As we enter the third month of 2022 (time flies!), we asked Vice President of Craft Beverage Financing at United Community Bank, Jason Sleeman to share some of the challenges on the horizon for the craft beer industry and what brewers can do to get ahead of them. Here’s what he had to say:
What are some of the biggest issues facing the craft brewing industry?
To say that the last two years have been a rollercoaster for the craft brewing industry might be an understatement. If you rewind back to March of 2020, the sky was falling on the industry, delaying openings and expansions and sending breweries scrambling to find solutions to keep the doors open. We have come a long way, and most of the industry is stronger — and in some cases, has stronger balance sheets and more opportunity to grow. But there are still some challenges we are facing:
The industry is tired, and in some cases, cranky. The last two years have put strain on relationships. Your best friend and business partner has not always been so fun to deal with. Family dynamics have been strained, as a lot of breweries are “family” businesses, either working together, or investors in the business. Sadly, there are stories of families not being so nice to each other. This could lead to some financially healthy and popular breweries calling it quits this year.
Real Estate Challenges
If you are looking for a location right now, this one is not news to you: finding a space is tough. As the industry has continued to develop, and the growth of a more retail-focused taproom trend has grown, finding the right location is hard. This has led to lots of decisions about leasing, buying, size of the brewery, and a number of other factors influencing location.
Supply Chain Crisis
Shortages are everywhere. From aluminum cans to grain prices rising, to equipment lead times ballooning, the supply chain is hitting breweries from all angles. These are all things that require strategic planning on brewery leadership’s part. Most can be overcome with proper lead times or partnering with a neighboring brewery or a co-op. I have seen breweries floating the idea of incremental — and most likely temporary — price increases to try and keep margins at a point so they can keep chugging along.
The age of your brewery and location affects one of the most apparent trends, which is regional COVID restrictions, and the capital that some have been able to receive since COVID started. This will come as no surprise, but in different areas of the country, people are able to do different things with their breweries. Places like Florida are wide open, where other areas of the country have you jumping through hoops to sell a beer in your taproom. This is allowing some breweries to operate at full speed ahead, while others are having to be creative to keep their margins up. Potentially compounding the issues, if you are a younger brewery, you may not have been able to take advantage of some of the stimulus that was available to more established breweries. Others are seeing strong balance sheets as they benefited from stimulus and fewer restrictions.
How the Industry Can Respond
The good news is, that most of this is expected to be temporary. A few steps can help you achieve your greatest success this year: first, you need to know your numbers, track your data, and be able to make decisions with solid information influencing each step. Surround yourself with the right advisors including your CPA, banker, attorney, suppliers, insurance agent, etc. Take time to focus on why you are doing this. No one starts a brewery to complete profit and loss and balance sheets, so talk to your clients and make sure you continue to stay attached to your brand and why you operate a brewery. The brewing industry has some of the most creative and hardworking leaders of any industry, and will succeed through any challenge that it faces.
Jason Sleeman is Vice President of Craft Beverage Financing at United Community Bank. Jason has worked on many brewery, winery, and distillery projects developing an understanding of the specific needs of these businesses and what roadblocks can happen in the lending process. Jason works with clients as a true banking advisor, finding solutions that address their financial needs. Craft breweries who need financial assistance can reach Jason at email@example.com.