all my orders for Monday were cancelled …  I have 14 people dedicated to bars and restaurants that we will redeploy to warehouse and off-premise work …. Now is time to work on shelf sets, POS, and deep cleaning the warehouse and trucks!”  Good plan. 

OFF-PREMISE GAINS STARTING TO SHOW, VALUE OF DSD

That same distributor said their business in both states  “is still great last week and today especially in grocery and convenience stores….Big  numbers in Grocery…. Pantry filling rampant, but not sure when the drop will occur or if it will…. But again Direct Store Delivery of beer shows coolers are stocked daily and ready for business!”

ON THE OTHER HAND … OFF PREMISE COULD BE A MIXED BAG. The BA did an impressively thorough update on the virus’ impact on its members and the beer industry yesterday.

Part of that involved Bart’s predictions about what the virus-spurred shutdowns could do to beer sales in the long and short term. Before we rely too much on a off-premise bump, he points out that “beer is a luxury,” and some people “may buy less as they stock up on other goods.” In fact, he said, “we’re hearing reports from members who distribute in the Pacific Northwest of distributor orders being cut by 20% in the Seattle region.”

But he did note that sales the week of March 8 are currently much more positive than the year as a whole in scans, up 6.4% that week vs. about half that trend YTD. 

DELIVERY PLATFORMS LIKE DRIZLY SEE A BOOST

How are e-commerce bev alc delivery solutions like Drizly doing in the wake of COVID 19 on premise closures? 

No surprise, “sales are continuing to accelerate as consumers rely more and more on home delivery,” said Head of Consumer Insights at Drizly, Liz Paquette.

“Customers are stocking up, spending on average 30% more than normal,” she told BBD.

“Latest week trends show Drizly is growing 2x the growth rate from earlier in the year. … Latest 4 days shows Drizly is growing 3.5x the growth rate from earlier in the year.”

Those trends are “even more pronounced” for wine and liquor, vs. beer.

“While all growth in all categories has accelerated versus earlier in the year, wine/liquor is now growing 2x as fast as beer,” she said.

The company only expects these trends to accelerate “as more people stay home and bars/restaurants curtail activities.

“Most every store on the network remains open and our retail partners [are] working day and night to satisfy the massive influx of orders.” 

SPEAKING OF SHELF SETS….  

Many off-premise chain Spring shelf sets are scheduled in the coming weeks, which is leaving many distributors wondering:  Are we really going to do full shelf sets amid this madness? From what we’ve gathered, it’s a fluid situation, depending on when the shelf sets are scheduled.  If it’s next week, probably not. Just moving the beer around could be risky. Some are calling for more of a “pull and plug” situation where it’s just sliding a few cases around.  This is developing….

NUNO:  “WE WILL MARCH AGAIN!”  HOW GUINNESS TURNED ON ITS HEELS IN THE FACE OF COVID-19 

No holiday in the U.S. is more important to Guinness than St. Patrick’s Day, which is today. In fact, March is a full 20% of Guinness’ yearly sales.  

Late last month we shared how Guinness was preparing for St. Patrick’s Day with a new multichannel campaign featuring Parks and Recreation star Nick Offerman, and a campaign that focused on foamy mustaches to a message of unity [see BBD 02-24-2020].

But that has obviously changed.  “In the last seven days we’ve done 180 degrees,” Diageo Beer Co. chief Nuno Teles told BBD yesterday. [Indeed, your editor was scheduled to travel to New York to visit with Nuno and his team this week and visit their new offices, but that changed too].  

“We were growing double digits and we felt good about the business going into St. Patrick’s day with a lot of plans and new news that would make the brand stronger in a more sustainable way. What we then realized throughout the week is that things were changing and we decided to embrace the reality sooner rather than later.”

So Nuno and chief marketer Jay Sethi made the call to update that messaging — and very quickly — in light of many communities banning large gatherings due to the COVID-19 outbreak, including cancelling St. Patrick’s Day parades and celebrations. 

Two new developments:  

1.  Diageo Beer Company promised $5oo,ooo “through their Guiness Gives Back Fund to help communities where we live, work and celebrate” during this crisis. 

2.  They created a new :60 video titled “A St. Patrick’s Day Message From Guinness”. Jay told us they completed the video in less than three days. In the video, Guinness nods to the situation, saying “we know this year things feel different,” and promises that “we’ll march again,” while showing images of friends and family toasting over Guinesses at the pub or in their homes. Guinness reminds the viewer to “thank the ones protecting us” and that “on St. Patrick’s Day, we’re all Irish, but let’s not forget that every day we’re all human.” 

Guinness ensured in the campaign update they were “not going anywhere,” as they “signed a 9,000 year lease on our brewery” while wishing a happy St. Patrick’s Day.

In addition, Jay indicated that they are reallocating marketing resources toward at-home occasions as the business shifts from on-premise to off-premise, including a partnership with Drizly. 

SILVER EAGLE BEVERAGES LOANS TRUCKS AND DRIVERS TO BIG RETAILER H-E-B

How’s that?  San Antonio Red/Gold Network distributor Silver Eagle Beverages, owned by John Nau, has been loaning trucks and volunteer drivers to help Texas grocer H-E-B replenish shelves at night of crucial staples like eggs, milk, and produce, which had been wiped out.  Silver Eagle secured a temporary exemption from the TABC we’re told (Texas wholesalers can’t provide services of more than a buck to a retailer) to provide the rolling stock and help.  

H-E-B took the extraordinary step of closing its stores from 8pm to 8am for the time being so that it could replenish empty shelves at night. It also put out a call to on-premise workers that they would pay upwards of $13 an hour for temporary workers to help with the effort of stocking shelves, acting as cashiers, and curbside delivery. H-E-B also donated $3 million for “coronavirus community support.”

MOLSON COORS RESTRICTS TRAVEL; PRODUCTS SAFE

Molson Coors sent out an update to its distributors over the weekend informing them of the measures they are taking in light of the COVID-19 outbreak.

Like a lot of companies, they’ve gone ahead and recommended that “employees who can do so work remotely” through the end of the month. 

But “their breweries and distribution centers remain open and shipping; and our locations, including our regional sales offices, will remain open,” per memo. To keep employees “safe” at these locations, they “are implementing stepped-up cleaning, sanitizing and hygiene processes in our production areas.”

Additionally, Molson Coors says it has gone a step further and placed “restrictions on all travel and all large meetings.” And cancelled tours at “all” of their “North American brewery locations, including craft breweries, until the end of March.”

They also used the memo to answer a question that keeps popping up in the middle tier – could products become at risk? Molson Coors says no. “We have robust food safety processes in place and given the nature of the virus do not foresee a risk to any products.”

As we are all learning, this is the plan currently, and things could change within an hour it seems. Molson Coors recognizes that, acknowledging the situation as fluid. “We see major events getting cancelled and at the same time major off-premise retailers upping their orders,” the company said. “Please keep your volume forecast updated on DRIVE to support supply planning… Thank you for your business and for your continued support of our brands during this challenging time.”

A QUICK RUNDOWN OF OTHER DEVELOPMENTS

-A number of casinos/hotels in Vegas are shutting down for the time being. MGM Resorts has suspended operations there; Wynn Resorts’ Wynn and Encore have temporarily closed; And The Cosmopolitan is shutting things down on Wednesday.

-Over half of beaches in Florida have been closed.  

-McDonalds has closed all company-owned restaurants.

-The Brewers Association is asking industry folks to take a Coronavirus Impact Poll  “to help us understand how we can help our community through advocacy and education.”  

-Postmates and other delivery services are instituting “Non-Contact Deliveries,” where whatever folks order can be left at your door without any physical contact.

A NOTE FROM THE PUBLISHER

It goes without saying that none of us has seen anything quite like this in our industry before. Yes, we’ve had our regional weather-related catastrophes. But the closest thing on a national level that even comes close was 9/11, and even that was different. 

In the spirit of keeping the free flow of information about how COVID-19 is affecting our industry, I am suspending the copyright on all three of our publications, Beer Business Daily, Craft Business Daily, and Wine & Spirits Daily, until March 31, and lifting the paywall on our three websites.  Please feel free to forward our publications to whomever you think would benefit from the information.

But most of all, thanks to those who have offered information about what is going on in your markets — in all three tiers.  That information is crucial to divine best practices, keeping us abreast of what is going on in the trade, and honestly just to give us a sense of community — that we’re not alone.  Please email me what’s happening in your market hs@beernet.com

As always, thank you for your business, and I look forward to having a beer with you when this is over.   

-Harry 

Until tomorrow,

Harry, Jenn and Jordan

“There are two ways of exerting one’s strength: one is pushing down, the other is pulling up.” -Booker T. Washington

———- Sell Day Calendar ———-

Today’s Sell Day: 12

Sell days this month: 22

Sell days this month last year: 21

This month ends on a: Tues.

This month last year ended on a: Fri.

YTD sell days Over/Under:  +1