Dear Client:

If you’ve seen the movie “A Quiet Place” – a film about a dystopian future where haunting creatures come and snatch humans up at the slightest peep – you may have caught yourself in the moments after the credits roll behaving like you too were in this horrifying setting, in which all noise was forbidden – you seal your lips, gingerly get up from your seat and tip-toe around, until your brain finally snaps back to reality and tells you ‘hey, we’re all good, just a movie.’

If a fictional hour-and-a-half film can have that type of effect on the human psyche even for a short duration, what type of effect do you think weeks of self-quarantining will have on the human mind once this real-life crisis is over? 

Some are coming to grips with the notion that it could be a sweet while before things return back to normal in the on-premise, or any premise.

Indeed, Rabobank’s senior analyst for beverages, Jim Watson, shared on a Beer Institute conference call this past Friday that he believes the recovery in the on-premise will be more like a “stair-step pattern” than a “V-shape bounce back.”

“A REAL SLOW RETURN TO ON-PREMISE PATTERNS.” Why’s that?

After “talking to colleagues around the world (including China and Singapore), they’ve heard some anecdotal stories that as some countries come out of this, some bars get very crowded as everybody can’t wait to get out, but we’re equally hearing a number of places move to half capacity, and have to remove half [their] seats before [reopening],” said Jim.

He adds that a “number of consumers are still fairly worried,” because “we will have no idea who has had this and who hasn’t and what percentages are.”

Therefore, Jim and his team at Rabobank are “cautious that once we sort of declare this shelter in place/quarantine moment over, that everybody’s going to say ‘ok… we can go back out in the same patterns we were’. We think it’s going to be a real slow return to those on-premise patterns.”

JON TAFFER: SOCIAL DISTANCING WILL LIVE ON PAST THIS PANDEMIC. We heard a similar take from bar/restaurant entrepreneur and TV star Jon Taffer, who sat down for a podcast interview with Barstool Breakfast, right before the weekend.

“The premise of social distancing is not going to go away so quickly,” Jon said. “People are not going to sit next to each other shoulder-to-shoulder two strangers at a bar for quite a long time, we have to accept that. People are going to want space between them, that’s just the way it f***ing is now.”

He reasons that things like social distancing and sanitation “are going to live on past this pandemic.”

That means bars/restaurants “can’t have a cluster of tables tied together so that you’re sitting next to strangers at the next table. We now have to spread tables to [show] reasonable social distancing.”

CONSUMERS ARE GOING TO EXPECT SAFE DISTANCES. In fact, he believes that “if the government doesn’t require [these types of measures], the consumer is going to expect it. And they’re going to be a little concerned about it when we don’t.”

THE EFFECTS OF IT ALL? “So when the restaurants and bars reopen you’re probably going to have half as many barstools, and you’re going to have 30-40% less tables,” according to Jon.

That “means your revenue potential after the pandemic at the most is going to be about 70% of what it was before,” he said.

“That’s what’s scaring me,” Jon said. “We don’t quite recover in the same way… It isn’t like we unlock the door and the bar is packed with everyone shoulder to shoulder again, I don’t see that happening so quickly.”

Of course, that doesn’t mean things can’t eventually go back to normal. Long-seeded human behaviors are hard to break. (Just ask any lady who has ever been pregnant, says Jenn.)

SOME RESTAURANT OPERATORS SAY RELIEF EFFORTS HURT THEM

In this quickly deteriorating economy, individual relief is being pitted against larger economic sectors’ well being.  

The $2 trillion CARES stimulus bill — signed by President Trump on Friday — features what CNN has called an “unprecedented expansion of unemployment insurance.”

Indeed, under the measure, unemployed workers would receive an extra $600 per week — besides state benefits, for a total of four months.

That’s a problem to some restaurateurs, many of whom employ hourly workers who they argue could in some cases make much more money by not working. 

George A. Schindler, president of Hospitality Restaurants, wrote his congressman last week to express just that concern.

“Assuming Governor DeWine follows CDC recommendations, restaurants will be closed in Ohio for a projection of eight weeks,” he said. “Re-opening will be a daunting task in and of itself.  Please consider the following negative impact of the new bill. Please fight for Ohio restaurants.”

He modeled the math where he says it behooves workers to stay home. Say a full-time restaurant employee makes $15/hour at 40 hours a week, for $600 gross weekly pay. According to Ohio benefits, the same unemployed worker would receive $300 in benefits. 

But under the new relief bill, which allows workers to keep state benefits, the same employee would receive $300 per week plus an additional $600 in federal aid, for a total of $900.  

“Employee receives $300 per week more by not returning to work / $3900 more over the proposed 13 week (four month) period.  Even after paying for MMO PPO coverage out of pocket ($412 single), they are ahead $2,252,” per George.

“Assumption:  Said employee would have no financial incentive to return to work for four months.  Restaurants (and many businesses) will simply not be able to staff their operations.  This will only stimulate closure of businesses and potential bankruptcy for restaurant owners.”

Of course, it’s likely that those appearing to”work the system” would be cut off. 

NRA STATEMENT. For its part, the National Restaurant Association has applauded the legislation.

“We applaud President Trump and bipartisan congressional leaders in crafting a relief bill that gives unique recovery options to the restaurant industry,” it announced last Wednesday. “This measure is an important first step to help restaurants weather the storm, take care of our employees, and prepare for when we are given the signal to open our doors once again.

“There are challenges that remain before the restaurant industry, and we look forward to working with federal and state leaders to find solutions to support the cornerstone of every community.”

WINKING LIZARD TAVERN CLOSING UNTIL BARS AND RESTAURANTS ALLOWED TO REOPEN

On Friday, large on-premise Ohio sports bar chain, Winking Lizard Tavern, announced it is closing the doors of its more-than-20 units, until restaurants and bars are able to operate again as normal.

“We took the last punch we could today and are now closing all of our restaurants at 9pm on Saturday until we are allowed to reopen,” he said.

Although it’s not yet gone into effect, he fears what CARES will mean for their eventual reopening.

“The stimulus bill ends up killing those that were trying to keep our workers gainfully employed. As written all those unemployed will receive $600 on top of their regular state unemployment amount which is about 50% of what they currently make.  For instance an hourly team mate making $15 an hour which is $600 a week would get about $300 on unemployment. Add on the $600 from the feds and they get $900 which is more than their working wage. Makes no sense. This will go on until July 31! When we reopen I wonder how we are going to get our help back when they are making more on unemployment than they make from us. If you have people under $22.50 in state of Ohio they are better off going on unemployment.

“Thanks for all of your support.  It is with great sadness that I send this email. Never thought at 60 I would be tearing down in two weeks what it took us to build 38 years.  I want to assure you that we are in a good place to ride this out and will be reopening when we can.”

WHY CLOSE? BARS/RESTAURANTS DOWN 85%. Why are they closing? As BeerBoard founder Mark Young told BBD in a vid podcast interview on Friday, these takeaway food and bev alc sales are barely putting a dent in the losses they’re seeing absent ability to run their regular operations.  Right now BeerBoard says their some 3,000 bar/restaurant clients of all sizes are seeing about an 85% drop. More tomorrow from Mark. 

SOME READERS SAY 50/50 SPLIT LEAVES MOLSON COORS WITH PROFIT, DISTRIBS IN THE HOLE

Anytime we try to do some math in an issue, we can anticipate a number of emails hitting the inbox disputing our calculations.

Friday’s issue detailing our estimates for Molson Coors’ keg buy back program was no different. 

While our back of the envelope math produced a total estimate outlay of $43.75 million for Molson Coors, a couple alert readers wrote in to say that these “numbers can be misleading, as it is critical to recognize that the FOB amounts include the Molson Coors ‘profits’ being built-in.”

“In actuality, the Molson Coors true ‘cost’ represents just a fraction of the Wholesaler FOB, meaning that even in offering this ‘split’ Molson Coors still has made a ‘profit’ on the overall transaction, whereas the distributor has suffered a loss.”

Another reader broke it down for us:

If Molson Coors (MC) sells a keg to distributor at $70, here’s the breakdown:

-MC cost to produce, pay taxes, ship and return ship that keg is at the most $25, leaving a $45 profit for MC.

-MC’s current plan calls for a 50% split in the $70 with Distributor, providing Distributor with a $35 loss per keg and MC with a $10 profit per keg!

-If you are truly splitting product cost, you would first have MC credit Distributor for 100% of MC’s profit in the keg sold to Distributor. Then the remaining cost… true cost that MC has into the product ($25) is split with Distributor. (note that Distributor is still bearing 100% of the cost to pick up the product from retail)

– The second method described above would result in Distributor receiving a total credit of $57.50; $45 (credit for MC’s profit) + $12.50 (1/2 MC’s cost to produce, pay taxes, ship and pick up the keg). Results would be MC and Distributor sharing equally in the product loss, $12.50 each.

Just the facts Ma’am.

BEER BRIEFS: 

MOLSON COORS WITHDRAWS 2020 GUIDANCE AND BEYOND. Like a lot of large public companies right now, Molson Coors has announced it is “withdrawing, in its entirety, its financial outlook for 2020 and beyond… due to uncertainty regarding the impact of the COVID-19 pandemic.” Recall Molson Coors had previously reported expectations of net sales revenue being “flat” to down “low-single digits” for the year, and underlying EBITDA to be a “high-single digit decrease from the full year 2019.” Molson Coors’ announcement to withdraw its 2020 outlook comes just days after ABI’s notice that it would be doing the same [see BBD 03-25-2020].

Until tomorrow,

Harry, Jenn and Jordan

“This old anvil laughs at many broken hammers.”

– Carl Sandburg

———- Sell Day Calendar ———-

Today’s Sell Day: 21

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