In the age of the COVID-19 pandemic, with its bar and restaurant closures and stay-at-home orders, people continue to drink—but in vastly different ways than they did before. Despite an overall increase in liquor sales in the month following most regions’ shutdowns, many smaller distilleries across the U.S. are hanging on by a bare thread.
According to the American Craft Spirits Association, in the absence of government stimulus, as many as two-thirds of its members might be forced to shutter within three months. The peril is amplified due to the fact that on-premise sales tend to make up a disproportionately larger share of profits for smaller distilleries than they do for their macro counterparts.
In a period of unprecedented upheaval, success will be defined by how rapidly these small businesses can adjust. Here’s a look at what some distilleries are doing to keep the lights on.
At Santa Fe Spirits in New Mexico, founder Colin Keegan is taking on a new task that’s already quite familiar to many of his industry colleagues. “We stopped spirits production entirely and moved to making hand sanitizer,” he says. He’s hardly alone; the ACSA estimates that more than 75% of craft distilleries are pivoting to the endeavor in an effort to address a national shortage. The Distilled Spirits Council maintains a running list of distilleries that have begun producing sanitizer. As of mid-April, it numbered more than 700 brands.
But unlike some distilleries, where sanitizer production is a part-time enterprise, at Santa Fe, it’s the only thing being produced, after distribution channels for its popular apple brandy, whiskey and smoked gin dried up without warning. “Our distributor will not talk about why it has stopped ordering, so we’re not getting our products into stores,” says Keegan. With his once-bustling tasting room now collecting cobwebs, Keegan has been forced to focus on the emerging market of curbside pickup to unload the supply he has left.
Selling Direct to Consumer
Andrew Auwerda, the president of Philadelphia Distilling, found himself in a comparable quagmire when Pennsylvania shut down all 600 of its state-run liquor stores in mid-March. “[We lost] the No. 1market for our Bluecoat gin overnight,” he says. “We pivoted to serving people where they are now: their homes. We have a direct-ship business through FedEx Ground that’s been extremely well-received: more than 100 orders in one day alone, compared to maybe one or two a day during normal times. That’s 97% of our business right now. The other 3% is from customers opting for our drive-thru and pickup option.”
Shifting sales to e-commerce may prove essential for all small brands. But they’ll need the cooperation of their local governments. “We just launched direct-to-consumer shipping in Virginia of our products for the first time. I’m so tired,” says Becky Harris, the president and chief distiller of Catoctin Creek, located about an hour west of Washington, D.C. “Virginia ABC [alcoholic beverage control] has allowed us to ship our products by common carrier to customers anywhere in the state. This has been a tremendous lifeline to our business.” In the first full day of taking orders, says Harris, her business sold more than 10 times the amount it usually would on a good Saturday, enabling it to rehire some tasting room employees to service these orders.
Harris might want to consider putting one of them behind a computer, as booze brands lean hard into the digital domain to help sustain interest and sales. It’s a virtually universal game plan at the moment. Of course, long before COVID-19 struck, a strong social media presence was already a sturdy plank in a brand’s marketing strategy. Suddenly it has become the plank. Without bartenders, off-premise activations or even handshakes to help spread the good word, the burden rests on the shoulders of tweets and Instagram stories.
“Digital is our main focus now,” says Thomas Mooney, the founder of Westward Whiskey. “We created a campaign called ‘Westward Together’ that brings the experience of a ‘meet the maker’ tasting to people's homes, and that allows us to have a direct conversation with them through a virtual platform.”
Building an audience in this space requires more than just interactivity—it demands ingenuity. Live cocktail-making demonstrations and at-home blending exercises are just the tip of the spear. A growing band of destinations, including George Washington’s Distillery in Mount Vernon, Va., are incorporating virtual tour platforms to seamlessly integrate educational insight with the feel of the physical space itself. Move through a Google Maps-like interface and click on anything of interest, and historical or technical tidbits appear on the screen. Expect similar software from innovators such as VisualizaPro to be rolled out among brands with the resources to acquire it.
Others are using websites to leverage the strength of their surrounding communities. In Hye, Texas, Garrison Brothers partnered with a group of veterans called Team Rubicon to help fund mobile hospitals and testing centers in a digital push known as Operation Crush COVID-19. “Our goal is to raise $2 million for first responders and bar and restaurant employee relief funds,” says Garrison Brothers co-founder Dan Garrison, who helped buoy morale within the industry at the end of March by emceeing the 2020 Craft Spirits Awards via livestream. “We have already raised $300,000 in just four days from generous friends and fans of our business.”
Pivoting Business Models
Other brands are pushing through new formats and packaging to appeal to a new era of increased home consumption. West Fork Whiskey, as an example, recently became the only Indiana distillery to offer canned bourbon cocktails. It’s offering ready-to-drink Cold Hamer whiskey highballs out of an Indianapolis bottleshop. Another whiskey label we can’t yet name is about to announce a cheeky variation on its usual branding, created specifically for the home bar. Westward, for its part, is staying the course with a major relaunch in the second half of the year.
According to Westward’s Mooney, however, the value of all this repositioning might not amount to much without government cooperation. “We’re lobbying for the right to ship directly to consumers, just like our colleagues in the wine industry do in 48 states and across many state lines,” he says. “Honestly, the relief I really want, more than government money, is the right to sell and ship directly to consumers.” In that regard, the most significant course your local distiller can chart leads directly into the statehouse.