Part 1 – The Long Term Effects Of The Next Recession On Micro-Breweries

The Effect Of COVID-19 On Micro-Breweries | A 2 Part Series

 

Part 1 – The Long Term Effects Of The Next Recession On Micro-Breweries

 

Beer And Breweries. One Is In. One Is Out For A While.

When times are tough and the chips are down, one thing American citizens always count on for easing the pain and relieving some of the stress – beer. It’s an outlet that has stood the test of time. Even during a global pandemic of unimaginable proportions, the men and women behind the scenes of our great microbreweries continue to innovate and create ways of delivering the tastes that local communities have come to love. And the communities respond.

But a hard fact is surfacing in regard to how Americans will be drinking their beer over the coming months and maybe years. Yes, beer will always deliver the warm intoxication of happiness and a lighter mood, but our breweries, those wonderful bastions of social interaction and communal sharing, will likely experience a different reality for quite a while.

Before we go any further, we want to pause and tell you that this is not a message of doom and gloom. We also don’t want to imply that people will no longer be visiting taprooms and breweries ever again. It will simply be different for a while. And we believe that it’s important to adjust your business model to meet the difference.

As you’ll read in Part 2 of this series, brewery owners are likely facing one of two scenarios. They are thinking about cutting their losses and liquidating their businesses. Or, they are looking for ways to keep the doors open and push through the fog of COVID-19. 

Now, we’re an auction team. Our business is in our name, Auction Masters. And you’d likely expect an article written by an auction company to talk about all the reasons why breweries should be selling their equipment before things get too bad. But we’re not your usual auction company. We know just how important small businesses are to our communities. We understand that our local businesses are a vital part of the lifeblood that keeps communities running. 

We’ll always be here to help business owners make the transition of selling equipment if that option is their best one. We’ve spent over 40 years building systems to assist people in getting the most value possible in a seller’s situation. But, in times of struggle, our priority is providing businesses with all of the resources we can find to help them succeed.

In the first part of this series, we’re going to explore strategies that the smart brewery brands will be using to thrive in the coming months and years. We’ll also give you some valuable information to consider while you navigate the present pandemic and its aftermath.

 

Strategies That The Strongest Brands Will Be Using

1) Direct-to-Consumer Sales

The strongest brands that people know, but haven’t historically been able to buy in their state or city, have a great opportunity to reach new customer bases as direct-to-consumer restrictions begin to lift and trends continue shifting to off-premise buying. 

This is a chance for great brewery brands to shine. If you haven’t already, you may think about exploring tactics on how you can reach consumers in areas where you haven’t been able to in the past. The strongest brands will be giving their current customers every reason to stay with them. And they’ll be capitalizing on every opportunity available for introducing new customers to their products. 

Of course, the most popular brands have a great advantage in this strategy. The well-branded brewers who can package cans in 12 packs (for instance) and do it reliably have a great opportunity to profit ahead of them. Recessions are great at concentrating markets. People are going to naturally flock to the brands that they know and trust, or brands that they’re hearing about from trusted sources like close friends and family. They’ll be looking to try beers from breweries who are marketing to them through digital channels with messages that resonate and show authority. Breweries who are seen as well-trusted have a chance to harness a significant portion of those concentrated buying efforts by consumers. 

 

2) Slashing Prices

We know that consumers spend less during recessions. But that doesn’t mean breweries necessarily benefit from offering cheaper pricing in their models. Price adjustment is always an option, but you may want to consider other creative strategies well before you play the pricing game. 

If you are thinking about lowering your prices, consider the fact that there are companies who are better positioned to beat you at this game. They’re usually big companies who have the infrastructure in place to slash prices on one line of products and introduce a product similar to yours in another line – without missing a beat. There are several tactics you could potentially employ to adjust how you sell your product. Racing to the bottom on prices may not be your most sustainable answer. 

Think about shifting your packages and how you are offering your products. If your brewery usually sells Hazy IPA’s in 16 oz. 4 packs, you might experiment with selling them in 22 oz. bottles. If your double or triple IPA appears to be a bit too expensive in the current market, then you  might experiment with shifting to an American Pale Ale or a single IPA, beers that take less resources and time to process, package, and sell. We’ve given you a couple of ideas here but remember, you’re the expert. You know your clientele better than anyone. Think from the perspective of your favorite fans. What would they want to see from your brewery? What are people like your most loyal brand ambassadors looking for?

Moving away from your current brand identity (which may be a specialty brand) and transforming into a value brand with lower prices, will likely have reverberating effects that you can’t get rid of down the road. As a craft brewery, you’ve set yourself apart with specialty tastes and products. You’ve built an individualized identity that makes your brand truly special. If you begin to rely on value pricing, you may not be able to shake yourself of that identity as time passes. 

 

3) Work With The Bank

Next, let’s begin to explore an idea that most people wouldn’t think about as a long-term advantage – working with your lenders and funders to push through the coming months and shine as a trusted brand that weathered the storm.

It’s going to be tough for competitors to move into the brewery niche. Securing loans and funding will be a challenge for folks who are looking to start a new brewery. The pressure of a recession on available loan funds will make securing start-up capital more difficult for equipment and expansions. Likewise, newer breweries who have recently opened their doors will have a tougher time using their equipment to secure loans once the market is flooded with used equipment worth 30% of its original value. 

Here’s the silver lining. There may be less demand on available loan funds which could give successful breweries an advantage. Banks will still need to process loans.  

Established breweries with a solid track record and smart business plan will definitely have an advantage when it comes to securing funds. This may even be the perfect time for them to look at buying more equipment, taking over existing brewery spaces, and expanding their operations into new markets. This may be a great opportunity for breweries who have been hurt by the pandemic to market their businesses and equipment as a ‘package deal’ before they move into the scenario of liquidating. Additionally, there are numerous breweries in the planning phase that have secured funding and are looking to select locations, buy equipment, and set up shop. Both of these situations could make for valuable outcomes.

So what does all of this really mean for you? Whether you’re thriving or struggling during the pandemic, you’ve got a great chance to increase your value and see a return on your investments. One option you have is to capitalize on selling your business if you’ve been negatively affected by the pandemic. Hire a trusted Business Equipment Appraiser to help determine the current market value for your equipment. You’ll then have a great idea of what price your equipment will demand on a better vantage point for moving forward. 

Another option you have if your brewery has suffered during the pandemic is using a Business Equipment Appraiser to help show your value to lenders, secure additional funding, and weather the storm. There will likely be many companies that have amazing opportunities waiting for them on the other side of this. You may be one of those businesses that simply needs to be open when your state lifts travel and social restrictions.

As you’ll read in the next part of this series, the equipment market may soon be flooded and when that happens value could drop. Instead of entering that diluted market sell-off, you may be in a great position to work with your lenders to keep your loans alive. They will likely be willing to help you stick through this rough patch of time. Before the pandemic, lenders would likely say this about a loan, “We’re going to foreclose on this loan and sell the equipment.” 

Now, because the value of equipment could be declining with the closure of more breweries, they likely won’t be able to secure the returns on that same equipment. And they know that is a possibility. So, for the funding institutions, it makes more sense to keep the loan alive and work with their vendors. This will probably vary from lender to lender. But many lenders, because the equipment will be less valuable, maybe much more patient with their current vendors and willing to work with them to get through the recession and come out on the other side. Because the value of the equipment will drop, a much better strategy might be practicing leniency with their current loans and helping business owners get them paid off in the long run.

 

4) Know Your Worth

The best strategy you can begin with right now as a business owner is to know what your equipment is worth. Regardless of how your business is performing at this moment, you will rest easy knowing that you have this important piece of the puzzle in place. Auction Masters is here to help you rise to that challenge. 

We’ve made the process easy for determining your business equipment value during the pandemic. In two steps you can set yourself up to effectively package and market your business and equipment as a hot sales item or lay down the foundation for securing more funds. Read below to see just how simple we’ve made this.

 

The 2 Step Process

Step 1 – Streaming Video Consultation

Our experienced team has seen so many auctions now that quoting breweries has become a streamlined event. Let us hop on a video call and take a walk around the facility! You can book your free consultation below.

 

Step 2 – Inspection and Auction Checkout Scheduling

For safety reasons, we will be scheduling inspection and pick-up times to minimize exposure to COVID-19. With appointments for checkouts, customers can load their products more easily and are helped more thoroughly. We offer digital document signing that allows you easy access to files, quick signage, and replacement copies if you ever need it.

We are always working to improve our systems. So, let us know what you think of our new process next time you pick up your items!

Taking this proactive step for your business could save you a ton of stress in the future and help you make the right moves when you need to. Call Auction Masters today and get started in determining your business’s value with our trusted, business equipment appraisals. 

 

 

Part 2