We are at the edge of a full-on depression thanks to COVID-19 virus and our government’s mis-handling of it. Many businesses, restaurants in particular, will not reopen. Some will, but maybe not for long under the new social-distancing reality. “Non-essential” businesses are gasping for air, trying to stay afloat. Highly-leveraged companies such as J. Crew and Hertz are trying to save themselves through bankruptcy protection.
Newspapers, already struggling in the new media landscape, are suffocating from even less income as shuttered businesses stop buying advertising.
Some operations are doing well. Supermarkets’ sales are up. Walmart and Target are enjoying increased business. Amazon is overwhelming landfills with packaging material and is getting closer to becoming the only place we can buy anything. The Amazon overlord may also be the owner of the last operating newspaper.
It probably surprises no one that alcohol sales are up. Sequestered people are drinking more. Alcohol-delivery sales have increased five-fold. That’s good news for the spirits trade. But not for the entire industry. The big guys are doing well; the small producers, not so much. Sales for craft distillers and brewers have fallen precipitously. We may be drinking more, but we’re drinking the cheap stuff. One example: Anheuser-Busch is selling a lot more of its Bud Light “beer.” The local craft brewer is reckoning how to stay solvent.
As a craft-distillery owner put it: “There’s a difference between feel-good booze and pandemic booze. Craft distillers make lovely spirits meant for savoring and sharing with friends. If you’re unemployed or don’t know where your next paycheck is coming from, craft is perceived as a little bit of luxury.”
National brands also have the advantage with beverage distributors. The small guys have little leverage. The nationals can pay for premium placement on liquor store websites and shelves. In the retail business, it’s known as a “slotting fee” and is normal practice for a new product to get shelf space. (In Alan Freed’s era, it was called “payola” and earned him a Congressional investigation and a ruined career.)
The wholesaler has a stranglehold on distribution. In many states producers are not allowed to sell directly to the consumer. Now-archaic post-Prohibition laws mandate a three-tier system: distiller or brewer to distributor to retailer.
Restaurants were an important outlet for craft producers. Now that is gone and is unlikely to come back as it was.
A new world is evolving. We don’t yet know what it will look like.