Covid-19 measures taken by governments in 2020 have disproportionately impacted bars and restaurants, eliminating 42% of beer hospitality sales volumes in Europe, according to a new report by The Brewers of Europe.
This has also decimated the significant, positive contribution made by the beer value chain to the wider economy. The drop in consumption, provoked 860,000 job losses, a 25% decline in beer’s overall value-added to the European economy and a 23% decline in government tax revenues from beer, principally due to €7 billion in lost VAT receipts usually collected through beer hospitality. A further €4 billion in government revenues were lost because of the income and social security contributions usually paid by the hundreds of thousands who lost their jobs.
With its report, The Brewers of Europe want to make clear that
- “Hospitality and tourism have been hit – so has the brewing sector”.
Responding to prohibitions on mobility and social gathering, hospitality and tourism have been the most severely affected sectors. In contrast, retail benefited from fewer restrictions. The spike in the summer months and subsequent fall in hospitality is the result of the easing and subsequent reintroduction of different restrictions in the sector.
- “Clarify any potential misunderstanding that the brewing sector profits from the crisis, with alcohol sales up”.
The performance of the beer sector has shown very different performance for different routes to market: In the on-trade sector the impact has been dramatic: after years of steady, but continued growth in consumption there was a 42% reduction in 2020. The off-trade has, in contrast, shown a stepped increase, albeit modest in magnitude: an 8% increase. On balance, an overall loss of almost 34 million hectoliters can be seen in 2020 in comparison with 2019. The Covid-19 crisis has therefore had important repercussions for the brewing sector overall in terms of both volumes and particularly value, due to the most significant losses being in the on-trade.
- “Economic impact for the brewing sector of Covid-19 on: jobs, value added, government revenue, on on-trade and other parts of the supply chain”.
The economic impacts for 2020 have affected differently the different segments of the supply chain. As much as 2.6 million jobs were related to beer in 2019 compared to 1.8 million in 2020. Value added generated, directly and indirectly by the beer sector in Europe has also dropped. The overall value reduced due to Covid-19 restrictions is over €15 billion, Executive summary - 4 - representing a fall of almost 25 per cent. The total taxes paid to governments in Europe was reduced by 23 per cent, and was mainly driven by the sharp drop of €7 billion in on-trade value added tax receipts, a fall that is not surprising given the restrictions imposed across Europe in response to the pandemic.
Concerning the outlook for the future, the Brewers of Europe state that in the short term, the European economy may start its recovery in the summer 2021, if reduced Covid-19 cases and progress in vaccinations allow for a gradual unfreezing of restrictions. However, the situation remains very delicate as in many European countries external borders are still closed to tourists. Any recovery will undoubtedly be uneven, gradual and staggered. Depending on the country and the policies imposed by governments, but also consumer confidence, sales of on-trade beer could experience some improvements in summer 2021, but will undoubtedly remain below 2019 levels. It remains unclear whether the pandemic will trigger, or accelerate, more fundamental shifts in policies, in business practices and, most importantly, consumption patterns in the medium to long term.
Pierre-Olivier Bergeron, Secretary General of The Brewers of Europe said, “As we look ahead to the recovery, we need to get the reopening right. We need clarity and certainty. A thriving hospitality sector is a key to the wider recovery, including as an important symbol of consumer confidence. With targeted support, beer hospitality can lift the economy, bring in much needed government revenues and boost jobs all along the brewing, production and hospitality value chain. Bars and pubs can once again become pillars of the local community - and with it, the economy.”
On the other hand, with much of Europe still in lockdown or under tight restrictions again, particularly in the hospitality sector, this kickstart is still tantalisingly just out of reach. The long wait is having a devastating effect on social lives, livelihoods, culture, the economy and government finances.
With a safe, secure and sustainable future absolutely vital, hospitality venues, event organisers, breweries and the whole supply chain need help to bridge the gap, not just towards first and partial re-openings, but towards full recovery. The Brewers of Europe and our partners have consistently called for support from governments, such as prolonged temporary unemployment benefits, flexible liquidity grants, reduced VAT rates in hospitality and targeted excise relief for hard-hit sectors. These same governments stand to benefit significantly from a revitalised social economy if they get behind beer hospitality.
Europe Economics’ Beer Covid Impact Report shows how much the beer hospitality trade has suffered and the impact on the jobs, value and tax revenues generated by beer. In 2020, beer sold on-trade dropped 42% compared to 2019, from 126 million hectolitres to 75 million hectolitres.
With a small increase in retail beer sales only picking up part of the slack, there was a net fall of 34 million hectolitres, or 9%, in the total volume of beer sold in Europe in 2020, wiping over €3 billion off the value of beer production in a single year. Jobs generated in the beer value chain fell by an estimated one third in 2020, from 2.6 million people to 1.8 million, with the vast majority of these losses being in beer hospitality, but jobs also being lost in supply and distribution.
Mr Bergeron added, “We are becoming more sustainable in our practices and more aligned with our local environment. We are getting more creative in our brewing methods and our range of beers. And we are leading the way in responsible drinking, including through the low alcohol choices on offer. As Europe plans its recovery, we are ready to play our role in driving the economy, continuing our push for greener practices, and rebuilding the local communities.”
Many hospitality establishments will unfortunately never reopen, even after the lockdown ends. However, many in the sector have weathered the crisis, made the necessary investments to ensure Covid-safe environments, and will be ready to again serve beer to our consumers when they return to the bar.