Craft Brewing COVID Q&A: Riley’s Brewing on the reality of taproom revenue, ramping up distribution

Owned and operated in Madera, Calif., Riley’s Brewing, has been one of the many craft breweries doing all it can to innovate and remain in business during the pandemic. The mass production of hand sanitizers for hospitals, first responders, senior care facilities and large companies to be distributed to the community has been its biggest initiative. President Dan Riley says they’ve been running the line for more than 18 hours per day to meet the demand.

But what comes next? It’s a million-dollar question that might take a billion hand-crafted answers. So, we asked Dan for his thoughts. What will breweries need to do to adjust their approach to succeed now in this era where doors are open again, but capacity is cut in half, and the virus and the risk is still with us? 

Thanks for taking the time, Dan. How do you see physical, taproom business going over the next 12 months? Not just in terms of adjustments to rules, but in revenue?

Dan Riley: Taprooms will be hit pretty hard on that side because of distancing and closing every-other table or so. Revenue will go down because you have half as many people, so they’ll have to raise prices for the low occupancy. This will be a challenge for taprooms with expensive rent and a small seating area – those who can only seat 30 will now only be able to seat about 15. These next few months will continue to be very painful.

Given that, what are some new sales concepts you think could make up the difference for breweries that centered their business around the taproom?

Riley: I think it’s going to force us to look outside sources of revenue. They know they can only make half the money at best, so now if you have a bad day it could take a month to recover. They’re going to half to get their product to the store shelf, will need to get their product to taps in other places, and must expose themselves to other locations. And since other restaurants and bars themselves will be hindered by restrictions as well, it will take creative thinking, otherwise, income will be severely impacted. 

How does one explore growing their distribution channels again, especially considering how tough the economics already were in doing so?

Riley: It is going to be incredibly difficult for all brewers – especially for the craft brewers – to get into those distributors. And even if you get into a distributor you won’t get into a store shelf because even if you get to the distributor you won’t be able to overtake the larger breweries who’ve historically commanded shelf space at major retail chains. It will become incredibly competitive for small brewers, who historically relied on revenue from their taprooms, who now must all simultaneously be looking for a store shelf and other ways to take their product home.

What other modifications to traditional craft beer sales channels and products might we see emerge?

Riley: I think you’re going to see displays, and more packages that are easier to consume at home (since consumers can’t go out). Since consumers will still have a much more difficult time visiting their favorite restaurant that used to seat 300 that is now halved, consumers won’t want to wait in lines, risk their health, and are looking for ways to have smaller gatherings at home. Craft brewers will come up with packages that are easy to pick up, inexpensive, creatively designed, and tailored to be consumed at home.

Can you give me a scenario with some numbers to show just how this new normal might play out?

Let me preface these numbers by saying they’re an estimate. I would say on my brewery we’re used to going through 1,000 kegs a year at the pub. With occupancy halved, I need to now make up 500 kegs worth of product in the trade. That’s where it’s going to hurt – it’s going to get on the fight on who can brew how much and where the consumer can take it home – which means I’ll need to come up with a better product at a lower price. This competition is ultimately best for consumers because every brewery must now be at their best in terms of quality and price to survive, and will make breweries better by forcing us to be on top of our game.