CEO Roundtable: Northern Colorado brewers brace for winter during a pandemic, and what comes after

While the shift toward to-go beer sales has partially stymied the pandemic’s effects, a group of brewery owners and leaders in Northern Colorado expect the winter to be particularly difficult as the threat of another COVID stay-at-home order looms.

The group of brewery leaders spoke Tuesday at BizWest’s CEO Roundtable on Brewing in Northern Colorado.

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Winter threatens smaller taproom capacity

Public health officials have long warned that COVID infections will increase into the colder months across the world as outdoor seating and services give way to frigid temperatures.

Although it came earlier than perhaps expected, Colorado has seen weeks of increasing infection rates across the state, leading state health officials to impose tighter restrictions on gatherings and business capacity to 25% of normal in Denver on Tuesday.

Similar case increases are happening in Northern Colorado, specifically threatening Larimer County’s status as a “level 1 safer-at-home” area that allows up to 50% capacity in a restaurant.

Verboten Brewing Co. moved from east-central Loveland to the city’s downtown in 2015 specifically to buoy the taproom, co-owner Josh Grenz said.

While Verboten has expanded its distribution reach across the state rather than the regional footprint it had before the pandemic, “It will affect our inside traffic, and it’s going to affect… our taproom employees for sure, it’s going to affect those shifts,” he said. “That’s what concerns me the most.”

Frezi Bouckaert, a co-founder of Purpose Brewing Co. in Fort Collins and a longtime figure in New Belgium’s history, said the loss of in-person customers hurts Purpose’s focus on the taproom.

“We love the interaction, but you cannot survive noaways during COVID, you cannot survive just on the bar side,” she said.

Cans, cardboard strained in the supply chain

For New Belgium Brewing Co., which has arguably the largest distribution footprint among the state’s breweries, the pandemic has tanked draft sales from taprooms and intensified sales of pre-packaged beer.

CEO Steve Fechhimer said New Belgium was able to take advantage of that because it was already a well-known and widely available brand in liquor and grocery stores.

“At our scale, we’re more profitable in packaged than draft,” he said. “In that sense, it’s allowed us to keep the (profit-and-loss) in a healthy spot for the year.”

The beverage industry at large is facing a shortage of aluminum cans as demand shifted rapidly from beer served from a glass in taprooms, bars and restaurants toward drinking beer at home.

Odell Brewing Co. CEO Eric Smith echoed the sentiment about cans, but also noted that wildfires across the American West have disrupted another raw material needed to make drinking at home happen.

“Once we were back on track a little with cans and moved some things to bottles, there was a shortage of cardboard in California and not being able to get carriers,” he said. “That’s been another hurdle we’ve had to overcome and still working through now.”

City Star Brewing Co. in Berthoud was opened as a community-focused taproom meant to draw visitors in. But co-owner Whitney Way said the brewery had to buy a canning line to be able to sell its beer to-go out of the taproom.

As more breweries scrambled to add cans and growlers for off-premises consumption, the competition increased significantly and pitted small brewers against not only major brewing companies, but also against makers of soda, seltzer and other beverages.

Charlie Hoxmeier, head brewer and co-owner of Gilded Goat Brewing Co. in Fort Collins, said the margins on canned beer sales are low, even when sold through the taproom rather than through a retailer.

Being a new canner has also proved a challenge to Hoxmeier, as he knows the brewery is paying more for cans than others have paid in the past, but he doesn’t know how much.

“We don’t have enough history to know how much more we’re paying, and we also don’t have enough buying power to buy enough to offset that,” he said.

Alternative revenue

While craft brewers pivoting resources from the taproom to the packaged side is well-documented across the industry, Red Truck Beer Co. has found a different niche to help offset the revenue loss from the brewpub.

CEO Laird Mulderink said the Fort Collins operation shifted some of its tanks for contract-brewing, where it brews other breweries’ recipes on their behalf.

The deals Red Truck has made are with other breweries that were considering opening additional locations this year or next year but changed plans as selling beer on-site became less viable.

“They’re taking that capital and instead of facing the pain of on-premise right now… we’re helping bring them to market,” he said.

A post-pandemic future

Some brewers mentioned that COVID implementations such as allowing beer delivery and drinks to-go from restaurants may stay once the pandemic ends, and others are continuing on with expansion plans.

Smith said Odell is soon to begin construction on its winery tasting room and finish construction on a second Denver taproom next January.

But other brewers aren’t as hopeful.

Carol Cochran of Horse & Dragon Brewing Co. is downbeat on the future, even without COVID-19 as a global threat.

Her brewery’s business model focused on supplying to restaurants and bars, and she believes the psychological fear of going out after months of social isolation will continue to hurt a hospitality industry that COVID-19 hit the hardest.

“Maybe I need a psychiatrist on this call rather than a bunch of brewers, but the next summer may not be a return for some of those people,” she said. 

WeldWerks Brewing Co. co-founder Colin Jones said the recovery so far from the earlier shutdowns has disproportionately benefited chains and established bars and restaurants in America at the expense of local independent operators.

He also argued that no matter the outcome of the election next week, the winter and early spring will be difficult in attracting people into taprooms. Former vice president Joe Biden would likely push for more stringent lockdowns to suppress the virus if he wins, Jones reasoned, or large numbers of people would continue to stay at home if President Donald Trump were to be re-elected and continue pushing for a broad restart of normal economic activity despite the risk to public health.

“I don’t see any positives for the restaurant and bar industry through this spring; I think it’s going to be an absolute decimation,” he said. “It will create even more divide between the winners and the losers, unfortunately.”

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The CEO Roundtable is sponsored by Plante Moran, Flood & Peterson and Elevations Credit Union.