The lockdown of the hospitality sector in Germany, which has been in place for almost six months to contain the corona-virus, has increasingly serious consequences for the German brewing industry.
According to an industry survey by the German Brewers' Association (DBB), every fourth brewery (25 percent) sees its existence at risk. The corona crisis hit the entire industry hard - companies of all sizes are reporting massive losses in sales, short-time work and layoffs. According to DBB’s survey, the breweries' turnover fell by an average of 33 percent from January through March 2021.
Breweries with a higher proportion of sales to pubs, bars, restaurants and at events are particularly hard hit. The complete collapse of the draft beer market, has struck some companies with a drop in sales of up to 85 percent. Only a very small number of breweries that sell their beers predominantly or exclusively through retailers were able to avoid drastic losses.
In general, however, the largely stable but usually low-margin bottled beer sales cannot compensate for the heavy losses in the catering business, which traditionally generates a large part of the added value for breweries and which is therefore essential for the industry as a whole.
The survey clearly shows that the brewing industry is more severely affected than any other industry by the standstill of the hospitality sector. "There have not been any slumps of this dimension in the German brewing industry since the end of the Second World War," says Holger Eichele, General Manager of the German Brewers' Association. The collapse of a single market segment, as is the case with draft beer, is so far unique in the history of the brewing industry.
“After almost six months of permanent lockdown, the catering business and parts of exports have completely collapsed and a recovery of the market is not in sight. The sales losses in the brewing industry now add up to historical levels,”says Eichele.
According to the survey which is not representative but represents the wide range of the industry well, almost 88 percent of the breweries admitted that they were very severely (58 percent) or at least severely (30 percent) affected by closings and restrictions in the hospitality sector.
When asked about a probable time perspective for the reopening of outdoor catering, the vast majority of breweries gave the month of May as the expected date. 15 percent were more skeptical and fear in the light of the sluggish vaccination campaign a delay in the reopening of the hospitality industry until at least June.
The consequences of the lockdown and the resulting sales losses affect all areas of the company in the breweries. More than 85 percent of the companies surveyed had to send employees on short-term work, especially employees in sales. In four out of five breweries (79 percent) pending investments that are important for the future have been postponed or entirely canceled.
Almost a third of the breweries (32 percent) had to lay off employees for operational reasons since the beginning of the crisis. Over a quarter of the breweries (26 percent) complain about bottlenecks in the procurement of bottles, beer crates and cardboard boxes, for example as one of the consequences of the pandemic. On the other hand, bottlenecks have also arisen in production and in the supply of bottled beer to retailers, as 16 percent of the breweries confirm.
When asked what effects the corona crisis will have on the German brewing industry in the medium term, the industry is concerned in many areas. Most companies (over 86 percent) fear higher taxes and duties in the future to consolidate public finances. Almost 84 percent of the breweries surveyed expect the loss of numerous outlets in the German hospitality sector.
At least 73 percent of those surveyed are also expecting a significant increase in the number of operations and bankruptcies in the brewing industry. 75 percent of the breweries expect even stronger growth in online trade and delivery services.
It is positive to note that more than 62 percent of the companies surveyed expect an increased trend towards non-alcoholic or low-alcohol beers. Alcohol-free beers were the only significant segment to increase their market share in the crisis year 2020. The Brewers' Association assumes that the non-alcoholic market will continue to grow sustainably.
Almost 73 percent of the companies surveyed had applied for state aid. Almost 69 percent of the breweries have applied for Bridging Aid III, a special financial instrument in Germany to support companies suffering from the pandemic. However, so far only just under three percent have been paid out.
More than 64 percent received short-time work benefits in full as requested - every fifth company received only a partial payment. For the November and December aids it looks even worse which received only just under 44 percent and a 31 percent of the companies in full as requested.
With regards to the support from the federal and state governments for affected companies, 75 percent of those surveyed come to the conclusion that the aid is not sufficient at all. When asked which measures should still be taken for the brewing industry and the hospitality sector in the corona crisis, many breweries are in favor of a clear opening perspective for pubs, bars, restaurants and events and call for progressive testing concepts. In addition to the waiver or lowering of the beer tax for all breweries and the return to the earlier beer tax volume scale for small breweries, a reduction in bureaucratization of economic policy is called for.
In the case of state aid, brewers ask for a compensation of lost employer's wages as well as a new valuation of fixed costs and lower thresholds with higher percentages for bridging aid III. In particular, the reimbursement for unmarketable draft beer urgently needs to be improved, so the demand from the industry.
In discussions with the federal government, the German Brewers' Association had repeatedly pushed for additional, effective aid for breweries. More than 300 breweries from all over Germany signed an open letter to the Government officials in February and pointed out that every week more and more breweries, tap rooms and beverage wholesalers are threatened with bankruptcy without fault of their own. (inside.beer, 18.2.2021)
On Saturday, Germany's new coronavirus lockdown rules, the so-called "emergency break", comes into effect. In cities and districts exceeding a seven-day incidence rate of 100 new infections per 100,000 inhabitants over three consecutive days, restaurants, pubs, bars and cafes must remain closed, with exceptions for dining rooms in rehabilitation centers or nursing homes, catering for the homeless or long-distance truck drivers, and similar circumstances. Takeaway food and beverage pickup remain permitted, as does delivery.
Large parts of Germany already exceed the limit, including many rural communities and large cities such as Berlin, Cologne, Frankfurt and Munich.
The stricter rules will apply until the seven-day incidence falls below 100 for five consecutive days. The law will stand until June 30, with any further changes requiring parliamentary approval. If states have stricter regulations in place, they will continue to apply.