Tight regulation is making survival harder for craft breweries amid the shutdown
Minnesota’s tight liquor industry regulation has been proving as an issue for producers for some time. Currently, regulation has come up as one of the issues that might contribute to breweries going out of business, thus in addition to their lack of revenue. Breweries have expressed that they might not be able to stay in businesses if the stay-at-home order is extended beyond May 13th. The current stay-at-home order runs until May 4th but there is a chance it might be extended.
The possibility of extension is what spells doom for most small businesses who do not have cash on hand to pay for their expenses without taking in revenue. As one owner of a brewery has expressed;
Breweries typically have one to three months of expenses on hand. But when revenues drop 60 to 70%, you can’t sustain that beyond eight weeks. Unless they can get really creative for capitalization, government help is not a long-term option. I’m glad the SBA loan is forgivable, but the option to take on additional loans is not good
Most breweries make a huge percentage of their revenue through taprooms or brewpubs. But those have been shut down at the moment. Some breweries have resorted to doing deliveries and pick-up orders, while others have stopped selling wholesale to liquor stores to boost profits.
About 150,000 craft brewery workers have been furloughed showing how tight funds are. While the government Small business loan was of help, it would not be a fix for the long run. Breweries need to be able to open their taprooms to stay in business because even though they make money doing deliveries, that is not sustainable in the long run. Taprooms are the lifeline of the brewery business.
But in addition to the loss in taproom business, craft breweries are also being hurt by regulation. In Minnesota craft breweries are limited to only selling growlers and crowlers, but customers are preferring to buy the packaged 12 to 64-ounce containers that are only sold in liquor stores. Additionally, large breweries cannot even sell those growlers or crowlers according to a Minnesota law that allows off-site sale only for breweries producing less than 20,000 barrels of beer a year. Making amendments to some of these laws, like allowing breweries to sell in the 12 to 64-ounce containers, would go a long way to ensuring their survival during the pandemic.