“That’s so cool!” This was the most common response I got when people heard that I owned a small brewery. In reality, I didn’t own a brewery. I owned an LLC that contract brewed our own beer on a “real” brewery’s equipment (Lazy Magnolia in Kiln, Mississippi). This distinction was hard to explain. It required complicated descriptions of the business of beer and could veer dangerously close to my standard pitch to potential investors. Both instantly killed the cool vibe, so I often omitted the distinction, opting instead for some witty response like, “Yeah, it’s really cool!”
My brewery (or LLC masquerading as a brewery) ultimately failed, but even if it had survived, it would certainly be on the brink of destruction now — an eventual casualty of COVID-19. Our local Memphis breweries are on far better footing than my fly-by-night business ever was, but the pandemic is closing or limiting brewery tap rooms, and it is hard to overstate the impact this will have on them. For a small craft brewery, a tap room can provide a disproportionate amount of overall revenue.
Indeed, my brewery’s entire business model was based upon opening a tap room. When we started the brewery, tap rooms were not yet legal in Mississippi (where the brewery was based), but we were betting that would change. Contract brewing, basically paying another brewery to use its equipment to brew and package our beer, was merely a way to build our brand and woo investors while we waited for more enlightened state beer laws. It was a PR stunt to put our beer in bars and on retail shelves, not a sustainable business. The end goal was the tap room.
To understand our plan, you have to get into some of the complicated beer business details that I tried to avoid in casual conversation. Beer is a low-margin business. This is primarily true for two reasons. First, state laws make it this way. In Tennessee (and most states), with the exception of tap rooms, breweries can only sell their beer to a state-licensed distributor. These distributors then mark up the price and sell to retailers (restaurants, bars, grocery stores, package stores, etc.) who then mark up the price again and sell it to you. Even in the current craft-beer renaissance, there is only so much you or I will pay for a beer, so this three-tiered sales system pushes down a brewery’s profit margin. The profit is split three ways.
The second reason beer is a low-margin business comes from the way we consume beer. Unless it’s coming out of a tap, beer is a highly packaged product. There are cans or bottles. There are six-pack containers. There are boxes that all of this is shipped in. The owner of Lazy Magnolia once joked that I was really getting into the cardboard business, not the beer business, because the price of sourcing cardboard would likely determine my brewery’s profit margin. Even with kegs, the kegs themselves are expensive and hard to keep track of. And regardless of packaging form, all of it needs to be shipped to wherever we want to buy beer. This is expensive. When combined with the realities of the three-tiered sales system, it means that your local brewery makes very little on each pint you purchase in a bar, and even less on each can or bottle you enjoy, regardless of where you buy it.
Tap rooms, however, are magical places where breweries can either eliminate or limit these profit-minimizing realities. There is no three-tiered system in a tap room. The brewery sells directly to the public — the beer version of a farmer’s market. Transportation costs are also eliminated. You buy the beer from the source and transport it yourself (either by lifting a glass to your lips or carting your beer home). Even packaging costs are minimized. Kegs never leave the brewery and thus can never be lost or stolen. Carry-out beer still requires basic packaging (cans, bottles, six-pack carriers), but not additional shipping packaging. There is even the option of the growler fill, which holds packaging costs to a minimum. In short, tap rooms are vital revenue sources for many craft breweries, but the pandemic is literally and metaphorically turning off the tap.
So, what can we do to help? Obviously, the answer is not to go hang out in a crowded space and drink beer. As therapeutic as that would be right now, it would only make the underlying problem worse. If you plan on adding beer to your provisions list for this period of social distancing, however, consider what you buy and where you source it. Obviously, you should buy local beer. The Memphis breweries need your business now more than ever. But also consider buying directly from our local breweries. This can help to offset the lost tap room revenue that is so important to these businesses. A couple of Memphis breweries have already set up to-go protocols, despite closing their tap rooms for on-premises consumption. Wiseacre Brewing Company has created a to-go request form through its website (also included in its Instagram bio) that allows you to order beer from the safety of your home. After ordering, the brewery will follow up with link for payment and arrange a pickup time at the brewery. Wiseacre also has an optional gratuity option for to-go orders with all funds will go directly to its bartending staff. Crosstown Brewing Company also has curbside pickup for to-go orders. You can place an order by calling the brewery or messaging them through social media. Although for both breweries, staff will still need to card you before you head home with your beer, this is the same level of face-to-face contact you would have in a grocery or package store. No doubt, other breweries in the area will come up with similar plans.
When the crisis has ended and we are all free to go back to enjoying Memphis collectively, we will likely need a beer, and we will certainly need places to meet face-to-face (“social normalizing?” “social associating?” “social crowding?”). Our choices now can help ensure that all of our favorite places are still around when that day comes. So, go buy some Memphis beer, and after you do, you can tell people that you helped save a local brewery. It will be at least as true as my brewery ownership claims and infinitely cooler.
Cameron Fogle is a professor of legal writing and a one-time owner of Sweetgum Brewing Company, LLC in Starkville, Mississippi.
