Written by Jared Herman, Brewer/Owner of Levity Brewing in Indiana, PA
I am a brewery owner in Pennsylvania. I hope to offer some perspective on the struggles that the current atmosphere has created for the people who make a living working in the industry. What can the craft beer fan do to support the industry? These suggestions are mostly based on brewpubs of my brewery’s size and scope of business.
Below are 10 simple ways you can provide support no matter where you enjoy a craft beer.
-
- Brave the cold and partake in the brewery’s outside dining options provided it’s safe to do so.
- Do the same for your local restaurant and be sure to drink Pennsylvania craft beer on draft.
- If it’s possible, buy products directly from the brewery rather than another supplier.
- Tip the same for takeout as you would for dine-in service.
- Tip on the things you probably would not have tipped on before-growler fills, merch, 4-packs, etc…
- When buying take out pick it up yourself rather than having it delivered, assuming it’s safe to do so.
- Diversify your beer buying habits….try something new!
- Buy brewery merch; anything the brewery has on hand is money they’ve already spent and buying their merch returns their cash outlay.
- Buy gift cards and give them as gifts this holiday season.
- When using a gift card to make a purchase, use something other than the gift card to leave a tip.
Some Basic Economics
Breweries today get linked with the bar and restaurant industry as many now have pub services associated with them. There’s a financial reason for that pub model of course. At the back of the house, however, breweries are manufacturers and have the same sort of struggles that most manufacturing businesses have; from efficiencies of scale to bottlenecking and beyond. Understanding this and how it interweaves with a pub-style business model in the front of the house may help the loyal craft beer fan understand the difficulties of brewers and how best to support their favorite breweries and the people who work in the industry.
The brewpub model is popular among small breweries because it makes financial sense. Though, of course, understanding the cost of craft beer production and retailing is essential for brewpubs to achieve success. For any manufacturer getting a product directly into the hands of a consumer eliminates a whole host of costs from packaging to third party contracts.
I’m going to go out on a limb here and suggest to you that draft beer is the most profitable product the brewery offers (ok-maybe it’s their seltzer). Point is, for most brewers in Pennsylvania, the elimination of draft beer service cuts deeply into profits that help sustain and keep the business healthy.
Then why do small breweries sell their products beyond their own pub? Any business must start with a plan for growth. Investments in space and equipment are generally made to balance the demands of now with the hope of what can be expected in the future. But even for investments based on current demand only, selling manufactured products to third parties introduces the benefits of volume and efficiencies of scale. In my own brewery, I have fermentation vessels that are sized for single batches of beer based on my brewhouse size. I also have fermentation vessels sized for double batches. Even at my relatively small size, brewing a double batch of beer is generally about 4-6% more cost-effective. The problem is, there may not be a demand for that volume of beer within the four walls of my own pub. So we sell the beer we make to other establishments to justify the production volume. When a brewer increases their production volume, they have a greater need for raw materials. Similar scales of efficiency work for the raw materials suppliers and thus brewers buying larger volumes can purchase at a discount.
Shutdowns of bars and restaurants have reduced outlets for the same volume of draft beer. As every brewer is aware, and probably most craft consumers’ too, packaging efforts have grown immensely in 2020 to the point that there is an aluminum can shortage. Shelf space for packaged beer is increasingly competitive so packaging one’s brand assumes a greater risk. Additionally, the costs associated with packaged versus draft beer are quite a bit more. At breweries my size, as much as 55% of the financial burden of packaging is in the package alone. This again is a function of the efficiencies of scale and benefits of buying at volume.
Shifting from the economics of production to the pub operation side, for front-of-house staff the financial burdens of shutdowns cut deep as staffing needs are greatly reduced. Reduced hours for servers lead to reduced hourly wages and tips. Even if employee hours don’t decrease, overall sales have taken a downturn and tipping as a percentage of decreased sales leads to decreased pay. Some brewpubs have been able to maintain even their gross sales by supplementing with takeout. But remember, packaged food is typically no different than packaged beer in that to-go packaging cuts into a company’s margins. Additionally, consumers tend to tip much less on take out if they tip at all. Please know that by federal law requires all tips to go to employees. Neither the company nor anyone in the company with managerial oversight over other employees can pocket any tips.
Pennsylvanians are making efforts to support local businesses through these difficult times. But knowing how best to do so can be overlooked. It’s typically the employees of any business who are affected first. Being an informed consumer can help stave off disaster for the employees of your favorite breweries and help to keep the business healthier so they can come through this scourge. The journey is still difficult but a horizon is in sight. There are probably decisions that will be made by some breweries that you may disagree with. Don’t sacrifice convictions or safety, but do try to be gracious as you may not see the full picture of what economic difficulties the employees and owners of a brewery are facing in these times.
One day hopefully soon, we’ll raise our pints again.
