Trickle Down

When the pandemic cratered the bar industry, the economic ripples were felt far and wide.

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Wine and highball glass sitting on white background casting shadows while a wine bottle pours messily around them.
What has COVID cost the bar industry behind (way behind) closed doors?

On the face of it, a bar is a showpiece. The complex infrastructure and intricate supply chain that keep it running are largely invisible. And so, from the outside, COVID-19 might seem like a windfall for the alcohol industry. After all, according to a report in the medical journal JAMA Network Open (and with the advent of booze to go), American adults are generally drinking 14 percent more.

Of course, anyone inside this industry knows that data is misleading. Yes, Americans are still imbibing, but they’re doing it at home. This shift, coupled with capacity restrictions, has devastated bars, as well as small and independent breweries, wineries, and distilleries that rely on foot traffic to their tasting rooms.

But the ramifications run deeper still. When a bar closes, the fallout reaches beyond the immediate staff and landlord, beyond what the eye can see. What about the lemon growers who supplied the bar’s citrus? The local craft ice supplier who is now out of a sale? Like their front-line counterparts, myriad behind-the-scenes vendors also found themselves in an adapt-or-die scenario.

Juicy lemon slices tiled on a background.
You can make lemonade out of lemons that don’t get sold to bars, but that doesn’t mean the growers get paid. / Olga Yastremska © 123RF.com

The Backbone

Pandemic-induced closures reverberated along the complex supply chain, often in unexpected ways. 

Bitters Sweet

When sales fell off of a cliff last March, Raymond Snead of Cocktailpunk bitters in Boulder was worried about his company’s future. Unlike many in the industry, however, his worries were unfounded. Snead says his artisanal, small-batch bitters company has weathered the pandemic and bar shutdowns “surprisingly well,” for a variety of reasons—some obvious and others less so. 

Cocktailpunk’s direct-to-consumer (via its own website and Amazon) and distribution sales are up, thanks to consumers stocking their home bars. “People are drinking more at home and, more importantly, drinking better at home,” Snead says. 

Ryan Geller, a partner at Basecamp Wine & Spirits in Frisco, says he’s seen a huge increase in sales of shakers, strainers, ice molds, cocktail cherries, cordials, and, yes, bitters as everyone seems to be playing bartender and outfitting their home bars.

A less obvious reason Snead’s bitters business has been so resilient? The rise of canned cocktails, a phenomenon that was already well underway pre-COVID (for more on this trend, click here). According to Nielsen data, canned cocktail sales grew at a rate of close to 80 percent between April 2019 and April 2020. Companies manufacturing these cocktails require a lot of bitters, and Snead has found a good revenue stream supplying bulk bitters by the gallon to a co-packer in Charleston, South Carolina. 

Papering The Pandemic

Industrial dishwashing detergents. Sterno fuel for catering and special events. Paper towels for bathroom dispensers. Environmentally friendly packaging. These are just a few of the products that EP Distribution, a Denver-based food packaging distributor, stopped selling almost completely after COVID shutdowns ravaged the industry. “For the most part, our business stayed good. It was a scare at first, but it’s really been a shift in what people were buying and how they were buying it,” says director of sales Peter Moore.

Unsurprisingly, to-go beverage containers and related products have been in heavy demand. Moore sold out of four-cup carriers early on in the pandemic. “[It’s] something you’d never think the world would run out of,” he says, “but we did, and they doubled in cost.”

Moore reports a huge spike in demand for clear plastic bottles, which bars and restaurants are using for to-go cocktails. “We’re so glad to be able to provide this to bars,” he says. “Cocktails have some of the best profit margins and restaurants and bars really need people to add that to a tab.”

Citrus Puckers Up

Unlike bitters makers and packaging providers, lemon growers have not been able to make lemonade from the heavy blow they’ve been dealt. Alex Teague, senior vice president of Santa Paula, California-based Limoneira company, says that pre-COVID, food service represented nearly 65 percent of his company’s total sales volume. And while retail sales have been up, they haven’t been enough to compensate for the loss. 

The biggest hit: “The size and grades [of citrus] that the food service sector takes is not the same as retail.” Without a fresh outlet, smaller fruit is left to go to “juice channels,” which is ultimately unprofitable for growers. 

Corona On Ice

Going into 2020, craft ice and sculpture company Colorado Ice Works was breaking its own sales records. “We did more in sales in January alone than we did in all of 2013,” says owner Michael Bickelhaupt. But that strong start was abruptly curbed when COVID hit. Traditionally, 70 percent of Bickelhaupt’s sales came from the service industry, and without bars, restaurants, hotels, distilleries, and country clubs fully open, Colorado Ice Works’ business froze over. 

The company purchased machines, a freezer truck, and display freezers in order to sell bagged ice to liquor stores around town. And while service sector sales picked up in the early summer, it “was never to the point where we could break even,” Bickelhaupt says. He’s let several full-time employees go and had to press pause on patents he was filing for proprietary new equipment. 

The Grainy Details

In 2015, Felicia and Stephanie Ohnmacht began selling grain from their family’s 100-plus-year-old Burlington farm directly to local distillers under the name Whiskey Sisters Supply (clients include Laws Whiskey House, Rocker Spirits, and Bear Creek Distillery). When the shutdown decimated distillers’ tasting room sales in March, the Ohnmachts shifted their sales to a nearby grain co-op and feedlots so their revenue streams were not impacted. But surprisingly, by the end of 2020, the sisters realized their sales to distilleries had bounced back—even approaching 2019 levels. “What’s interesting about [this] industry is that it’s a long-game product,” Felicia says. “Distillers were trying their hardest to have cash flow now to buy grain to lay down barrels of whiskey so that they have product two to three years from now.” So fear not: Thanks to that hustle, we’ll still be able to savor local whiskey in 2023.

overhead view of top of aluminum beer cans
Cans weren’t just a victim of COVID last year; other forces were at work, too. / geckophotos © 123RF.com

The End of the “Can-demic”

Can shortages are likely to continue for a few more months, but there’s good news in the works. 

Even pre-pandemic, the nationwide can shortage of 2020 was an inevitability. That’s because “2020 was already poised for notable aluminum can growth across a variety of categories,” says Scott McCarty, director of strategic communications for Ball Corporation. The growth of canned seltzers, soft drinks, canned cocktails, and sparkling waters—plus a larger move away from single-use plastics to cans—set the scene. When COVID hit and consumers bought even more beverages in aluminum cans for home consumption, the shortage went from bad to acute. 

Shawnee Adelson, the executive director of the Colorado Brewers Guild, says the shortage could not have come at a worse time for brewers. With breweries looking to satisfy demand for off-premise sales, many were left without a way to package their product. Ska Brewing Co. rewrapped its old inventory of cans and called in every last favor from suppliers. “We weren’t able to satisfy all of the off-premise demand because of the can shortage,” says Ska’s sales and marketing director Kristen Muraro, “but we were able to get creative and fulfilled as many orders as possible.”

Meanwhile, brewers with existing bottling lines, such as Odell Brewing Co., were able to shift over to glass bottles. “While we’ve leaned into cans for the last few years…when the can shortage started, we shifted some of our volume back into bottling. We’re very fortunate to have a bottling line and the option to do this,” says Kristen Wood, Odell’s community manager. 

Another Band-Aid? Crowlers. These giant cans produced by Ball were a readily available, much-needed way to serve draft beer to go. “It hasn’t necessarily offset the can shortage,” Muraro says, “but it has been a great way to help on-premise restaurants and breweries have more options for to-go beer and products.” 

It’s looking like true relief from the can shortage will arrive later this year. Ball is investing in long-term domestic can growth by “aggressively expanding [its] U.S. can manufacturing production by installing two new lines in existing facilities and building two state-of-the-art plants…that will provide at least six billion units of capacity by the end of 2021,” McCarty says.

Changing Tastes

As consumers learn to mix their own drinks at home, will their tastes change?

During the lockdown, consumers who previously didn’t know the difference between a Gibson and a greyhound abruptly became at-home bartenders. They learned on their own (thank you, internet!), and were further schooled by suddenly out-of-work bartenders sharing recipes via social media and Zoom.

But in the long term, does this mean operators can expect patrons’ tastes to change? We can look to the trends we saw as bars reopened for dine-in service over the summer to project. 

“We saw a lot of people being open to trying new things [on premise],” says Steven Waters of Run For The Roses in downtown Denver. “For the most part, if you’re an old fashioned drinker, you can make that at home. We were selling a lot more of the ‘out there’ cocktails that didn’t sell well before.” In fact, when Waters reopened over the summer with a pared down menu, he saw demand for the entire 36-cocktail menu was still there, and he figured out a system to make all of those cocktails available again in order to satisfy more adventurous tastes.

But the same logic doesn’t seem to hold true when it comes to to-go cocktails. “It’s hard to sell a cocktail with six ingredients in it when someone’s buying it online and they’re not able to have a conversation with the bartender about what’s in it,” says Marika Evanger, manager of Zeppelin Station food hall, which includes two heavily-trafficked bars, Big Trouble and Kiss + Ride. In general, Evanger says that Zeppelin Station’s bars have returned to their roots with best sellers like ever-popular daiquiris and piña coladas—things that are “memorable and recognizable.”

Kendra Anderson of the now-shuttered Bar Helix echoed that sentiment. Her RiNo bar was known as a destination for Negroni lovers, with upwards of 10 variations of the cocktail on the menu at all times. Those fanciful takes always sold well in person, but that changed when it came to curbside and to go. “When we shifted [the to-go menu] to slightly less esoteric drinks, we saw an increase in sales,” Anderson says.

More than anything, Waters says it comes down to value perception. “As the shutdown and unemployment dragged on for so long, there was so much uncertainty with what was happening. People wanted high-value things, to feel like they were getting a lot of value out of a drink.”

Two wooden barrels, one standing upright and one laying on its side.
Craft distillers are over a barrel right now. / Ivan Kish © 123RF.com

Distilleries on the Brink

Colorado craft distillers fear for their futures.

Last March, craft distillers made headlines—and recouped some of their losses—by filling an urgent need for hand sanitizer. But when the second shutdown took effect in the fall, big-box hand sanitizer producers had caught up to satisfy demand, and that market evaporated. 

Small distillers found themselves in a particularly brutal situation. “Most of us have tasting rooms in industrial areas due to the fire risk of spirits,” says Sol Richardson, owner of Rising Sun Distillery, which has locations in Denver and Frisco. “We don’t get the foot traffic or visitation of breweries, and we were already working so hard to pull in customers. Now we’re wondering, how do we just survive?”

Robert Wiley, co-owner of Deviation Distilling in Denver, says that without the ability to offer tastings and tell the story of the product in the tasting room or at liquor stores, off-premise sales also suffered. “It can be challenging to get people to buy something they don’t know,” he says. Meagan Miller of Arvada’s Talnua Distillery agrees: “Consumers know what they like, and they’re not willing to spend $80 on a small craft distillery.” Miller adds that the cancellation of distilling festivals—another key way people were discovering their brand—further hurt the bottom line. 

Couple those struggles with the loss of revenue from private and corporate functions and special events, and it’s easy to understand why many craft distillers are barely hanging on. 

Distilling Success 

Innovation from the industry.

Palisade’s Peach Street Distillers has benefitted from rolling out some of its rarefied offerings during the pandemic, from a 10-year bourbon to an eight-year peated single-malt whiskey to a six-year peach brandy. “It’s a heck of a time to try and make it on just clear spirits in the Front Range,” says director of sales Dustin LeMoine. “It’s the bourbon and whiskey and the aged stuff that keeps us treading water and moving in the right direction. It helps folks remember us and sets us apart.”

Denver’s Deviation Distilling was able to find strong off-premise sales when it entered the Washington, D.C. market in March 2020. The distillery’s products have been well received thanks to the city’s high demand for craft gin. 

Talnua Distillery has amped up its virtual cocktail class offerings to stay fresh for loyal regulars, going beyond cocktail 101 into 201. It even offered a barrel-aged cocktail class over the holidays that came with a mini-barrel for participants to experiment with aging their own cocktails at home.

Whiskey with ice splashing out on glass on a black background.
Successful businesses will have to think outside the glass. / 5phonrf © 123RF.com

Trend Alert: COVID (& Beyond?) Winners

Alcohol Delivery

Direct-to-consumer liquor delivery and wine club subscriptions have performed very well throughout the pandemic. Joel Kampfe, one of the wine minds behind Denver’s Noble Riot wine bar and the direct-to-consumer natural wine club Unrooted Wines, says that Unrooted saw a spike in members during the pandemic. “Our model at Unrooted is to deliver natural wines to your doorstep, and we saw an increase in consumer web searches for just that. We didn’t have to pivot.”

Large Formats

Dustin LeMoine of Peach Street Distillers says the two products Peach Street sells by the handle (vodka and gin) saw a nearly 100 percent increase in business in 2020. He attributes it to the fact that “people were looking for a larger volume so they didn’t have to go out as much.”

Mountain Tourism

Samantha Alviani, co-owner of Bread Bar in the tiny town of Silver Plume off I-70 near Georgetown, says that summer interest in the patio was so strong, the spot switched to a reservation-only system to prevent an excess of people flooding the town. “Our weekend reservations would typically book out within 20 minutes of slots going live,” she says.

Canned Cocktails 

Colorado Springs’ Lee Spirits Co. distillers had the prescient fortune to launch its canned cocktail line in February of 2020. “We are thrilled with how the canned cocktails have performed,” says co-founder Nick Lee. “Sales have risen exponentially…the consistent rise in sales gave us the confidence to introduce our two new flavors, Whiskey Lemonade and Fuego Lemonade. Both are selling very well since their introduction in late September.”

Outdoor Space

Over the winter, Stanley Beer Hall, located at Aurora’s Stanley Marketplace, decided to go all in on the construction of a next-level patio, complete with a self-serve beer tap system and two-sided enclosure. “We’re continuing to invest in outdoor space at Stanley, even beyond COVID,” says Bryant Palmer, a spokesperson for Stanley. “We’ll continue to explore more ways to activate outdoor space.” 

Off-Premise

Lance Hanson, owner of Jack Rabbit Hill Farm and brands like CapRock Gin and Jack Rabbit Hill Farm Wine, kept his celebrated commitment to sustainability even as he switched his priority to retail sales. He now sells one and a half- and three-liter boxes of wine compared to the winery’s usual 18-liter box. Hanson continues to think in terms of on premise too, as these boxes are also customizable to cater to restaurants’ to-go and dine-in markets, and they help keep wine fresher without corking and recorking.

Talk to us! Email your experiences (and thoughts, opinions, and questions—anything, really) to askus@diningout.com

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