Philly craft breweries look to PPP and innovation to keep going in the pandemic

This story has been changed to note that while the PPP records indicated that Yards kept 128 employees, the brewery has been able to bring back 108 so far.

Attic Brewery was open for eight weeks before the owners had to close their taproom.

Originally planning to prioritize on-premise sales and growler refills, owners Todd and Laura Lacy didn’t even have canning or packaging equipment for their beer. But when the pandemic hit and they could no longer rely on taproom sales, they changed their approach. “It really felt like we were starting a whole new company again,” said Laura.

Attic is one of several craft breweries in the region to receive a Payment Protection Program (PPP) loan, getting about $56,000 to help retain 11 employees. Some of Philadelphia’s larger craft breweries, like Yards Brewing Co., received over $1 million. The loans come as breweries are suffering from losses in on-premise sales at bars, restaurants, and taprooms, which have been too great to recoup through distributors, grocery stores, and home deliveries.

Laura Lacy used her PPP loan to pay her bartenders their base salary of $8 per hour, plus more to compensate for tips, bringing each to over $20 per hour. She also invested $30,000 into canning equipment in order to sell beer to go while the taproom was closed.

“We adjusted the team we had in place to go from being bartenders to now being production workers canning beer all day,” she said.

Evil Genius Beer Co. didn’t have to worry so much about that. Founded in 2011 by Luke Bowen and Trevor Hayward, the company had the capability to can and bottle its beer for distributors and grocery stores. “We have enough can and bottle supply already in our supply chain to ensure that we’re going to be able to brew and package beer for the next 12 months at least,” Bowen said.

But Evil Genius found it needed a PPP loan, too, and got one of more than $150,000. “It was pretty necessary,” Bowen said of the loan. “Our taproom is a big source of revenue for us, as well as all the bars and restaurants and sports venues and concert venues where we sell our beer.”

When that business dried up overnight, Bowen and his team didn’t know how they would be able to keep paying their 35 employees. The company saw its off-premise sales increase by 65% above what they were last summer, but it didn’t make up for lost on-premise sales.

“The PPP loan allowed us to make job offers to every single one of our employees again, and get them back on payroll,” said Bowen.

Yards faced similar challenges. When Gov. Tom Wolf mandated widespread business shutdowns in March, “we immediately lost 100% of our taproom and private events business,” said CEO Trevor Prichett. Yards also relies heavily on sales at bars and restaurants, which haven’t reopened to full capacity. “We overnight lost the majority of our revenue.”

Before the shutdown, Yards had 160 employees. The PPP loan, which Prichett says was for $1.17 million, allowed it to bring 108 people back to work, with kitchen staff and bartenders transitioning to production roles.

Like Evil Genius, Yards also saw a big spike in its off-premise sales “in a way that’s more than it would have been had the pandemic not hit,” said Prichett. Still, “it’s not nearly enough of an increase to make up for the entire loss in the on-premise,” he noted. “Maybe it’s making up for half of it.”

Despite early reports that Americans were drinking more during the pandemic, total alcohol volume sold is down slightly, according to IWSR Drinks Market Analysis. Paul Gatza, a senior vice president at the Brewers Association, noted that off-premise consumption has grown by about 12% for craft breweries. But he also pointed out that “many craft brewers do between 30% and 100% of their business in the on-premise market,” leaving them more vulnerable to shutdown-related losses than big companies like Anheuser-Busch.

Gatza also thinks that while PPP loans and other funding programs have helped craft breweries stay afloat so far, that money won’t be enough to last through the winter. With a new surge in COVID-19 cases across the country, many states are revising their reopening plans and leaning toward renewed shutdowns. “The re-closings could be the final straw for many craft brewers,” Gatza wrote in an email.

Matthew Farber, director of the Brewing Science Certificate Program at the University of the Sciences, agreed that craft breweries have an uphill battle ahead of them. He worried about smaller breweries, like Attic, that have to rely more heavily on the canning and production business. “It costs a lot of money to put beer in cans,” he said. “Packaging is one of the most expensive angles for the brewing business.”

But already having that equipment in place won’t necessarily protect larger breweries. “Your larger craft brewery relies very heavily on distribution and the sale of kegs to bars,” said Farber. “It can then be very difficult to rely on the single-serving, small package distribution model that the pandemic has warranted.” And because larger breweries use equipment typically meant for a much larger output, Farber also thinks it’s more difficult for them to get creative with new brews in the same way small breweries can.

Lacy sees that as Attic’s advantage. Being one of the only breweries in Germantown, she says, Attic has a strong local client base. The business originally grew out of crowdfunded investments, and many of those investors have offered additional support since the start of the pandemic.

“I think what we’ve shown already is that we can operate just on the sales locally,” said Lacy. “As long as we have that core business, we’re good to go.”