Beer, breweries and COVID-19

While the hospitality industry has been allowed to partially re-open (under exception of localised lockdown in Aberdeen), earlier 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.

Difficulties

Breweries across Scotland, small and large alike, have been left reeling by the enforced closure of pubs, bars and restaurants earlier this year. While breweries and distribution centres could remain operational, the temporary closure of on-trade resulted in beer-making companies facing immediate profit hits and cash-flow issues.

An unprecedented reduction in demand for beers and other alcohol resulted in a major shut-down of the brewing process which, despite Government intervention, may result in further 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, although many may have re-opened, may have been detrimentally affected by initial contradictory government advice and which will require to adhere to social distancing guidelines. Social distancing measures have also resulted in any public tours offered by breweries being cancelled indefinitely.

The ongoing restrictions and lack of demand for draughts and other beers may have left breweries with uncertainty as to when to restart their brewing processes, where these have been reduced or stopped altogether.

Overcoming Difficulties

Beer-making businesses have the daunting task of finding alternative methods of getting beers to customers in order to survive the current climate.

At the start of lockdown, drinks with friends, family and colleagues initially re-located from in-person at pubs and restaurants to virtual gatherings, via various social media platforms. The focus for many brewers at that time shifted from on-trade to off-trade, where supermarkets and other stores were often struggling to keep shelves stocked. Panic buying was not restricted solely to toilet paper and pasta.

While pubs, breweries and restaurants are beginning to open up, many businesses will have seen decreased footfall since pre-COVID, due to social distancing measures, despite the Government’s Eat Out to Help Out Scheme (which excludes alcohol). Certain planning restrictions have been temporarily loosened allowing certain pubs, breweries and restaurants to open for take-away purposes, and publicans and brewers may be able to 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 offered free virtual tours while lockdown was enforced. While this is unlikely to help with immediate cash flow issues, it may help to keep consumers engaged with the industry. For those who remain wary of returning to pubs, 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, stock in closed pubs and stock currently being produced will have ended up as spoilt. Some reports suggest the figure could be as high as a whopping 50m pints!

Acknowledging that standard processes may not be achievable, HMRC has introduced temporary measures to assist brewers and publicans 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.

The British Beer & Pub Association has also announced a free cross-industry platform to contact brand owners to receive permission and guidance on how to destroy spoilt draft beer and cider. Publicans in Scotland have until mid-August to apply to water companies to avoid charges for spoilt beer.

Government Assistance

Scottish Economic Secretary Fiona Hyslop has recently announced a government package worth £2.3bn 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.

While currently due to end on 31 October 2020, breweries, like other businesses in the UK, may have benefited from the UK Government’s Coronavirus Job Retention Scheme. The Scheme was set up to cover 80% of wage costs of furloughed works, up to £2,500 per calendar month per employee. Many furloughed works may now have returned to work on a part-time basis, as allowed by the Scheme.

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.

While celebrations of International Beer Day today may look extremely different in the current COVID-19 climate, all those involved in the making and serving of beer should be celebrated for the ingenuity and adaptability shown in the midst of a global pandemic.

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