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The Impact of COVID-19 on 3 California Breweries

by Dean Brightman
The Impact of COVID-19 on 3 California Breweries

The COVID-19-induced economic shutdown has affected breweries large and small. The Bay Area city of Richmond, California, offers several examples of the varied challenges breweries of vastly different sizes have faced.

Richmond is home to three breweries, ranging from nanobrewery to neighborhood taproom to regional distributor. Unique in their approaches, they are a great case study of how the pandemic has affected them all in different ways, and how differently they have had to adapt.


East Brother Beer Company
East Brother Beer Company began operations in their 12,000-square foot production facility in late 2016. It currently produces roughly 10,000 barrels per year on a 20-barrel brewing system.

For Rob Lightner, East Brother’s saving grace has been its can distribution, adding statewide shipping and, surprisingly, their beer to-go program.

“Business was definitely down, but not as much as I thought it would be. All that was left was the can distribution before we started the carry-out program, which we did three or four days into the lockdown, so that part is good. The production team’s employed. The taproom team is almost fully employed. They’re spending almost all their time on the curbside program. We built an online store.”

“It’s funny,” says Lightner. “The profitability is not the same, but we’re selling through the taproom almost as much beer as we were doing when the taproom was open, volume-wise. It’s amazing how many people come and pick up beer.”

Lightner also attributes the flexibility of the various vendors he works with as a key to weathering the storm.

“I cannot tell you how much time I’ve spent emailing, texting, calling vendors and creditors, just getting deals. ‘Can we push it off by 3 months? Can I push it off by a month? Can I pay you over 6 months? Can we do half now, half later?’”

“I will say 95 percent of everyone I’ve spoken to has been super cool. Some have been ‘Just pay whenever you can. Don’t worry about it.’ It’s almost like Christmas, where everyone’s nice to each other, generous, caring, sharing, giving. That kind of vibe. Everyone was like ‘No problem, happy to help, we’ll get through this together.’”

Rather than shrinking distribution (primarily Northern California) during the pandemic, their California footprint has actually grown with the addition of distribution in Raley’s Supermarkets, and, most importantly, Trader Joe’s.

“Funny, we thought it would only be Northern California, but Trader Joe’s main distribution center is in Southern California. They’re famously tight-lipped — ‘We’re going to do what we’re going to do.’ Suddenly we had friends texting from San Clemente, Santa Monica, and San Diego saying ‘Oh, here’s your Bo Pils, it’s in Trader Joe’s in my neighborhood!”


COVID
East Brother is employing food trucks to help satiate hungry taproom visitors, and when it comes to eating at the brewery, the rule is “wear a mask all the time unless you’re at your table.”


We wanted to be there, anyway. Our plan was to continue building our brand here in Northern California and then go south at the right time. This might kind of jump start that.”

As for the future, they look forward to reopening their taproom to guests. However, the path to getting there seems daunting, with lots of logistical hoops to jump through.

“We’re sitting in the webinars, reading all the documentation, new regulations that come out seemingly every day — everything from plexiglass to taking temperatures to wearing gloves and masks to putting in contactless transactions.”

The requirement of needing to serve a meal for a place that uses a food-truck model, presents additional complications.

“So you’ll make a reservation (this is all sort of in planning right now), you order your meal and your beers, pay for them, text us, and we’ll come get you when your order’s ready.”

The entire dining experience will take some getting used to.

“Wear a mask all the time unless you’re at your table.” And regarding other taproom amenities, “No pool, no ping pong, no video games. We were sort of lamenting, ‘Boy, this is not going to be enjoyable.’”

Regardless of how the taproom experience evolves, the curbside pickup program will continue.

“100% of people are not going to run out of their houses and go to taprooms [once everything reopens]. There are going to be a lot who want to participate in some way and enjoy our products and services and want to support local businesses, but who still don’t feel comfortable going to places full of people yet. Hopefully between the curbside takeaway and the limited opening we’ll be doing, we’ll be okay.”


Origin Brewer
On the other side of the size spectrum, there’s tiny Origin Brewer. Michelle Baker’s three-barrel system (recently expanded from one-barrel) is literally right in her backyard. She started brewing in the little facility in early 2017.

Baker’s core beers include her popular Backyard IPA, Resistor’s Wit, English Mild and an age-worthy People’s Porter. She also likes brewing one-offs using fruit from her own fruit trees. I recently enjoyed a delightfully tangy/tart Persimmon Wheat, which for me begged the question: “Who needs seltzers?”

Baker still works full-time “in the government sector assisting communities with their environmental protection and disaster recovery efforts,” but a passion for beer and brewing led her to open Origin Brewer, where she plans to devote all her time once she eventually retires.

Before the recent brewery expansion, Baker was brewing roughly 10 barrels a year. “This year, I was projecting to brew 18-20 barrels based on increasing demand and was brewing two-barrel batches about every six weeks through March.” She hadn’t even had the opportunity to brew a full three-barrel batch when the pandemic hit when everything shut down.

This was especially difficult for Baker, as her revenue came almost exclusively through selling kegs to local draft accounts. In order to keep her retirement plan alive and the company afloat, Baker needed to switch immediately to to-go only sales, which has proven logistically difficult.

The unique permitting and licensing required for running a brewery from her home means she cannot serve the public, so no taproom. In fact, she only installed taps in the brewhouse recently to ease filling growlers.

She’s not even allowed an online store, so customers need to contact her via the website to place orders. And even then, they can’t stop by to pick them up. Everything has to be delivered. Quite cumbersome, to be sure, but she’s grateful for the support she’s gotten.

Baker has decided on growlers exclusively for packaging to-go orders (and kegs, of course). No crowlers or cans.

 “I chose to invest in and sell growlers instead of canning as a way to promote reusable containers over recyclable, and in an effort to further promote sustainability as a business practice,” says Baker. This was a conscious choice “to limit distribution capability in favor of sustainability. My second job allows me the flexibility to make these business decisions.”

 So, while the pandemic has thrown her brewery a curve ball, as it has for everyone else, Baker’s more than willing to jump through whatever hoops are necessary to keep supplying beer to her grateful friends and clients.

“I grew up as somebody who always had two jobs. When I was in high school, my parents made me work at a friend’s deli washing dishes for two hours after school. I think about my own trajectory, getting a master’s while working full time, running a brewery while working full time — it’s just my DNA.”


Armistice Brewing
Somewhere between the regional player and the backyard brewer is Armistice Brewing. Its situation is perhaps the most challenging.

Siblings Alex and Gregory Zobel began Armistice in the summer of 2017, with the neighborhood taproom model in mind. Whereas East Brother has a defined structure of core and rotating series beers, the Zobels release new beers constantly, so their tap list is consistently in flux – although they do revisit their more popular releases from time to time.

While they do sell to about a dozen well-chosen local draft accounts, their bread-and-butter is the taproom.

At least until March, when COVID had other plans.

With few options available, they pivoted to to-go only sales almost immediately. But growlers were a no-go due to health concerns, and sudden demand decimated crowler inventories and completely booked mobile canners. Fortunately, they were saved by something they purchased almost as an afterthought — a small canning line.

“To be frank, I was feeling some regret on buying it, because we really weren’t using it that much,” says Gregory. “We didn’t start using it until six or seven months after we purchased it. Even then, if we used it once a month, that was a big deal for us. We basically got saved because of that. I don’t really know what would have happened. It would have been horrible.”

While the volume they’ve produced and sold has, to their surprise. remained fairly stable, shifting to strictly to-go has put a big dent in their bottom line.

“Unlike before, we were selling some cans to accounts, which was fine because we could subsidize that with our taproom sales, no problem at all. But when we sell these cans over the counter, we’re paying for the can, the lid, the label, the label designer. After all of that gets paid out, it’s such a little amount of profit for us.”

“Plus adding about 18-22 labor hours,” added Alex.

The worst part of all, both Zobels agree, was letting go of their entire staff.

Says Alex, “If you work as a bartender, you probably love to be around humans. To have to lose all those folks — we literally had one employee who didn’t work in the taproom — was super painful for us. That was the worst day.”

“That’s the only time I can remember crying at work, ever,” added Gregory.

While there is no such thing as good timing for a global pandemic, it was particularly painful for the Zobels due to a recent taproom expansion. They moved into the two units next door, which had coincidentally become available. The additional units also came with more outdoor space to enlarge the beer garden.

But even with the additional overhead, a conservative business plan (and the generosity of their landlord and suppliers) kept them lean enough to run the operation by themselves.

“We were able to do that for a month,” says Gregory. “We hated our lives. Alex definitely had a ‘Why am I working like this?’ breakdown at one point. And I had plenty of my own.

“A lot of breweries in the Bay Area physically can’t operate with just two people — with their canning line, brewhouse, keg washing, whatever it is. In a sense we were kind of saved by that super-conservative thinking. I don’t know if that’s going to be the key to thriving after Coronavirus, but it’s definitely one of the key factors in our survival right now.”

Added Alex, “It doesn’t set us up for growth, but it definitely sets us up to be good at tightening our belt.”

As Richmond slowly moves into reopening, the Zobels are working to bring guests back to their outdoor areas, with significant changes. As much as they’d love to see their customers and get that taproom revenue going again, it comes with a LOT of reservations.

Says Alex, “The worst thing I can imagine is one of our people getting sick, or [a customer] getting sick at Armistice. It’s really about doing this as cautiously and conservatively as possible. I’m sure that’s going to be frustrating for a lot of people. But it does feel like a really heavy responsibility, thinking about the safety of our staff and the community that comes into Armistice.”

Aside from the additional outdoor space, expanding did provide an unintentional benefit, according to Alex. “We had pretty much run out of money, so we weren’t able to fill the space with as much furniture as we needed. So physical distance is happening thanks to our [poor] financial forecasting.”

As for the long-term, the Zobels have a lot more questions than answers.

“We’ve always been talking about recession-proofing this company, and what that looks like,” says Alex. “Should we have a much cheaper beer that’s always available? Should we lean more into the taproom model? Is a taproom something that people are always going to visit no matter how things are looking economically? Or will it be the first thing that’s cut [out of their budgets]?

“I hope that people will always want to have a social experience and will always want community. But again, if the [costs] are higher, maybe they’ll [stop coming]. I don’t know.”


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