The COVID-19 pandemic has hit businesses hard across the U.S., and that’s especially true for brewers.
We attended the Montana Brewers Association Conference — held virtually this year — and watched as presenters shared statistics that show a striking shift in business practices. As consumers limit visits to bars, restaurants and taprooms, which are also operating under lower capacity allowances, keg production is down 95%.
That has caused brewers to pivot to serving consumers via to-go or delivery options, or even shipping directly to consumers. To-go sales have risen 8.2%, delivery by the brewery itself (no third-party partner) has risen a full 30.5% and shipping directly to consumers has risen 4.8%.
To meet demand, brewers have shifted to bottle/can production. Cans now account for half of all craft beer revenue. However, this shift has caused material shortages, which is limiting just how many bottles and cans each brewery can produce.
Last year was about staying competitive, but this year is about survival. And with winter on our doorsteps — making outdoor dining an impossibility for a large portion of the U.S. — brewers need to do all they can to ensure survival and success going into next year. To help, we’ve put together four actions you can take:
1. Manage your cash flow
Right now, you’re faced with the unpredictability of your sales, which makes it hard to project what future sales will look like and what your costs will be. But you can take several actions to help:
- Go through, analyze and gain a full understanding of your true overhead costs. This analysis often identifies opportunities to reduce costs, but at the very least, it will help you better manage current cash flow.
- Since you can’t rely on yearly production trends right now, track and manage your current inventory and then adjust your production schedule accordingly.
- If you applied for a PPP loan, make sure you’ve 1) used the funds for allowable expenses and 2) have extensively tracked fund usage, as this is necessary to receive forgiveness on the full loan amount. Not achieving forgiveness is going to put a real dent in the increase in cash flow you experienced from the loan.
2. Look into tax credits and deductions
A potentially significant way to increase your cash flow is on the tax side of things.
For example, brewers are often able to qualify for the R&D credit, which exists at the federal level but is also offered by many states.
One of the biggest opportunities you may have, however, comes with net operating losses (NOLs). The CARES Act enacted a five-year NOL carryback opportunity for losses incurred in tax years beginning in 2018-2020. Prior to the CARES Act, these NOLs were only allowed to be carried forward. Carrying NOLs back can result in a refund, which further increases your cash flow.
The IRS also made the change earlier this year allowing businesses to revisit depreciation elections made in prior years. Talk to your accountant about whether you can leverage this change to increase your NOL and gain an even larger refund.
3. Invest in what you need to launch or improve online sales
Have you evolved your business practices to meet current consumer habits?
With limited indoor dining capacities and dwindling outdoor dining due to the weather, it’s crucial to build up your online sales capabilities. Consumers are still looking to drink beverages, but they’re doing so at home. You can reach them with an easy-to-use app for their phones that enables curbside pickup, delivery and shipping. Developing an app is not as time-consuming and expensive as you may think. You have custom development options, as well as low-code options like Microsoft Power Apps.
Because consumer habits are not likely to simply snap back to how they used to be once the pandemic is under control, investing in technology now will continue to pay dividends for years to come and will diversify your customer base/revenue sources, which is a crucial way to not only increase revenue but also increase the value of your business.
4. Reopen (or continue to manage being open) safely
Managing unanticipated change has been a challenge during the pandemic. So has determining how to safely keep your business open. Strategy is key.
Strategic planning can help your business look at your short-, medium- and long-term needs, as well as better and more quickly react to unanticipated change by creating action plans based on best-case, most likely and worst-case scenarios. Effective change management can communicate the “why” of changes to employees, increasing adoption and decreasing frustration.
Once your strategy is in place, you can manage the challenges of keeping your facility open for business more effectively by using technology. Microsoft offers a Return to the Workplace solution that provides:
- Tools to track and manage facilities
- Employee self-check-in and check-out
- Phased capacity
- Light contact tracking
- Case management and incident reporting
The solution allows you to monitor your employees and your reopening plan across all your facilities, and it can help your employees feel safer and more comfortable about returning to work.
Read more: Reopening during COVID-19: Microsoft Return to Workplace solution
How Wipfli can help
Managing change in times of uncertainty is difficult. You don’t have to do it all yourself. Wipfli can help you set your business up for success moving forward, whether it’s thinking more strategically and innovatively, to increasing cash flow, to selecting and implementing the right technology for your business. Learn more about our solutions and how they benefit you: