The owners of Skeleton Key Brewery in Woodridge are working on a beer called "Plan for Everything." It is inspired, of course, by 2020.Most of the suburban brewery's revenue before the pandemic came from its taproom, says co-owner Emily Slayton. Now, besides a few intermittent pints served on the patio, all of Skeleton Key's beer is canned and sold for at-home consumption.
Though it is making about the same amount of beer, the brewery is losing money, Slayton says. Profit margins are smaller on canned beer than draft.
Such is the case around Illinois, home to 286 of the nation's roughly 8,275 craft breweries. Bars and restaurants have been closed for indoor dining since October, and the reopening of concert and sports venues is not yet on the radar.
For craft breweries that sold beer to those establishments and have seen their own taprooms close, the situation has been a shot in the heart. Brewery owners wonder how much longer they can hold on.
"Can I make it through to March? Sure," Slayton says. "Beyond that, I don't know."
Closures throughout the industry could reach far in Illinois, which ranked 16th in the nation for craft beer production in 2019, according to data from the Boulder, Colo.-based Brewers Association. Craft breweries in the state generated almost $3.4 billion in economic impact and produced 421,809 barrels of beer that year.
So far, COVID-19 has not caused the onslaught of closures in the craft beer industry that it has in the restaurant world. Bart Watson, chief economist at the Brewers Association, tracked nine Illinois brewery closures in 2020, up from eight in 2019.
Watson expects that number to rise.
"I don't think we should confuse not dying with being healthy," he says. "The combination of pivoting strategy, to-go, some government support . . . has helped many at least kind of eke out existing this year."
To be sure, consumers have not stopped drinking craft beer. They are buying it at stores instead. Craft beer sales are up in stores about 16 percent year over year, according to research firm Nielsen. But those increased sales aren't nearly enough to make up for the loss of closed taprooms and restaurants.
Hopewell Brewing used to bring about 35 percent of its revenue through selling draft beer to bars and restaurants. Another 30 percent came from sales at its own Logan Square taproom.
"We loved being the pale ale or the IPA or the lager at a corner bar," says co-founder Samantha Lee. "That's really how we found our strength as a small business in a really competitive craft field in Chicago."
Hopewell has launched new revenue streams. It sells canned beer, merchandise and other local goods from a shop in its closed taproom. Still, Lee expects 2020 revenue to be down at least 15 percent from the $1.8 million it brought in during 2019.
Gross profit is likely to be down 45 percent, given the costs of packaging materials needed to can all of its beer.
"We can't keep operating this way. We're not profitable," Lee says. "Each time there's assistance or aid coming from the government it's literally just buying us time."
Nielsen has estimated that the U.S. alcohol market needs to sustain 22 percent volume sales growth across all booze categories to make up for the losses at closed bars, restaurants, sports stadiums and concert venues. The growth numbers, at about 13 percent, are not hitting the mark.
Craft brewers are hit the hardest by this slump, experts say. While grocery store shelves are dominated by domestic beers, craft brewers' business models are built around their taprooms and sales to bars and restaurants.
Sales to bars, restaurants and other venues account for less than 20 percent of revenue for the total beer industry, says Watson from the Brewers Association. That number rises to about 40 percent for craft breweries.
Furthermore, craft brewers without the distribution partnerships or production capacity to supply grocery or liquor stores likely aren't benefiting from increased sales in stores, says Danielle D'Alessandro, executive director of the Illinois Craft Brewers Guild.
When it comes to grocery shopping, consumer behavior has also shifted. People are shopping at fewer stores and browsing less, gravitating toward brands they know.
"If you didn't build your reputation for your brewery before COVID, it's really tough," says Josh Deth, founder of Revolution Brewing. "There's no sampling . . . so you can't try out new beers as easily. It's hard on the innovation pipeline."
Revolution typically releases new draft beers for people to try at its own bars and others, Deth says. Revolution's Logan Square brewpub is closed indefinitely, and its taproom is open only for curbside pickup.
One-third of Revolution's business typically comes from sales at bars, restaurants and other venues, Deth says. The two-thirds coming from store sales is not covering the loss. Revolution's sales were down 12 percent last year, and volume was down 18 percent, Deth says.
The brewery is finding other ways to get new beers to consumers. It is launching a variety pack of its session sour beers and selling specialty four-packs. Independent bottle shops are a bright spot, Deth says. Still, he misses the bars.
"The most powerful thing we can do for craft brewing is get bars back open safely," Deth says.
Like Revolution, Begyle Brewing has flagship beers that did well in stores last year, says owner Kevin Cary. It expanded to more stores, too.
The North Center brewer went from canning 2,500 cases of beer a year to 10,000. Still, 80 percent of Begyle's revenue came from its taproom, which is closed. Cary says the brewery ended 2020 with about a 30 percent loss overall.
He hopes the increased sales in stores helped Begyle reach new customers.
"We're going to be in a little bit of a hole if and when we get to the other side of this, so how do we dig out?" he says. "Maybe we made a new customer. . . .Maybe that turns into more visits in the future."