Delivery becomes lifeline for craft breweries
What was once merely a perk at craft breweries and wineries across Canada, home delivery has become the main revenue source keeping these businesses afloat during the COVID-19 pandemic.
Keg sales evaporated overnight as bars and restaurants were ordered to close their doors while tap rooms now sit empty, leaving these companies to significantly scale up their delivery services, retrain employees to fulfill orders and figure out logistics in record time.
For Nova Scotia-based winery Benjamin Bridge, co-owner Ashley McConnell-Gordon says delivery has now become the company’s “lifeline.”
“The upswing in direct delivery is keeping us going along with Nova Scotia Liquor Corporation orders.”
The winery, which is located about an hour outside of Halifax, has increased deliveries from once a week to six days a week.
McConnell-Gordon says January to April sales are generally softer for her winery but success in the summer months are strongly tied to a vibrant hospitality season, tourism and wine tastings.
John Romano, co-owner and founder of Nickel Brook Brewing Company - a mid-sized brewery in Burlington, Ontario - says online orders skyrocketed from around $20,000 per month pre-outbreak to upwards of $5,000 per day during the lockdown, but it’s still no match compared to revenue from keg sales.
“I probably have $200,000 to $300,000 owed to me from bars and restaurants on my books and I’m probably going to have to kiss it away but that’s probably a far cry less than a lot of other people," Romano told BNN Bloomberg in a phone interview.
"It may wash out that this may not be a profitable year because of what’s happening but we have enough revenue coming in pay the rent, pay the bills and pay our staff."
He says he’s already received calls from a few restaurant owners in Toronto alerting him that they don’t plan to reopen once the lockdown is lifted.
When consumers buy directly from a brewery or a winery rather than from their local liquor store, more money is kept by the business because they don’t have to pay a cut of the sale to provincial liquor corporations. But soaring delivery costs due to higher packaging, shipping and car expenses are now eating into margins.
“My feeling is that I’m not really making any money but there are pluses and minuses. It’s not all about money. We spend a lot on shows and events. When we knock on your door to deliver your beer, we’re building brand equity – that’s marketing,” Romano said.
The co-founder of Winnipeg-based Stone Angel Brewing, Paul Clerkin, says he and his partners made the decision to limit home delivery mostly across the south end of the city.
“We did an analysis of where our beer sold more using the liquor commission orders and beer vendors and felt initially, until we really got to grips with home delivery, it was better to provide a really good service in half the city as opposed to an okay service in all of the city,” he told BNN Bloomberg by phone.
Aside from Benjamin Bridge accessing financing from Farm Credit Canada, all three businesses have not made use of any of the recently-announced federal measures such as the Canada Emergency Business Account because they either don’t feel their situation is that dire yet or they still don’t qualify despite relaxed rules around revenue decline requirements.
Stone Angel made the difficult decision to furlough its employees and would like to see the federal wage subsidy increased to cover even more than the current 75 per cent of employee salaries.
“I think at some point the [federal government] might have to move to a full funding model for employees and staff. Because our cash flow is decimated, and I’m not only just talking about us, I might not be able to afford to take the staff back. 25 per cent is still too much because you have to find that 25 per cent,” Clerkin said.
“In this line of work, you’re still paying overhead – yeast, gas costs, rent, electricity and water costs. You’re doing all that with a massively smaller income. But you have to keep the beer flowing. If the beer’s not flowing, you’re done,” he added.
With the key summer season fast approaching, breweries and wineries are still uncertain how they should proceed with investments in their businesses.
“If this went on for another three or four months, we’re probably going to be okay,” Romano said. “But if it goes on longer, I hate to say this, but heads are going to roll. I’m probably not going to be able to sustain it much longer than that.”