The Canadian beer industry has been suffering multiple hits since the start of the pandemic, particularly on the brewpub and restaurant front. Even where revenues are growing, profitability is shrinking in many quarters, with observers saying the challenges will continue for the foreseeable future.
Beer Canada, based in Stittsville, Ont., reports that nationally, the beer industry is running at 3.8 per cent below pre-pandemic volumes, with the hardest-hit regions being B.C. and Alberta, while Atlantic Canada is the least affected. “Nobody is doing great,” says CJ Hélie, president of the Stittsville, Ont.-based association.
While Beer Canada does not have breakout data on licensed bars and restaurants compared to home consumption, a telling indicator is draught-beer sales, as they are exclusively consumed on premise, he notes. “They are down 55 per cent from pre-pandemic volumes. All of the draught-beer occasions are gone because of the restrictions, and people drinking beer at home was not enough to offset the on-premises loss.”
“When bars and restaurants closed, all draught-beer sales dropped, which is probably the most profitable [sales channel] for brewers,” confirms Scott Simmons, president, Ontario Craft Brewers Association in Toronto. “Even if you replace that with bottles and cans, grains and packaging costs are up 20 to 30 per cent so profitability is being hammered.”
Brewpubs were the hardest hit, says Jason Fisher, owner of Indie Ale House in Toronto’s Junction area. “We’re down 80 per cent in revenues because we haven’t been able to operate our 140-seat restaurant fully in more than a year-and-a-half. The largest part of our revenues went to zero.”
However, Rick Dalmazzi, executive director of the Canadian Craft Brewers Association in Ottawa, reports that overall, 2021 volumes are starting to approach what they were in 2019, especially for larger brewers with established distribution channels. “Some of the larger ones have approached or are exceeding their numbers. The largest brewers increased bottle and can sales 115 to 120 per cent during COVID. Even with that, we’re talking revenues, not profitability.”
Some initiatives are helping bring numbers back, including policy adjustments to allow home delivery and takeout, and designating the industry as an essential business. “Without breweries being named essential businesses, the industry would be gone right now,” says Simmons. “It’s been a life-saver for our industry.”
Home delivery was a big winner for brewers as well, says Fisher. “A lot our deliveries were done by our own employees. It has also worked to grow our LCBO sales. Eataly has also been a huge partner for us. However, it takes time to build those channels.”
Breweries have also seen growth in some unexpected areas, such as ready-to-drink (RTD) and non-alcoholic beer offerings.
But the struggles will continue in the coming months. Hélie says the industry took another hit when the federal government’s automatic escalator raised beer excise duties during the pandemic. “That didn’t help anybody.”
The problems moving forward will be increased costs and supply-chain delays and shortages, says Dalmazzi. “Smaller breweries will be hit harder because they don’t’ have the accessibility and economies of scale the biggest players have.”
Although closures may have been relatively few for the craft beer industry to date, Simmons says it too early to say things are improving. “A lot of businesses are highly leveraged and the money will be coming due. We’re not out of the woods yet.”
By Denise Deveau