With craft distillers relying heavily on sales through on-site tasting rooms, they have been hard hit by the pandemic.
The Distilled Spirits Council of the United States says the figures show the ‘extreme challenges’ small businesses face, and is calling for Congress to act immediately to help distillers.
4,600 employees furloughed
A study, conducted by the Distilled Spirits Council of the United States (DISCUS) was based on a June 2020 survey by the American Distilling Institute (ADI), a trade association for craft distillers.
It showed that 41% of craft distillers’ sales had evaporated, worth more than $700m. In addition, around 4,600 employees - representing 31% of total employees - had been furloughed.
US craft spirits in 2019
Craft distilling is a $1.8bn industry in the US, generating approximately $3.2bn in retail sales in 2019.
There are more than 2,000 craft distilleries, that collectively generate more than 15,000 direct jobs.
A significant portion of these losses was attributed to the shutdown of on-site sales from tasting rooms and other on-premise sales. In 2019, an estimated $919m of craft distiller revenues came from on-site sales. More than 40% of craft distillers get more than half of their business from tasting room sales.
“Like many businesses in the hospitality sector, COVID-19 quarantining has negatively impacted craft distiller sales, particularly on-site sales," explains DISCUS. "Many craft distillers closed their tasting rooms in the last few months to comply with local and state public health guidance and to protect their employees.
"And, as one would expect, for those who could open safely, the number of customers was limited. As a result, nearly 40% of craft distillers reported that their on-site sales were down significantly (i.e., 25% or more). Over 15% said that their tasting rooms were completely shut down.”
In addition, craft distillers have seen ‘significant declines’ in their wholesale business - unsurprising given that nationwide sales to on-premise establishments are down 50%.
“As small, independent businesses craft distillers typically do not have the financial resources to sustain such losses for long," says DISCUS. "Over half of all distillers did receive loans under the Paycheck Protection Act. Unfortunately, this has not been enough.”
DISCUS has been working with state guilds to urge Congress for additional economic relief.
“Key to the craft distilling industry’s survival is the passage of the Craft Beverage Modernization and Tax Reform Act (H.R. 1175/ S. 362), which will make the current federal excise tax rates permanent. If the legislation fails to pass by year’s end, craft distillers will face a 400 percent tax increase in January 2021, creating further financial turmoil for these small businesses.”
Help for US craft distillers
DISCUS' Covid-19 Industry Response page is a resource for distillers, consumers, advocates and leaders in the industry. It includes information for distillers making hand sanitizer, ideas to support moderate drinking at home, and ideas for making cocktails to-go and other measures to help the hospitality industry.