Brew Talks: Navigating the Next Normal

Justin Kendall [00:46] Welcome to Brew Talks, our 2nd virtual town hall meeting brought to you by Dogfish Head. I am Justin Kendall, the editor of Brewbound, and I'm joined on this edition of Brew Talks by my colleague Jess Infante. Jess, I believe this is your first time co-hosting a Brew Talks.

Speaker 2 [01:04] It is very exciting.

Justin Kendall [01:06] Well, welcome to Brew Talks and welcome to everyone out there for tuning in today. We are coming to you 5 months after our 1st, 1st virtual Brew Talks meet-up to check in on the issues facing brewers and the industry as a whole. We have 2 big panels for you over the next 2 hours. First, we're gonna chat with the leaders from Dogfish Head, Russian River, Hopewell Brewing, and Green Bench about how they're approaching this next normal. Then we'll catch up with the leaders of the Brewers Association, Beer Institute, and NBWA about their legislative efforts, as well as discuss their members' biggest needs and look ahead to 2021.

Speaker 2 [01:50] So first, a really big thank you to all of our sponsors, uh, namely Dogfish Head, for once again presenting Brew Talks, as well as Scott Fabricating, ABS Commercial, G&D Chillers, Graphic Packaging International, North Star Pills by Raar Malting and Reyes. So, friendly reminders, starting Monday, uh, Brewbound is gonna become a subscription-based publication. If you're not already a charter member, we'd love for you to join us on the journey ahead. Look for details at brewbound.com/subscribe.

Justin Kendall [02:20] OK, let, let's go here. Uh, I, I don't have to tell you the last 5 months have been challenging. The pandemic is still going on. Another million people filed for unemployment benefits last week. The supply chain has proven unstable with shortages of cans and CO2. Speaking of instability, there's a lack of clarity on regulations from states and many that have reopened. Then they rolled back those reopenings. The middle tier has continued to shrink via consolidation. There have been wildfires, a duratio in Iowa, and a hurricane in Louisiana and Texas. Our thoughts are with our friends there impacted by the storm. There's unrest on the streets that we can't ignore. Um, put simply, it, it's, it's not easy right now. Nothing is easy. Uh, it's not easy to be in business, it's not easy to just exist in this country at the moment. It's not easy to be a craft brewer, uh, but today we're here to discuss how this industry forges ahead. Joining us are Dogfish Head co-founder Sam Calagione. Sam, thank you for being here.

Speaker 3 [03:33] Justin, excited to be here. Uh, I thought we agreed to only talk about happy things today. I don't know where you went with that intro, but, uh, no, as you said, this is, these are challenging times for sure. And as Mike Tyson says, everyone has, has a plan until they get punched in the mouth. And, you know, our, our globe, not just the brewing community has been punched in the mouth, but when you You think of the craft brewing community and the fact that we didn't even exist as a, as a community 40 years ago. Uh, we of any community have proven that, uh, necessity is the mother of invention. We invented this community and the necessity now is coming together and figure out sharing best practices and learnings as we will in these two, these two panels on how we navigate. This moment, uh, together. So I'm excited to be part of this panel. I'm excited to hear Jim and Craig and Bob, uh, later. We have a, a lot more to, to, to, to learn, uh, today, and, uh, we're very proud that Dogfish is a longtime sponsor of this event series, Justin. So I couldn't be more excited to be here with you and everyone else who's participating today.

Justin Kendall [04:37] Uh, we appreciate your support over the years and I'm coming to you from gloomy Boston, so it's a little hard to, uh, it's rainy, it's crappy here, you know. It, that's Boston life though. Uh, also joining us today in facing a lot of challenges is Natalie Cilurzo, the co-owner of Russian River. Natalie, we are thrilled to have you here today.

Speaker 4 [05:01] Hi, everyone. Uh, thank you very much for having me, Justin and Jess. Great to see you and hello to the other, uh, panel members. I'm really looking forward to the next hour and Catching up with everybody and, uh, you know, we'll try to get past the doom and gloom. The sun came out today here in Sonoma County, or at least above the brewery, so I'm grateful for that and the air quality seems to be improving. So, um, things are starting to look up around here, at least as far as the wildfires go. So, every day is a new challenge though, right?

Justin Kendall [05:33] There, there are plenty of challenges in this industry, and we, we got to welcome as well, Hopewell Brewing. Co-founder Samantha Lee. Samantha, we are excited to have you on this panel. Thank you for being here today. Hi,

Speaker 5 [05:46] thanks for having me. Um, I'm really looking forward to this hour just picking the brains of everyone here. It's not always, uh, you know, especially right now I haven't had the opportunity to talk to too many folks, uh, who aren't in my own city. So I'm, I'm really looking forward to just chatting and hopefully learning a lot from other folks in the industry right now. Thank you.

Justin Kendall [06:08] Pleased to have you here. And last but not least, I'm excited to have Green Bench Brewing co-owner and head brewer Khris Johnson here. Khris, thank you for being here.

Speaker 6 [06:18] Oh, thank you so much for having me, man. This, uh, this means a lot to me personally and, and to our business and, um. You know, being on a panel with uh people that, that we've looked up to for, for years, um, you know, means a lot and, um, it's a lot for us to learn and a lot for us to, to hopefully listen to as a community, um, not just in the beer world, but, but, uh, hopefully beyond that. So, I know it's been a distracting time for everybody, whether it be You know, wildfires and hurricanes or, you know, as you say, unrest in the streets. Um, but, uh, I'm hoping that it's discussions like this that allow us to pull together, um, and, uh, try to find common ground with one another and figure out how we can all make difficult times for everybody a little bit easier. So thank you for having me.

Justin Kendall [06:59] We're pleased to have you here. To our viewers out there, if you have questions, text, text us at 617-336-8560. That's 617-336-8560. We will answer, we'll get answers for you if we can. So let's get to it. I've outlined all the hard things that we've, we've been through over the last uh five months. So let's get a snapshot of where each of your businesses are heading into September. Sam, 8 months in, uh, how is Dogfish Head pacing compared to last year? And what are you doing differently 5 months into this pandemic?

Speaker 3 [07:39] Yeah, so I'll say, um, you know, we were a brand, uh, you know, that's skewed pretty heavily into indie independent accounts and draft, uh, you know, compared to say, top 50, other top 50 IRI craft, uh, brethren, and usually smaller formats since we do generally sell our beers at a premium. Dogfish, uh, is about a 35% premium per CE, uh, over IRI defined craft. And that was such an asset when we talked to distributors and retailers for so many years. But as the, uh, as the pantry loading moment came, it frankly put us at kind of a, a dual disadvantage. The on-prem channel dried up, so 35% of our business went out the window with that. And then the fact that unlike so many of our top 50 IRI craft uh brand brethren, we did not Have a focus on bigger packs, multi-packs, uh, variety packs, 12 packs, or cases. Um, so we kind of got out of the gates, even in the pantry loading moment more slowly than some of our peers and, uh, with the help of all of our co-workers quickly adjusted and did put, uh, focus on our, our three sort of, I call the most approachable from an ABB, uh, beers. That are year-round core beers and got them into 12 packs in as many markets and it made sense. And so by July, July became our biggest, you know, shipping month in the history of our company. Uh, but I don't know that that new trajectory that hopefully we maintain is enough to offset the challenges, especially on-premise that we, uh, continue to face. But I at least feel like we're making the right adjustments in light of what the marketplace is looking for in this moment.

Justin Kendall [09:27] Is it all 12 packs all the time right now, or has any semblance of a meaningful on-premise business returned for you?

Speaker 3 [09:37] Uh, I would say that, that, there's starting to be glimmers in certain geographic pockets of on-prem coming back. Uh, uh, I give props to my co-worker Hemy, who runs our on-premise world. Uh, and, and, and basically, we just, we, we shifted to only doing essentially two beers on draft and focusing on. Fewer SKUs in this moment and going deeper with them and we're starting to see, you know, inventory levels are being depleted more quickly. So that's giving me some hope, but as we all see across the country, everything's kind of waxing and waning, uh, with in-state regulation. So I don't think it's anything to jump up and down about yet.

Justin Kendall [10:16] Natalie, uh, we appreciate you taking time out from Pliny's political campaign. How, how, how's that going?

Speaker 4 [10:25] It's going great. I, I have a can up there. I should grab that. Um, yeah, so, uh, uh, Pliny the Elder runs for president every 4 years. This is his 4th, 4th run, and, um, you know, it's a, it's a big year. We got a lot going on in, in addition to. You know, pandemics and elections and everything else and, um, in the, in the country and the world, and, um, you know, it, I think in an effort to bring some levity to, um, all of the doom and gloom that we're all trying to deal with every day, um, Vinnie and I just thought, you know what, this is the year we're gonna make a beer, and, um, and so we made Pliny the Elder and we double dry hopped it and we put it in a can, and, um, it's been, it's been a huge hit. Um, so I think it's been a lot of fun for us, um, to have something kind of You know, positive and, and playful to, uh, to be able to focus on right now. I know that consumers are, are enjoying it. Um, we, we sell yard signs and pennants and buttons, and so it's really become a whole really fun campaign and, um, we've been sending, uh, beers and yard signs to our friends around the country too. So I'll, I'll, uh, hook each of my panelists up after, uh, after today, so.

Justin Kendall [11:40] It's absolutely one candidate I think that we can unite behind, but I, I wanna get serious here though with you. Um, how, how's Russian Rivers business doing? I mean, I know that you guys are facing any number of challenges from, you know, the wildfires out there to CO2 shortages, uh, like, how are you doing? How's business going so far? And, uh, you know, are you guys seeing any type of like summer tourism that you're used to out there?

Speaker 4 [12:09] Yeah, so, um, you know, like all the other breweries, um, we had a, a, a pretty different business model in March, um, compared to now. So, you know, uh, 50% of our revenue previously came from our brew pubs and gift shops, and so we built this new beautiful Brewery here in Windsor, California as a tourist and hospitality destination. And so when all of that shut down, we had to pivot pretty quickly to focus on wholesale and direct to consumer, which is now between the two wholesale and direct to consumer is now about 70% of our revenue. So it's a really different business model, but That said, we have actually not stopped seeing tourism through, even through the shelter in place, even when our entire estate was essentially shut down, none of the beaches were open, none of the parks were open, the hotels were closed, we still saw some tourism. We are a very heavy tourist destination. Area, um, this is kind of the peak season for winery tourism. We have about 400 wineries here in Sonoma County with Napa right next door to us, um, and beer tourism, you know, is also very, very popular. Um, the weather is usually really nice this time of year too, and, um, it's just a beautiful place to visit. So we have been seeing. Quite a bit of tourism, more than we were expecting, actually, which has been really um interesting and, and it's been frustrating as well because we, um, you know, like many of us, um, throughout the country, we're, we're not allowed to have indoor dining. Um, we have limited space for outdoor dining, so we can't provide the Quintessential Russian River experience that people are looking for when they come to visit our brewery for the first time. So that's been a little challenging. We've really had to be creative and innovative, um, to make sure that when tourists come or even locals come, um, for a visit, um, that we, we make sure that, that they have the best time possible given the circumstances, but it's been a, definitely a challenge for us.

Speaker 2 [14:10] Great to hear that you guys are still getting visitors, but speaking of tourism, that gives us a really great segue into, so Chris, Justin and I have been tracking every state's reopening procedures, and some states, you know, like to pull a fast one on us and change the plan up again, and it's been happening quite a bit. Your state has had some pretty crazy rules about how breweries can, can reopen, and you guys recently opened a food truck. So can you walk us through what it's like to operate in Florida right now and give us a view of Green Bench's business so far this year?

Speaker 6 [14:38] Absolutely. Um, well, it's definitely been challenging as, as, uh, the last two panelists have mentioned. Um, We have had to change, you know, our business plan. Um, I think just like, like Natalie's, uh, business, we're, we're typically kind of a, um, we're a community gathering spot, you know, we built a business around having people come together in a, in a place and sort of enjoy it, uh, together. So, um, about, I'd say about 60% of our, of our actual business was on-site, uh, before this. And so that dropped down to about 5 to 10% on a good month, um, during the shutdown. Uh, that were just to go sales. So, we definitely had to go to, you know, focus on wholesale, sending beer to, uh, to, um, supermarkets and, you know, any, any off-premise, uh, account that, that honestly, we could find at the time, uh, with the franchise laws, they are in Florida, we have to go through a wholesalers. There's no such thing as self-distribution in the state of Florida. That's just probably never gonna happen, um, the way we see it. And, um, so that's been difficult and I think, you know, we're You know, doing that maybe 30% of what we used to do before this, which, what's the most difficult is not having our staff back yet, you know, we, we, we're only we're 7 years old as a business come, you know, next month. And um we're down to less than half, half of what our staff used to be, which um that's been difficult, not seeing as many faces and, and, and people that have basically become family. And, because of the rule changes, as you mentioned in, in Florida, uh, originally, they, they shut everything down, um, and then they opened up restaurants. And during the first shutdown, the go sales were pretty good the first couple of weeks. Once restaurants opened, they slowed down again, um, to almost nothing. And people just, if they were gonna go out and drink, they were gonna go drink on site at restaurants. Then we were allowed to open, uh, bars were allowed to open back up. We opened back up and then there was a spike in Florida. So they decided that what they were gonna do is gonna shut bars down specifically, kept restaurants open. The only path and we had to open, uh, at least this is what we're told by the DBPR, which is our, our regulation, uh, group here in Florida. They, the, the licensed regulators, they basically said that if you can become a, a restaurant, then you can open because restaurants are allowed to be open and serve, uh, alcohol or beer, whatever it is. So, we, um, We, we were a little frustrated with that because technically, the rules to become a restaurant means in the state of, or restaurant in the state of Florida means 51% or more of what you, your revenue has to come from food. So what they did was just to, to help us with that a little bit, was to waive the 51% clause. So essentially, all the restaurants that were open became bars, um, even though the bars are still shut down. So, we spoke with not only the local sort of uh health group but we also spoke with the state regulators for ABT Alcohol Beverage, Tobacco, and uh the DBPR. And unfortunately, um, none of them could agree on exactly what kind of restaurant license you needed. So, uh, 509 chapter, Chapter 509 licenses restaurant here. There's probably uh 14 different types of 509 licenses currently available and uh none of them can all really agree on which one that a brewery needs. So, you had all these breweries opening under different 509 chapter uh licenses and every time we call them and ask them, almost, at least one of them would say that won't work. So we were actually one of the last breweries to, um, to, to take this route. We actually opened last Friday. So just uh less than a week ago, we opened back up to the public. The way it works is we had to basically uh take ownership of a food truck and put it on site, get the health department to come out after one week into being open, and, and part of this is we're fortunate enough to be somewhat known in the state. Um, so, I think whenever we kind of do something, we're a little on the radar and uh after just 3 days of being open, after following probably more strict guidelines than any other place that open around us, uh, we were told that by the health department locally that they don't like how we're open and we're doing that wrong. So we got them in touch with the DBPR and we got them in touch with ABT. Who both of them say we're doing it correctly, as far as they're concerned. So we're trying to get them to talk to each other cause they can't even agree on what it takes for breweries to be open. So we don't know how long that's gonna last. Uh, we don't know if that's gonna shut us down again. We hope not, and we're just doing our best to try to follow whatever rules once they decide what the rules are. So it's, we're kind of in the blind. We're, we're, we don't know what we're doing, so.

Speaker 2 [18:44] Oh my gosh, I, I think I'm aggravated on your behalf. That's quite an odyssey. Um, so, Samantha, I know Chicago's had a few different rule changes about how breweries are allowed to operate. Um, what's it been like in Chicago and how's the business climate been for, for breweries there?

Speaker 5 [19:00] Yeah, I don't think, uh, the changes have been as dramatic as the ones in Florida, um, thankfully, but, um, we are, so our taproom is in a pretty high traffic area in Chicago, um, and our taproom represented about 30% of our revenue. On top of that, uh, About 40% of our distribution sales was draft, so for on-premise accounts, we built our business on having a strong draft presence where we just turned 4, so actually one of the last semi-normal things that happened was we had our 4 year anniversary party the weekend before. The shutdown, um, so it's sort of bizarre to think of that time, that the before times, um, but we've been around for about 4 years, 2 years of that time we built, um, our draft business, so we went around, uh, we self-distribute, we've self-distributed since the beginning, um, and that represents a really huge chunk of our business, that really consistent patio bar business or just the. The, the, the corner bars in Chicago that have been buying from us for the last couple of years. Um, so that has been a big shift for us. We now package all of our beer. Um, we used to do a few draft-only beers, but we, um, now we're packaging, I'd say 95% of our beer, um, which is a massive shift. For us, I mean, uh, we were not prepared for, um, just the growing pains of, of shifting our production to just packaging. Our canning line is about 1.5, 2 years old, so in some ways we're, we were just getting to know it and then all of a sudden we threw this at the canning line, um, and it's just been, uh, a really. Uh, like a, a big battle for us over the last few months. Um, but that being said, we've really leaned into, um, the creativity of our brewery. Um, you know, at this, it sort of feels like, well, you know what, we may as well try a new thing. Like, we may as well make a new beer that seems really off the wall, um, because what's the worst that can happen? Honestly. Um, so that's been a really, you know, interesting part of this is that we're really proud of the beer that we're putting out right now, and we, we are excited about it, um, but at the same time, there's nothing that can make up for our tap and revenue. Um, there's not much that can make up for the loss in draft revenue that we had on accounts. Um, as far as Chicago goes, um, bars and restaurants that have existing outdoor space can be open. Um, we don't have that existing outdoor space, um, so we've been closed since March. Um, a lot of places are choosing not to open either, um, just because Chicago has been sort of in this stasis of a number of cases. Um, it's not gone down for several months now. Um, so the, the realities, the actual like lived realities of living in a global pandemic, um, I think are prohibiting a lot of businesses from actually opening up and us as. Well, you know, I can't say, um, I'd, I'd be super confident in opening up because we've done the sort of cost-benefit analysis of, well, we open and someone gets sick, and we have to close for 2 weeks. So that's just the financial side of it. If you have to close for 2 weeks, what does that look like for us? If our brewery is shut down, our, um, to go sales are shut down, our distribution is shut down, that, that would be catastrophic for us, more so than, you know, any. You know, incremental revenue that we could, we could take in from the tap room. Um, so, basically survival mode, I'd say.

Justin Kendall [22:48] I think a lot of folks are, are, are feeling that survival mode. So, when you all look at your businesses, in the over the next four months or, you know, basically the rest of 2021 here, what, what are you most concerned about? What, what, what do you see as sort of the biggest challenge, and then uh on the flip side of that, I guess, what, what do you see as the biggest opportunity? And I'll, I'll start with Sam.

Speaker 3 [23:17] Yeah, we were chatting, uh, with this as a panel before we uh started. So I'd name, uh, two as challenges. I'd say really the, the one that I think we're all just as humans, you know, battling with right now is just the lack of connectivity, you know, concentric circles from our co-workers to our customers, to our communities. And, you know, recognizing that does take a mental toll and not being stoic about it and actually trying to talk to your friends and And co-workers about it, even if it has to be over a Zoom or Teams. Or also for me, I'm making sure I do something outside for at least an hour, a paddle board or a run or a bike and get out in Mother Nature, uh, including drinking in Mother Nature, you know, the fact that, uh, you're like, I don't know, I'm, I'm no scientist, but, you know, the odds of contracting COVID outside is, you know, certainly a, a minute fraction compared to inside. So, you know, whether it's an opportunity to find other breweries that have outdoor spaces and I and I ride our bikes to them and support other outdoor, uh, breweries or just going out in a boat or a kayak and being out in nature to kind of separate yourself mentally from the, the challenges that we're facing every day. So that connectivity and what it does to, you know, uh, us mentally is something I think we all have to be sensitive to. And, and especially as we engage with our co-workers and customers and recognizing that people are taking this in a different way. And when people are emotional pre this era, you, you might be Less, less loving, you know, less willing to forgive them if they were sort of socially inappropriate, but trying to give people grace and leeway as we're all, you know, navigating this in a different way. And then from a business perspective, the thing that's most challenging is we and Samantha touched on this too, have, have chosen, regardless of local regulation to keep our restaurants closed, uh, a, to, to protect our co-workers cause there has been some, you know, surges in, uh, COVID cases here in The coastal area of Delaware, but be on it, you know, because our, our company, while we have 3 restaurant locations, you know, 90-something% of our revenue is driven by our production brewery and distillery. So that's sort of the, the heart of our company. It's the Oregon pumping out, uh, the, the, the, the most sort of revenue that sustains all our jobs. Thankfully, we've been able to redeploy uh almost all of our hospitality co-workers to help us make hand san sanitizer or in our distiller. ry or in our, our brewery. And I do hope that, you know, in September, we'll, we are, we'll see lightly in a tunnel and get our, our hospitality locations open as well. The other challenge I'd see is when so many of us have only a fraction of our hospitality businesses open. Those are our brand-building epicenter. So the revenue is one component, but that opportunity to, to grow our brand and amplify our brand voice in a grassroots manner, you know, face to face with our consumers, that's uh, a really Subjective component that is definitely not helping us that have brands that a big fraction of our, where we engage with customers are closed. So that to me is also the biggest opportunities when we get all of our hospitality locations open, not taking for granted that opportunity to convert new evangelists that care enough to come visit us and treat those opportunities, you know, more precious and, and, and, and, and with more of a sense of purpose than maybe we did before we started living through this together.

Justin Kendall [26:43] You mentioned those hospitality, uh, locations and, and one of those is gonna include the, uh, concrete beach location in Miami. Um, how are you approaching that, that, that news leaked out today? How are you approaching that in, in a time that is so uncertain with COVID and reopening and multiple cases in, in, in Florida alone, I mean.

Speaker 3 [27:06] Yeah, yeah, in a, in a word, we're approaching it very carefully, and my, my co-worker, Rob Krez, uh, who, who oversees our, our retail locations, is really leading on what that timeline will look like. So we're excited to do that. I'm excited to go have a beer at Chris's place. We're down there. My daughter just became a freshman at the University of Miami. And what man, is she pissed that mom and dad are gonna be hanging out in her home city, uh, when she's trying to insert her independence. So we're looking forward to that, but we're not rushing into it cause we obviously are living through a very, uh, uh, challenging moment and we wanna do that right, uh, when we do, uh, share more information about what that, that looks like down there.

Justin Kendall [27:47] Khris, when, when you look at the last quarter of the year, what are you most concerned about and where do you see opportunity for growth?

Speaker 6 [27:56] It's a really good question. I mean, I think on one hand, we're, we're fortunate enough that um about a year before the pandemic uh struck, which, you know, March of this year, last year in 2019, we, we commissioned our canning line, um, which was, was huge for us. Um, It's, luckily, there's uh, uh, quite a volume for us, it, it is about 100 cans a minute of rotary line, so we have, you know, really good, uh, dissolved oxygen levels and, and really high quality on the, on the cans, especially for brewery our size, uh, which is something that, uh, you know, means a lot to us and I think ultimately it's gonna help us be able to sort of pivot and then send the beer, you know, through distribution. The difficulty there though is Uh, trying to figure out how to be profitable on a completely different, uh, margin, um, that, that we had sort of built a business with this, you know, intention of, of community gathering and, and being able to do projects and selling things on site and, and, and having, you know, variety but with purpose here on site, um, and projects that, that uh, we're passionate about and that we're able to give our consumers that, that they really can't experience anywhere else around here. So trying to figure out how to be profitable with those investments already made, um, And then also trying to figure out, once we have now opened again, how soon can we get back to being who we are, right? And being who our consumers expect us to be this sort of, you know, verbal contract that we've kinda made with them, that this is who we are and this is the experience that you will, you, that we can provide you when you come here, not really knowing, frankly, if we're gonna get shut down again. Uh, the fact that it's happened to us two separate times where things started going well after we opened back up, we sort of figured out what the new normal was and then we got shut down again. We gotta lay off staff again. Trying to figure out how to, uh, actually account for something that is not account, you can't account for it at all. Um, that's been our, our toughest decision, like how do we invest in these projects that allow us to be who we are, uh, and allow us to provide the experience that we sort of promised we would, we would provide. Um, the only thing we can really do now is So the only guarantee we have is cans. Yet, that's still not guaranteed, right? Now, there's shortages with aluminum. We're having a hard time, you know, sourcing materials for those kinds of things. So, uh, you know, I hate to sound potentially like the bleakest one here, but, uh, I don't know, man. I have no idea how we're gonna figure that out. Uh, it's literally what keeps us up at night every, every night. It's what we show up every morning talking about. Um, every day is a new day and potentially a new opportunity, but I never, I don't know if I'm gonna wake up tomorrow and we're shut down again. So, um, what I'm just trying to do is provide somewhat of a, uh, of a, of a stable production that I possibly can. I can predict if I can at all, uh, for my staff and the family that are here, my co-workers that have, um, that have been with us for, you know, throughout all of this, you know, supporting their families and, um, just doing our best to try to like, be able to sort of pivot and, and maybe have some potential like uh plans in the background, but really never knowing if we can count on any of those has been tough. So, um, Yeah, I'm not exactly sure what, what we can do because I'm not exactly sure what we're allowed to do.

Justin Kendall [31:00] That's a tight rope to walk. Uh, and, and Samantha, you, you mentioned survival mode. Um, when you look at, at, at the needs of small brewers out there like Hopewell, What, what do you think the biggest need is so far in, in terms of assistance? Is there state or federal government assistance that, that should be applied, uh, another round of, uh, paycheck protection program funding? Is it, uh, rent assistance? What, what do you believe is like the, the thing that would help brewers make it through the end of 2020 and on through 2021?

Speaker 5 [31:38] Yes to all. Um, yeah, I mean, having to be in a position where you're weighing the, uh, health and safety of employees and guests versus the financial security and the survival of your business is, it's not really a choice. That's, that's how I always feel about this kind of thing, like I. You know, I don't blame anyone for reopening, even if we choose not to at a certain point, um, but as time passes and reopening becomes an option, that's something we may have to entertain, even if there's not a vaccine, even if it's not, if it's not super safe, because it's a false choice. And so if we all as small businesses, as well as. Individuals had the resources to make the right choice based on public health and the actual facts of public health, then, then we could actually move forward and feel like we can prioritize things like public health versus like, we need to save our business because that's sort of the mode that we're operating in. And so much of what Chris just said, I was just not. Along with it because it resonates really strongly. A lot of us, you know, we built our business plans thinking that we operate this one way, you know, you have this profitable tap room, you're this community gathering space, but if all of a sudden that's gone and you're putting all of your beer into the package, your margins are totally different now, so. You know, you can make that pivot. A lot of the small businesses have the, the ability to make those changes because we're small and we're still nimble, but at the same time, some of the math just won't make sense. You can pivot as much as you want, but without federal assistance. A unified response to a global health pandemic, it's really hard for us to make the right decisions for ourselves and for our employees. And then on top of that, a lot of the health insurance is tied to their employment. And so when you're thinking about letting folks go, you're not, you're not only ending their employment, you're also. Cutting off their health insurance, and there's no employment benefit, or the additional $600. It's just, it feels like A lot of this is where the government is needed, um, and, and frankly it seems that this is exactly what the government is made for, um, so that's, so all would be my answer.

Speaker 2 [34:00] So, exactly, and it sounds like all of you guys are, are such thoughtful employers and you really just want the best for your teams, um, and that's really nice to hear. Um, so as we talk through all the challenges that you've all faced, which are many, um, what's maybe one strategy that you've developed or deployed or one thing that you've learned that you think might be helpful for another brewer out there, and Natalie, let's start with you.

Speaker 4 [34:23] Sure. And uh, I just wanna echo everything that all the panelists just said. I've, it's, it's very, I think one of the silver linings of this, if, if we're looking for something is that um All of us are going through this together and it's really bringing our com our, our brewing community back together because, you know, our, our, um, this is not answering your question, by the way, um, you know, our, our, the, the craft beer industry went through an explosive period of growth and You know, while, while I have a lot of old friends in the industry, Sam included, um, you know, it's, it's really nice to make new friends in the industry and, and connect, um, while, you know, via Zoom and phone calls and stuff and just a much, much deeper level, um, you know, not just with the panelists here, but just with so many people, um, around the country that we're just, it's bringing us together as a, as a much more cohesive group, um. Um, so, anyway, to answer your question, um, uh, so, uh, we have like multiple plans like Plan A, Plan B, Plan C, and then Plan D is just that thing you can't really plan for, um, but you kind of have to be ready to figure it out, like whatever that is. And so that's what we've kind of learned through this whole thing, um, because it's really, really hard to plan for an uncertain future and, and what we found is that, um, you know, some employees, um, and. Leaders, you know, do a better job at, at being flexible and, and, and adapt adaptable and, and just pivoting and then others kind of have a difficult time with that and so, um, us as leaders and owners of our, of our companies, we need to really, um, we need to find those people in our organizations that can help us come up with these plans, um, you know, whether the plan is, um, what are we gonna do if, um. Winter comes and we're still not allowed to go inside. We still can't have indoor dining. Well, you know, for most of us, that affects not only our brew pubs, but it also affects our distribution because like to, to Sam's point, we all lost on-premise distro. And so now we're putting all of our, our beer in the package and selling to off-premise, and we can't have our pubs open. So, what happens when November rolls around and it The weather gets bad and, you know, we kind of, we have to have those plans and then, you know, you also need to plan for in the event that you have an employee who tests positive for COVID. What's that plan gonna be? And so we have all of these plans kind of laid out um in the event that something comes up that we've never experienced before. And so we're all kind of in this boat together that we're all trying to figure this out together and I think it's really good to have Have a lifeline too, like have a support group of friends and just people that you maybe you know that they've like had this experience or maybe um you just feel like they have a better handle on it whether it's direct to consumer or whether, you know, you're like, I know they have a really strong HR department or maybe, you know, you have um brewery friends that have labs. That, cause like maybe all of a sudden you're distributing, right? I think Samantha talked about that on our, on our pre-call and um and, you know, you're just having another brew you can reach out to just to use their lab equipment in the event that all of a sudden your, you know, QC is like super important to you. So, anyway, I just think having multiple plans and being able to be flexible um would be my, my takeaway.

Speaker 2 [37:55] Such great advice and speaking of, you know, being a team and being a community and calling on each other for, you know, collective support, you guys are all brewers Association members and their funding and staffing troubles have been well documented. But right now, what would be most helpful for them to focus on that would help you, help your business the most? Sam, why don't we start with you?

Speaker 3 [38:16] Well, I think they're, they're doing, you know, what they need to be doing and, and, you know, a lot of us have been long, long time members and now more than ever, we need to, you know, lean into our support, you know, they made hard decisions as, as you mentioned, Jessica and You know, it, it's our trade group, but it's also essentially the economic engine is events for the Brewers Association and those events have essentially disappeared, uh, temporarily but have disappeared. And so the BA had to make some tough decisions, but while they're wrestling with those tough personnel decisions, they were getting in front of issues like, uh, you know, alerting their, their, our membership to the coming CO2 shortage. Like the BA put out the first alert about that in April and just trying to help. Breweries, uh, navigate, uh, that moment. Similarly, they're, they're, they're recognizing the challenge on supply chain when it comes to cans, putting out, uh, recommendations to that. You know, when Chris was talking about the, uh, insane challenges of, of navigating the, the local regulatory environment, you know, the brewers Association, uh, you know, has come out with, uh, really good documents to help us as brewers engage in, in, in educating local and, and state level. Uh, um, you know, decision-makers on why a brew pub or a tasting brewery is not a bar and, and why we need to be considered, uh, separately. So I think, a, you know, the mission of the brewers Association is to promote and protect America's small breweries. And now, it's, there's never been a moment in my 25 year history where we need to be promoted and protected more. And I think the BA is making, uh, the, the, the right decisions in this hard moment to, to do what we all signed up for them to do.

Speaker 2 [39:58] Chris and Samantha, you guys are, are much smaller and your needs are very different. So, what would you say that you need help from, um, from the trade organizations right now, Chris, let's start with you on that one.

Speaker 6 [40:10] Yeah. Um, I, you know, I guess to, to first, you know, echo and, and sort of speak on what, you know, Sam just brought up, um, you know, we actually had, uh, like hosted a, a sit-down conversation with, um, um, Uh, Halsey Beshear, who runs the DBPR as secretary of DBPR here in actually the cellar where I'm standing. Um, and a bunch of other brewers showed up, like owners of breweries, and, you know, we had like an open conversation with him, and he showed up with the, with, uh, you know, at least saying to us that he's here to listen, he's here to try to find a way where we can get open right away, uh, as a brewery. Uh, as breweries. And, and what we continue to try to explain to him was the, the, the foundational difference between what a brewer is and what a bar is, right? And the, the differences, you know, are, are varied. The, the main one really being, if you're looking at it on like a licensing thing is that we are manufacturers first, right? Secondary, we are retailers. Uh, we, we don't exist without the manufacturing side as a brewery. Um, and While the claim is that he understands that his response essentially was, well, it's your fault for having, or rather, you're in a position where Uh, you have a perception problem. The perception is that you are a bar. The perception is that people are here getting drunk and, you know, partying and here till 3 o'clock in the morning. And so ultimately, it, it felt as if it was sort of thrown back at us, um, as sort of our problem still to figure out, um, which is pretty frustrating. Um, I would say that I guess to go back to answering specifically the questions, things that I think would really help um small businesses, uh, especially would be some sort of forgiveness of sales tax for a while, um, licensing fees, very specifically licensing fees. I know that's typical right now because even those organizations are starving for money. So, at least here in Florida, they're getting even tighter, you know, breweries are getting fined for things that we've never really been fined for in the past because I'm sure The secretary of any of, of the DBPR same I was here saying, find as much money as possible because we're all in a pandemic. Um, The things that I think would help us, I really just don't think are probably on the table, um, unfortunately. So, unfortunately, I think we just have to rely on ourselves. We have to do our best to make the best decisions every day, uh, for our staff and for our families. And I don't think that Each day, it's going to be the same as the previous one. So it's really just about being able to be, being able to be nimble, being able to pivot, being able to, to adapt to whatever that day is gonna throw at you, cause every single day feels like a completely different time period, um, every day we wake up. So, um, I wish I had a better answer.

Speaker 2 [42:56] I'm back to being completely aggravated on your behalf again. So, uh, Samantha, is there anything else that you think the BA would, would help you guys out in particular with? Anything you'd need from them?

Speaker 5 [43:06] Yeah, sure, I mean, money, I'll always say money, money, money, um, not from the BA but lobbying on our behalf for assistance from the government, um, but a lot of us small businesses don't have HR departments, we don't have a CFO, um, we don't have a lot of the sort of core functions that various like executives or directors would have at a business. It's me and two other founders, one of which is my husband, um, he's brewing right now and my other. Founder is doing beer deliveries right now, so we're, we're stretched very thin right now, um, that, so with all that in mind, just I, I think, um, Natalie referenced sort of what businesses are doing around plans for if someone gets COVID or plans for if someone's loved one gets COVID. What do, how are different businesses approaching this so that each one of us doesn't have to make it out from the beginning, uh, other people are. Dealing with these exact issues, uh, whether it's a brewery or other small businesses, and you know, a lot of us can sometimes feel like we're alone in this, but we're not alone like like you're mentioning, and a lot of folks are dealing with these exact same questions and I think the BA has this position of of speaking to various organizations and breweries at various levels who are approaching these problems, um, daily. So that's something that I could see as being a huge asset to a business like ours where we just don't have the infrastructure in place to deal with a lot of these things, you know, it's, it's always on the back burner like, oh, I'll get to that, I'll add that to the grievance leave policy, but, you know, if, if one of us is out doing deliveries, it's kind of hard to get to it. Um, so I think that kind of sort of, um, capacity building would be huge.

Justin Kendall [44:51] We got an audience question that just came in. Uh, direct to consumer is the lifeline for business during COVID. How would that ability nationwide help save craft brewing? I'll, I'll throw that to you, Natalie. What, what would DTC rights nationwide do for craft brewers?

Speaker 4 [45:08] Uh, great question, and that would actually be my answer to Jess's question about, um, what, how the BA can help, um, craft brewers here in America. DTC has been our lifeline, um, because we had talked about margins and we talked about, you know, hospitality-focused breweries who were suddenly found themselves shut down on March 17th and, um, and how, um, we Pivotted very quickly and started shipping direct to consumer just here in the state of California. California is a massive state and we have 40 million people who live here. Um, it's probably 25 million of them are beer drinkers. I don't know, but, um, but that has turned out to be a really successful, um, part, new part of our. Business, something brand new we haven't done it in like 15 years, um, and so I think if the brewers Association could help with the legalities of opening up new states because there's really only about 10 states that uh breweries can legally direct ship to consumer, um, while wineries are, are far ahead of us. I think there's about 40 or 45 states. Most of the states wineries are able to. Direct ship to consumer and so I think that if the brewers Association was able to take that on, on our behalf and start because you have to go state by state because every state has its own alcohol shipping laws, um, that would be super helpful, particularly for the smaller brewery who doesn't have that wholesale, um, you know, uh, sales channel.

Justin Kendall [46:39] That would definitely be a game changer. Uh, another audience question that we received, in an industry in which hard seltzer has taken the mantle of the hot growth category away from craft beer and imports, and the growth that is still happening, at least in pre-pandemic was with small local breweries, how do you see the regional size brewery landscape evolving over the next 3 to 5 years in order to continue to find growth and remain relevant? Uh, I'll throw that to Sam.

Speaker 3 [47:10] Yeah, so I'll start by saying, obviously, Dogfish is now part of Boston Beer, so we have truly as a seltzer brand. So, uh, you know, consider my answer through that lens, but I'll also say that our head of off-premise sales, George Ward, uh, says nobody lines up for the next seltzer release outside of a building. Craft beer, you know, Still has the, the romance and that direct grass level connection with the drinker that is unparalleled, I think, for any other, you know, alcohol category. I don't think that's gonna go away. We're not gonna let, let it go away. But what I will say is that I think the COVID moment is kind of accelerating the bifurcation of like To what I see as, as the, the most distinct and sustainable models for craft breweries that's very different from the era when, you know, Russian River and Dogfish were coming up, where, you know, in Stone and Bells, what I call second-generation 90s opening breweries, where you could aspire to be a national brewery and only make 200 or 30,000 barrels, but still get the attention of distributors, you know, or you could aspire to be a 2. 3 500,000 barrel National Brewery, or you can stay small and local. I think it's a lot harder now. I think that it's to, to be a national craft brewery distributed in 50 states through the three-tier system, you really have to have very professional sales organization, very professional, uh, uh, come to market, uh, programs, because there's, uh, as consolidation. It is happening at retail, it's happening at distributor level too, and the distributors are, that are selling more and more of the volume, the smaller and smaller number of distributors selling more and more of the volume. Obviously, they prefer to deal with fewer and fewer uh suppliers, and that creates a lot of, uh, challenges. So you see that, that, the sort of top 50, top 100 IRI craft breweries are generally, I think, thriving through this. Challenging moment. And I believe that hyperlocal model is well positioned to come out of this. I, I worry about that sort of 2000 to 200,000 barrel breweries that rely on sort of broad, you know, distribution outside of their call it states that they're in and the contiguous states that are easy to distribute to, to be in that scale, but to try and be a national brand, I think is, is pretty challenging in this, in this In this moment, you know, and that's why I, when folks call me, they're having challenges. I, I, I, I, I know that I believe craft, the revolution would have never happened without the three-tier system. If you look at other countries that don't have the three-tier system, small indie breweries are essentially fucked, or they never even, the movement never even started if the biggest guys can control direct to, to market. So I'm a huge advocate of the, the three-tier system. But I advise any small brewery that's in the. At mid-size, if they can contract to do more of their volume out of their own locations in this challenging moment and keep more of that margin, and then they'll, they, they'll be lightly in a tunnel and things may change, but that would be my recommendation cause I really see that bifurcation of hyper-big and hyperlocal, hyperb relative to the average size BA member as really the two paths that for right now seem to be coming clearly uh into focus.

Speaker 2 [50:25] OK, so we are running out of time. Shockingly, this went so fast, so we are gonna kind of go lightning round style and and toss you guys each a question individually. So, um, Natalie, BA chief economist Bart Watson said 30 to 40% of consumers won't be willing to return to brewery taprooms until there's an effective vaccine, which I'm sure is pretty scary to hear, um, being that you have two beautiful taprooms to visit. So, how are you guys preparing for the possibility of that?

Speaker 4 [50:52] Well, um, uh, you know, from our perspective, people are, are very eager to come back. We have people lining up and wondering why, why aren't you open, you know, like I said before, we, we are still seeing some tourism, obviously with the fires that kind of died off, but it, it will come back. And so I, I, I do think that people. People are, um, they're, they're going stir crazy. I think we're all going stir crazy, and I think, you know, to Sam's point, we're, we need to connect, we're human beings and we need to connect with one another, and the best place to connect with people is at your local brewery taproom or brew pub or pub or bar and, and I know in our community, you know, we've been, um, you know, we've had, unfortunately, some very severe wildfires in the last 3 years, and every single time. The gathering place becomes like our brew pub and, and we all get together and we all make sure we're, we're safe and we get information and we charge our cell phones and we get a hot meal and we get You know, cold beer, and we're just, you know, maybe we're the only place in town with the power on or whatever it is. And so I think that, you know, I think there is just this sense of community that comes with the brew pub and the brewery taproom, and I do feel that people will be coming back. And I think they're more eager to come back now than maybe they were 3 or 4 months ago. So, I think if we did the survey today, I bet we would find people a little more comfortable about coming back.

Speaker 2 [52:18] Uh, that's a great, great point. Um, I've been to both of your tap rooms and they are lovely. So, um, why don't we have everybody share one takeaway from the last 5 months that you tell somebody else? Um, what do you, what have you learned that's helped you, um, get through this? Samantha, let's start with you.

Speaker 5 [52:35] Oh boy, um, that you can make plans, but it, it doesn't matter until you actually see sort of the situation in front of you. Um, I think we're, we're getting used to making new plans about every month at this point, um, and being comfortable with, uh, sort of the. The changes that you have to make and not getting married to ideas of who you were also, so our, you know, our business is fundamentally changed at this point, um, hopefully our, our identity hasn't, but I think, um, just being comfortable with letting go of certain things maybe, uh, so that you can move forward and survive this moment, um, and being flexible, treating your employees. Um, like they are, like you, they are you, um, because without them, there's no way that you would survive this kind of pandemic. Um, so making sure that people feel taken care of and heard, um, right at this moment when everything, everyone is going through it, um, is super important and, um, something that we've, we've tried to prioritize right now.

Speaker 2 [53:46] Khris, what's your one takeaway?

Speaker 6 [53:49] I think that it would be to, uh, you know, lean on your support system, understanding that, um, there are people in the world that are going through the same thing all around you, um, understanding that, um, this is hard for everybody. And I think, for me personally, the thing that's sort of been helpful, uh, to kind of Assist me in, in, in sort of, you know, re-energizing me and, and recharging my batteries has been trying to help other people. So, uh, do my best to realize again, that other people are struggling, whether it's just to listen, um, or it's more specific like activism or, you know, in my community. Especially locally. Um, in addition to, you know, founding Green Bench, I'm also the vice president of Beer Culture. And our, our sort of goal and mission statement is to, uh, assist in, inequality in, in this industry and to, to, um, You know, see more people of, of, of color and, and women and people of, of different backgrounds to sort of, you know, I think, even out, uh, our industry a little bit and, and, and bring fresh ideas and, and, and more community and connectivity with the people that live in our cities. Um, you know, in the, what the, I'd say probably the, the thing most recently did, we, we did a campaign that we launched, uh, that was very simple, but it was just Having, doing a backpack drive for kids going back to school, which has been tough, you know, as a parent, you know, myself and, and, I know, probably a lot of you are too, uh, uh, going back to school has been a really tough thing for parents trying to figure out what they're gonna do with their kids and figuring out what the city's gonna do or the county or the state or You know, federally, so I think it's been like that little thing, being able to do this drive, dropping off, I dropped off 32 backpacks down to the south side of the Boys and Girls Club two days ago and that was probably my best part of the week for me. Um, so I think trying to find ways of, of, again, leaning on your support system. And then being there for other people to lean on has really been the thing that's motivated me to kinda get up and, you know, fight for, for my family and my co-workers and the people that, um, that, you know, around us that, that help us every day.

Speaker 2 [55:52] Absolutely. Natalie, what about you? What's your takeaway?

Speaker 4 [55:56] Uh, there are just so many. Um, I think, you know, my takeaway is, um, I, I guess the top takeaway maybe is that I, I have, I have, uh, I have found a new level of flexibility and adaptability and empathy um within myself and also, um, you know, like to Chris's point and Samantha's point that you really need to think about other people right now and not just get wrapped up in your own drama in your own self because we obviously have a lot of stress as business owners, but we also have a lot of people who rely on us. We have You know, a ton of employees who are looking to us for answers that, you know, for the most part, we just don't have the answer, and I know that's been really, really challenging for me that, you know, I, I, I pride myself on trying to be a good boss and a, and a good mentor and a good friend to, to our employees and, and right now they're really looking for answers and I, I don't know when California is gonna lift the meal requirement, and I don't know when we're gonna be allowed to go back and have indoor dining and And when all this is going to be, you know, safe again, and I just, I wish I had those answers. And so you just kind of have to really step back for a moment and think about where other people are coming from as they're experiencing, you know, an equal or even greater level of stress and anxiety, um, because we all have a lot we're going through right now and I I think just having um just more empathy and understanding and, and then also understanding the responsibility that we are as business owners um to our, to our staff as well as our, our community. So that's kind of my, my deep level takeaway,

Speaker 2 [57:33] a beautiful way to put it. Sam, last word, what's your takeaway?

Speaker 3 [57:38] Well, I mean, I don't have anything to add to the last 3 panelists' comments cause I think it, it bookends Justin's setup where he talked about the challenges that we're living through right now, and then ending with the eloquent hopefulness that the, the, the panelists said, I think is the right way to go out. I learned a lot in this hour and I'm uh looking forward to, to getting back into the game tomorrow, and I'm looking forward to hear what Jim and Craig and Bob have to say next.

Justin Kendall [58:09] See, we can bring it all, all together, Sam. You know, we bring you in with the gloom and we keep you for some positivity at the end. So, on that note, uh, we're gonna ask you all to stay tuned for our second panel as Sam just previewed. We've got Beer Institute president. and CEO Jim McGreevy, Brewers Association president and CEO Bob Pease, and NBWA president and CEO Craig Percer. Don't go anywhere. We will be back in maybe like 5 minutes or something, maybe less. So, hang tight, we'll see you very soon.