Drastic Government restrictions mean brewers across Scotland will require extraordinary measures to weather the Covid-19 pandemic. Short-term stringent measures will no doubt have long-term consequences across the sector.
Breweries across Scotland, small and large alike, have been left reeling by the enforced closure of pubs, bars and restaurants. While breweries and distribution centres can remain operational, the temporary closure of on-trade has resulted in beer-making companies facing immediate profit hits and cash flow issues.
An unprecedented reduction in demand for beers and other alcohol has resulted in a major shut-down of the brewing process which, despite Government intervention, may result in business closures and job losses. Issues with supply chains and packaging increases the risk of any stock being produced going to waste.
A number of beer-making businesses also own bars and restaurants throughout the country, which may have been detrimentally affected by initial contradictory Government advice, and which will now be closed to the public. Social distancing measures have also resulted in any public tours offered by breweries being cancelled indefinitely.
The ongoing lockdown and lack of demand for draughts and other beers may also leave breweries with uncertainty as to when to restart their brewing processes, where these have been reduced or stopped altogether.
Beer-making businesses have the daunting task of finding alternative methods of getting beers to customers in order to survive the current climate.
Drinks with friends, family and colleagues have re-located from in-person at pubs and restaurants to virtual gatherings, via various social media platforms. The focus for many brewers has shifted from on-trade to off-trade, where supermarkets and other stores are often struggling to keep shelves stocked. Panic-buying has not been restricted solely to toilet paper and pasta.
Temporary loosening of planning restrictions also allows pubs, breweries and restaurants to remain open for take-away purposes only. Bottle-shops within bars can also remain open for take-away. While restrictions permit this, publicans and brewers can therefore increase or introduce home deliveries to keep trade going.
Online shops remain another option allowing consumers to browse and select beers, to be delivered for consumption from the comfort of their own home.
A selection of larger distilleries are offering free virtual tours while the lockdown is enforced. While this is unlikely to help with immediate cash flow issues, it may help to keep consumers engaged with the industry. Other options available may be to offer virtual beer tastings, with packs purchased and delivered in advance.
Beer-making businesses can also offer gift cards for future business with extended expiry dates. This may not save current stock from spoiling, but it could help with immediate cash flow issues.
Waste – HMRC Notice
The notion of any beer going to waste is enough to horrify both brewers and beer connoisseurs alike. Inevitably, at least some existing stock in closed pubs and stock currently being produced will end up as spoilt. Some reports suggest the figure could be as high as a whopping 50 million pints.
Acknowledging that standard processes may not be achievable, HMRC has introduced temporary measures to assist brewers and publicans to destroy spoilt beer. Rather than requiring an Authorised Company Representative from a brewery, brewers can appoint a publican or agreed person to destroy the spoilt beer.
Brewers are still required to keep an audit trail of the destruction, evidence of the destruction (such as a video), a spoilt beer record and evidence of full credit of the duty paid or replacement of the goods provided when they became spoilt.
These temporary measures are due to last while COVID-19 restrictions are being enforced and HMRC will provide at least 30 days’ notice before withdrawing the measures.
Economic Secretary Fiona Hyslop has recently announced a Government package worth £2.2 million and outlined various measures taken by the Scottish Government to support businesses as a result of COVID-19. Breweries which also run bars and/or restaurants may benefit from a year’s 100% non-domestic rates relief for the year commencing 1 April 2020.
Those with bars and/or restaurants may also be eligible for a one-off £25,000 grant, but only if the properties have a rateable value between £18,000 and £51,000. All other properties in Scotland will also benefit from a 1.6% relief, which effectively freezes the poundage rate for the year commencing 1 April 2020.
Micro-breweries and other businesses which are currently in receipt of Small Business Bonus Schemes or Rural Relief may be eligible for a £10,000 grant for small businesses.
The UK Government has also announced the Coronavirus Job Retention Scheme (also known as Furlough Leave). Breweries, like other businesses in the UK, may be eligible to claim a grant from HMRC to cover up to 80% of wage costs of employees who are not currently working but are kept on the business’ payroll, up to £2,500 per calendar month per employee.
The current COVID-19 situation is a moving beast and, at the time of writing, little guidance is yet available for the various Government measures introduced to support businesses. With multiple ‘rescue packages’ having been announced in one week alone, it is possible that further assistance may become available in the coming months.
Not all doom and gloom
With the 24-hour news cycle, it is too easy to be overwhelmed by the constant bleak coverage of COVID-19. However, among the troubling stories of business closures, job losses and, most upsettingly, lives lost, there are uplifting stories of individuals, businesses and communities rising to the challenges brought by COVID-19. Brewers and beer-making businesses are, of course, among those making a difference.
Reports include a brewer setting up a scheme to allow donations of beer to NHS workers and even businesses re-allocating breweries and distilleries to produce hand sanitiser to help combat shortages.
Government grants, crafty creative solutions and community assistance may help beer-making businesses fight off immediate cash-flow issues. However, the long-term impacts which COVID-19 will have on the industry remains to be seen.
If you have any questions about the impact of COVID-19 on your business, please do not hesitate to contact a member of our specialist Food & Drink team.