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Thursday, October 22, 2020

Insiders Question Whether There Will Be A Post-Pandemic On-Premise Alcohol Market

Despite innovative concepts to deal with the present nationwide lockdown, like restaurants offering pick up service, fine dining take out delivery and restaurant parking lot drive-in-movie theaters, restaurants are not doing well. 

More than half the 6,500 restaurant owners the National Restaurant Association (NRA) surveyed across the U.S. claim the existing federal business relief grants do not cover enough for them to maintain employees on the payroll. As a result, the U.S. restaurant industry has shed more than 8 million employees during this pandemic. The survey also shows that the restaurant industry lost $30 billion in March, 2020; by the last day in April another $50 billion is likely to be lost. NRA estimates by the end of 2020, the restaurant industry will be down by at least $240 billion.

In a letter to Congress, the NRA executive vice president of public affairs, Sean Kennedy claimed shut down mandates across the country have hit the restaurant industry the hardest. He speculated that future need for social distancing will level an even greater blow to the industry. 

The NRA asked Congress for targeted recovery relief for what it refers to as the second largest private sector employer in the country. Among other requirements NRA seeks, the top of the list includes: an industry recovery fund of $240 billion to compensate for government-ordered closings, “start-up” capital to reopen, restock, and supply new safety equipment, and to rehire and retrain staff; a tax credit or grant to help restaurants accommodate continued social distancing; and federal relief for the restaurant employer’s share of unemployment insurance.

In a related story, distribution system emoloyees are also affected by the national shut down. On April 24, 2020 WineBusiness.com’s Cyril Penn reported that the nation’s largest beverage alcohol distributor, Southern Glazer’s Wine & Spirits (SGWS), has furloughed hundreds of on-premise sales rep employees. The distribution company confirmed its decision in a statement which laid out the “…devastating impact” of the pandemic in the on-premise alcohol sector (restaurants, bars, hotels, clubs, etc.). The company also said, “…the unprecedented and still unpredictable disruption to our business is forcing us to make the tough decision to furlough employees whose jobs have been directly impacted [sic] by these shut downs.” 

SGWS extended, and bears the cost of, full healthcare benefits for those furloughed. 

Speculation within the industry is that the next largest distributors are likely to follow suit. 

According to publisher and executive editor of Wine Industry Insight, Lewis Perdue: “The distributor layoffs are just a revenue-calculated recognition that on-premise is currently an empty shell of its former self and unlikely to approach pre-pandemic significance for a very long time, if ever.” 

Meanwhile, there is this recent positive headline, ‘Wine Still Strong Off-Premise and Online-Nielsen’—that’s retail, not restaurants. Off-premise spirits sales outpaces wine by almost 5%—more on that in a future post.

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