“How did you go bankrupt? Two ways: gradually, then suddenly”
“How did you go bankrupt? Two ways: gradually, then suddenly” --
Ernest Hemingway, The Sun Also Rises.
A world gone upside down. It’s just my opinion…
Hundreds of Craft Brewers may close. During the last CCBHOF survey of Craft Brewery locations compiled in January 2020, there were 503 locations in Colorado serving/brewing craft beer. Based on what I’m seeing, I would forecast that there will be 100 to 150 locations which will be gone at the next survey in January 2021.
- If you’re waiting for government loans or government assistance to bail you out, you may as well close the doors right now, because the strings attached--either now or later-- and the bureaucratic delays will put you out of business anyway. I hope I'm wrong but this usually doesn't work out well.
- Most brewers are do-it-yourselfers. This has helped make them successful. But that strength can now become a weakness. You need help and you should rely upon finance professionals, eCommerce experts, operational gurus, and customer service and marketing experts to resuscitate and re-energize your enterprise. Get a good lawyer if you're considering bankruptcy. Develop and engage in Initial activities for survival and post-pandemic activities for future prosperity. I am amazed by the emphasis of Craft Brewers on beer QUALITY....this quality emphasis must be expanded to every aspect of the enterprise: finances, marketing, legal, operations, customer service, branding and communications. Get some assistance where you need it.
- If you haven’t already, please visit the 3-19-20 Blog Post: New Colorado Ghost Towns (https://coloradocraftbeerhalloffame.com/blogs/news/craft-breweries-challenged-across-america). Everything mentioned there is still ringing true, but I would add a few additional items:
- Unfortunately, delivery services like Uber Eats, DoorDash & GrubHub can charge upwards of 30% of gross to deliver your beer. I don’t believe these services will work for most. If you offer your own delivery, make sure you have insurance for your employees delivering in their cars.
- I would reduce brewing 20% to 40% to keep your variable costs lower. Retain your 4 to 7 most popular brews and get rid of the rest. How do you tell which ones are most popular? I would suggest two approaches to find the best way to “cull the herd”. 1) Rank your sales for the last six months from all sources (Taproom, Takeout and Distribution). 2) Survey your customers and ask them which ones they would retain. These two methods should yield the best approach.
- You should proactively approach landlord and suppliers instead of waiting for them to contact you. They want you to survive, but they have their own issues. Propose no payments for 90 days, half payments for the next 90 days and three-quarter payments for the next 90 days after that. Indicate you intent to catch up within a year. Be honest, but recognize as the situation evolves, you may have to revisit this.
Fix the damn Website! The governor of Michigan recently got elected with the saying "Fix the damn roads". I have visited hundreds of microbreweries both online and physically. Most websites need fixing. You should know that your website needs to be user friendly, up to date and accurate. Don’t ask your customers to jump through hoops to buy beer. If your clients want to speak French, give information to them in French. In far too many cases I’ve seen websites with:
- No phone number listed.
- No email address listed.
- No e-Commerce for beer, gear or gift cards.
- No hours listed.
- If you're doing pickup or delivery, make it EASY!
- “insert logo here” or “insert picture here”
- 404 ERROR meaning web page no longer exists.
- Dozens of clicks or numerous pages to get to beer and/or take-out menus and ordering directions. Studies have shown that there is an inverse correlation between # of clicks to buy and realized sales. Keep it simple.
- Phone numbers saying call us if you want something, but it’s really more efficient for you, your staff and customers if you can process orders (delivery or take-out) on-line.
- Don't put phone numbers only on Contact Us page
In my 40+ years experience in finance and operations for the consumer retail and professional services industries, I’ve never seen anything like this. Words like unprecedented, unparalleled and extraordinary don’t adequately describe our situation. For Colorado, this is the bust that always follows the boom. Extraordinary circumstances require extraordinary measures.
As a voice of reason in extraordinary times, a recent April 9 Wall Street Journal interview with the Chief Executive Officer of Tractor Supply brought some interesting insights. Although he was responding to questions about retail, I believe these items extend beyond retail to restaurants, bars brewpubs and any other “bricks” (consumer on-site locations).
- “We are seeing customers rapidly adopt e-commerce as well as mobile and contactless payments”
- “There is a growing divide between those organizations with strong balance sheets and those without”
- “consumer behavior will have changed dramatically post pandemic.”
For your information: Bankruptcy is the legal proceeding involving a person or business that is unable to repay outstanding debts. ... All of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt. Debts could include property taxes, employee wages, taxes collected, as well as loans, lease payments and many other types of secured and unsecured obligations.
There are various legal forms of bankruptcy. Chapter 11 is a voluntary bankruptcy proceeding to financially restructure an enterprise and attempt recovery. Chapter 7 is a liquidation proceeding to close the doors permanently.