09/17/2020

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The Beer Industry Adapts to Coronavirus Closures



What to do With 10 Million Gallons of Beer


St. Patrick’s Day and March Madness season are crucial moments for the beer industry each year. This spring, however, consumers across the country were at home on their couches instead of at bars and stadiums. Now, beer distributors are coping with an unprecedented situation. In March, an estimated 10 million gallons of beer , equivalent to almost one million kegs, were left to rot in empty venues. “This was the absolute worst time for this to happen for draft beer,” said Craig Purser, Chief Executive of the National Beer Wholesalers Association.

Draft beer can usually stay fresh for two to six months, but now the excess supply of ale is expiring in shuttered bars and restaurants as well as in warehouses and breweries. All this wasted product could cost the beer industry up to $1 billion.

Beer Companies Face Unique Challenges


The beer industry is not alone in needing to find creative solutions for dealing with excess supply. Oil companies are facing a shortage of space for storing crude oil. Cruise lines and air carriers are in need of places to park their empty ships and planes.

Other sectors of the food and drink industry are also feeling the burden of excess supply. Farmers who supply restaurants, school cafeterias, and other establishments that have closed are dumping milk and destroying meat and vegetables.

Each industry has unique challenges in dealing with unused supply. Beermakers need to keep environmental regulations in mind. If excess beer is dumped down drains and gets into bodies of water, it can produce bacteria, lower oxygen levels, and interfere with pH balances. The logistics of retrieving full kegs of beer from closed establishments are also complicated. “This is a hot potato because none of our businesses are set up to return massive amounts of beer. It takes three times as many trucks to transport full kegs than empty ones,” explained Dan Vorlage, Head of Marketing at MicroStar Logistics, the country’s largest keg-logistics company.

Beer producers are also struggling to determine who should pay for the unused ale. Some companies, including Diageo plc (DEO), who make Budweiser, and Constellation Brands Inc. (STZ), who make Modelo, have agreed to split the costs of the excess beer with restaurants and bars to help them make it through what has been a difficult time for many reasons.

Cheers to Creative Solutions


Even as shutdowns begin to lift, the coming months could be rocky for the beer industry. The Tokyo Olympics, the Major League Baseball season, Oktoberfest, and other events have been canceled. Even when bars reopen, social distancing measures will likely mean that their capacity will be reduced.

However, beer companies are adapting and innovating. Some companies are packaging their supplies in cans to be sold at grocery and liquor stores, where customers are still flocking to buy alcohol. Boston Beer Company Inc. (SAM), which owns Sam Adams, has been recapturing ethanol generated from beer for gasoline for several years, and is ramping up this process.

Some companies are using excess beer to make something particularly important in the current moment. Beermakers are shipping their expired supply to factories where it can be turned into hand sanitizer.


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