Wall Street Journal: A New Problem Is Brewing in the Beer Industry: One Million Kegs Are Going Stale | NBWA: America's Beer Distributors

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Blog| Apr 24, 2020

The coronavirus pandemic stranded unused beer in stadiums, concert halls, restaurants and bars. Now brewers and distributors facing sizable losses have to figure out what to do with it all.

By Saabira Chaudhuri
April 24, 2020 | 9:00 am ET

Millions of gallons of beer stuck in stadiums, concert halls, restaurants and bars are fast going stale, leaving the beer industry with a tricky problem: What to do with all that booze nobody will ever drink?

The coronavirus pandemic forced U.S. bars to close ahead of two of the country’s biggest drinking occasions: St Patrick’s Day and the “March Madness” basketball tournament. Beer intended for those events is now spoiling in locked establishments, and brewers are trying to get it back so kegs can be refilled before lockdowns lift. Executives say draft beer typically stays fresh for between two and six months.

“This was the absolute worst time for this to happen for draft beer,” said Craig Purser, chief executive of the National Beer Wholesalers Association, a trade body. “We have never ever seen an interruption like this where everything freezes in place.”

Many industries are wrestling with similar dilemmas about what to do with their excess supply while the global economy recedes and a deadly virus rages around the world. Farmers are dumping milk. Air carriers are looking for places to park all of their idled planes. Commodity traders are looking for floating supertankers to store an overabundance of crude oil.

The beer industry is hunting for ways to deal with roughly 10 million gallons of suds abandoned in venues in March alone, according to an NBWA estimate. That is the equivalent of almost one million kegs. Even more beer is stuck at distributors’ warehouses, in transit from other countries and in breweries. Unsold and expiring beer could cost the beer industry as much as $1 billion, according to the NBWA.

Dumping the unused ale en masse isn’t an option. Environmental regulations say large volumes of beer shouldn’t be poured down drains or into rivers because it can disturb the pH balance, reduce oxygen in the water and produce undesirable bacteria. Before this though, brewers or distributors must access tens of thousands of locked-down venues, lift the heavy kegs out of cellars and safely balance trucks that may be carrying a mix of full and empty barrels.

“This is a hot potato because none of our businesses are set up to return massive amounts of beer,” says Dan Vorlage, marketing head for Denver-based MicroStar Logistics LLC, the U.S.’s largest keg-logistics company. “It takes three times as many trucks to transport full kegs than empty ones.”

MicroStar—whose customers include 1,000 brewers—plans to treat the beer with defoamer and balance the pH before sending it to city water authorities for further testing and treatment so it can be released into waterways.

Brewers and other keg owners say they are also eager to quickly recover the containers—which cost between $100 and $120—in case they get tied up in bankruptcy proceedings.

Who ultimately pays for all that beer that no one consumed is another point of contention. Guinness maker Diageo PLC, Budweiser brewer Anheuser Busch InBev SA and Modelo owner Constellation Brands Inc. are among brewers that have said they would share the cost of the undrunk beer with their distributors to spare bars and restaurants from picking up the tab. AB InBev and Constellation have also temporarily extended the expiration dates on their draft beers to buy the companies more time to deal with the glut of expiring beer.

“We’re afraid lots of places will close and won’t be able to open back up—they’re on very thin margins,” said Bob Pease, head of the Brewers Association, a trade body for small and medium sized brewers that are typically more dependent on bars than liquor stores.

In the U.K., an even bigger slice of beer is at risk, since about 49% of beer is drunk in pubs, restaurants and bars, compared with 20% in the U.S., according to industry tracker IWSR. The Campaign for Real Ale, a consumer-focused beer group, estimates about 50 million pints of beer could go to waste.

Many pubs serve cask ale—the peculiarly British, naturally carbonated beer that is often drunk at room temperature—which has a shorter shelf life than most beer. An unopened cask lasts about a month but once opened last just a few days, according to Matt Todd, who owns the Wonston Arms, a village pub in the Southwest of the U.K. “They’re a ticking time bomb,” he said.

When pubs were forced to close in the U.K., Mr. Todd created a website offering home delivery to sell his existing inventory of rapidly expiring ale. Strong demand means he’s now buying fresh supplies, delivering small kegs and growlers to local customers.

“I thought ‘right I’m going to take the pub to people,’” said Mr. Todd, who now makes 60% of his ordinary weekly revenue through deliveries. He carries a bar stool in his van so he can stop to chat to older customers.

Some brewers already have a strategy for how to handle expired beer. Samuel Adams owner Boston Beer Co. has long recaptured the ethanol for gasoline it then can sell to other buyers. Founder Jim Koch says the company will step up this practice to handle the larger volumes expected.

New York brewers Montauk Brewing Co. and AB InBev-owned Blue Point Brewing Co. are making other adjustments. Both are switching their packaging and putting more fresh beer in cans to be sold in liquor and grocery stores, where demand is still strong. They are also sending beer that is expired or can’t be distributed to a nearby craft distiller to be turned into hand sanitizer. The distiller, Better Distilling Co., which ordinarily makes vodka, gin and white rye, says it is much quicker to use beer to make sanitizer even though the process yields less ethanol than mashing and fermenting corn from scratch.

For D.G. Yuengling & Son, sending its flagship Yuengling beer to distillers isn’t a solution because volumes are far too high, according to Chief Operating Officer David Casinelli. The company, which has several million dollars worth of beer stuck in bars and restaurants, is looking for third-party logistics operators to dispose of its beer safely.

“With each week going by more beer goes off,” said Mr. Casinelli. He worries that even beer that isn’t past its 60-day shelf life could be spoiled if not stored properly at locked establishments. “The kegs could all be warm. We have no idea how the beer has been handled.”

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This article originally appeared in the Wall Street Journal