THE CRAFT

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How Local Distilleries are Coping in the Age of the Coronavirus

  • by: Robby Haynes
  • On: 6, Aug 2020
47 min read
As you can imagine, Covid-19 has been extremely disruptive to the hospitality industry, which has, in turn, affected the spirits industry in unprecedented ways. As a producer of craft spirits myself, I can attest that this situation has been particularly challenging. Apologue Liqueurs is a relative new-comer to the scene here in Illinois, launching just over 3 years ago. Our products were designed with bartenders in mind and about 85% of our business to date has been seasonal on-premise cocktail menu placements. We were just starting to see Spring cocktail menus peak their heads when on Saturday March 21st, Governor Pritzker issued shelter in place orders, effectively ending our “spring sling” and sending our four person team back to the drawing boards.
 
We’ve put a lot of effort into understanding what this new normal might look like for us and our customers by re-prioritizing our resources and leveraging what we can to support accounts and keep our small team busy doing R&D, content creation, education and promotions where possible.
 
About a month in and hoping to broaden my perspective, I reached out to a couple of maker friends who have been in the business to see how they were holding up and adapting to the circumstances at hand. I feel that to paraphrase or summarize would do a disservice to their candid, straightforward and sobering answers. I’m incredibly thankful to both Brent Engel (Letherbee) and Paul Hletko (FEW spirits) for taking the time to respond and doing so thoughtfully and quickly. For me, sitting still long enough to craft a proper sentence has been surprisingly challenging during the pandemic, even with nowhere to go. According to a Facebook post, it’s called "Brain Fog” and it’s totally natural.
 
Revisiting their responses now, some two months in and on the verge of a very tempered patio season here in Chicago, further serves to underscore the dire necessity for reforms in our industry, as well as the tough realities many of us will continue to face as we ease in to this new normal.

Brent Engel Letherbee Brent Engel, Owner/Operator of independent craft distillery, Letherbee in Chicago, IL

How has the shuttering of restaurants/bars due to COVID19 directly affected your business?
This is typically our slowest time of the year, but our sales have pretty much completely dried up.  We're basically shut down.

 
What tough decisions have you had to make?
Payroll is frozen at $0. All four of us (including myself) are totally furloughed and seeking unemployment insurance from the state. I'm using what funds Letherbee has to continue covering our health insurance and pay rent at the distillery.
 
How have you adapted?
Hand Sanitizer! Who'd of thunk it?
 
How will it change the way you do business in the future?
I don't know. I'll try to save more and keep more money in an emergency account. I'm looking at my inventory right now (alcohol, botanicals, finished products, empty bottles, labels, etc) and wishing it was cash instead.
 
What can people that care about and want to support craft producers like yourself do to ensure that the products they love continue to be available to them.
Now, more than ever, I hope people think of us when they shop for spirits. I have always asked folks in my community to have the wherewithal to spend a few more dollars on our products vs. the commonplace brands. But it's an all-new level of seriousness now.
 
Anything else top of mind?
In my world, bar and restaurant owners and workers have been hit the hardest. They were the first ones to be laid off work and forced to close. Because the employees typically don't claim their tips as income, they might not be able to get very good unemployment insurance benefits from the state.  Additionally, they typically have to pay for their health insurance out of their own pockets. Restaurants and bars need free money, not loans, to pay their rent and help their employees RIGHT F*CKING NOW...No, actually, LAST F*CKING WEEK! 
 

Paul Hletko Founder of FEW SpiritsPaul Hletko, Master Distiller/Founder of Few Spirits in Evanston, IL 

 
How has the shuttering of restaurants/bars due to COVID19 directly affected your business?
Shuttering of bars and restaurants is challenging to the business. First, they are our friends and we want them to succeed personally and professionally! Second, they make up a good fraction of our sales, so when they stop purchasing, it affects the business really quickly. Cash flow goes down, sales models and projections go out the window. Especially in whiskey, where we produced the whiskey we sell today years ago, any interruption is hard financially, and a sudden interruption, even harder. Bars and restaurants have always been one of the best places to find out about FEW, so losing that, hurts.  I've always said that our competition is not other alcohol companies - our competition is Netflix, and with everyone locked at home, our primary competitor just got a lot stronger.   
 
What tough decisions have you had to make?
The only real tough decisions relate to people. We have had to cut back on our hourly employees, and even had to let go one of our newest full time people. Those were hard decisions. Pausing production was an easy one. Cancelling events and travel is easy short run, but can be challenging in the long run as we lose the ability to introduce who and what we are to a new audience.   
 
 
How will it change the way you do business in the future? 
I don't have any idea! I think the sudden "flexibility" in many regulators' minds will be very challenging to reverse in the future, so the real effect long term is super hard to see. Will bars/restaurants keep the ability to sell retail? Will retailers gain the ability to sell by the drink? How will we be able to reach consumers in bars and restaurants when there aren't as many, and the (illegal) tactics that large suppliers use will be even harder to combat when they focus their resources on a smaller number of accounts? Will Amazon get the ability to sell alcohol, like they do in other countries, and if so, will the consolidation in the retail industry drive consolidation among either of the other tiers; or even a combination of the other tiers? On the other hand, with fewer restaurants, prices will rise, and perhaps they will be less rigid on pricing or ounce costs etc? Will restaurants struggle to charge $30 a cocktail for a commodity product, and turn to smaller brands to help justify the cost?
 
What can people that care about and want to support craft producers like yourself do to ensure that the products they love continue to be available to them.
There's no difference today, than ever—if you want to be able to have craft producers around, you need to buy their products. Yes, it's more important today than ever due to a market shock, but purchases make a difference. Craft producers produce art in a bottle, and it generally costs more due to scale and other economic realities. You can't just say "I'm glad you are here" —you have to actually buy what they produce. "I see your stuff everyone" is great, and we love that, but if you don't actually buy it, you won't see it anywhere in the future. Yes, we are all about the whiskey and we are lucky as hell to do what we do, but that whiskey is how we pay for things like food. Just like it often costs more to eat out at a restaurant that isn't a national chain (but not always!), it might cost more to drink that craft brand - if that's important to you, consider it.    
 
Anything you want to mention, plug or communicate to folks out there that might be reading this? 
We're all struggling these days, but if you can, please support small brands, and support your bartenders by donating to the USBG Covid relief fund.

**Photo of Brent Engel by Clayton Hauck / 2013 Clayton Hauck

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