Shift in alcohol buying means new normal for breweries

Jake Gunderson boxes six packs of Skip Day, a specialty brew, on Aug. 3 at Fernson Brewery in Sioux Falls. (Erin Bormett/Argus Leader via AP)

SIOUX FALLS (AP) – Blake Thompson and his fellow beer-makers at Fernson Brewing Co. had planned to use white cans for the Sioux Falls-based brewery’s new hard seltzer.

Thompson reached out to the supplier to inquire about getting some extra stock of the white-painted cans commonly used by large manufacturers of hard seltzers.

At first, the supplier said it would only be a matter of weeks before new inventory became available, Thompson said. But then things changed.

“Everyone started canning like crazy,” he told the Argus Leader. “I went on the phone and tried to order some cans and the guy was like, ‘We can’t get those until fourth quarter.’”

Fernson and other breweries in Sioux Falls are adjusting to shifting market conditions in the alcohol industry during the COVID-19 pandemic. A significant increase in retail beer and soda sales has created a drain on the nation’s supply of aluminum cans.

Consumers across the United States are buying more of their beverages from retailers and bringing the products home during the coronavirus pandemic, while taps of all kinds remain quiet. While the rush on product has allowed breweries who do retail sales to make up ground, it hasn’t been enough to offset the losses suffered by taprooms and bars.

“COVID kind of flipped our business to can sales more than kegs,” Thompson said. “We’re trying really hard to not have to rely on draft sales, because people just don’t want to go out like they used to, which is fair. But they still want to drink.”

Shift in drinking habits

Bar business in Sioux Falls is nowhere near what it normally is during the spring and summer months, and even a bit of recovery in recent months wasn’t enough to get the city’s watering holes up to speed.

City officials repealed rules for in-house dining in May, allowing bars and restaurants to serve as many guests as they please. Previously, a temporary cap on patrons restricted establishments from serving more than 10 guests at a time.

A number of local bar and restaurant owners made the decision to close altogether when COVID-19 first arrived in Sioux Falls, while others limited operations.

Bars instituted new social distance policies and reopened their doors to revelers, and the result was a bit of recovery. But only a bit.

City leaders nixed the rules in the first half of May, but the month stands as the worst for bars since the start of the coronavirus.

June bar sales more than doubled, reaching $2.7 million. But compare that to June of 2019, when taxable bar sales tallied at $5.7 million. In fact, for the four-month stretch from March to June, the local taverns have lost $9 million since the start of the crisis when comparing their sales to the same stretch last year.

The trend is clear: Sioux Falls drinkers prefer their alcohol to-go during the pandemic.

For the four-month period of March to June, taxable sales at liquor stores in Sioux Falls jumped by more than $3 million from the same period last year.

And Sioux Falls shoppers aren’t the only ones to change their drinking habits.

Beer in a can, please?

For beer, it means drinkers are trading a poured pint for bottles or cans.

Lupulin Brewing Co. is on both sides of the trend because of the service it provides at its Sioux Falls taproom and the canning they do out of their center of operations in Big Lake, Minnesota.

Business was still slow in June at the Lupulin taproom, located in the retail center across from Century Stadium 14 theater. But part of that was Lupulin leadership’s decision to reopen gradually and keep more limited hours at first, said co-founder Jeff Zierdt.

Meanwhile, Zierdt and his coworkers are figuring out how to keep enough aluminum cans stocked to meet the rush in demand for Lupulin’s retail product.

Lupulin usually ships about 150,000 cans of beer a month between its line of specialty styles that wind up on liquor store shelves in the Midwest, Florida, Arizona, Georgia and Washington — not to mention international shipments to Denmark and Japan.

The global rush on canned beer has contributed to the drain on aluminum cans in the 12-ounce size, Zierdt said.

“That is the one that’s taking a huge hit,” Zierdt said. “A lot of your beverages, like juices and soda and all of those other types of beverages, are in 12-ounce cans. That one has tightened up quite bit.”

Getting creative with canning

Business appeared to be improving last month for the Lupulin taproom.

The Sioux Falls location hit its stride, Zierdt said.

“This month of July we started seeing things pick up again,” he said. “Our metrics were back to where we were in February, pre-COVID.”

But the trend in consumer behavior and a lack of supply are forcing both Lupulin and Fernson to make adjustments when it comes to canning their product.

For Fernson, it was just a matter of switching the hard seltzer to silver cans, which are pretty easy to obtain, Thompson said. The prices are more competitive, but it’s about a four-week waiting period, which is standard if not slightly better than previous years.

Not to mention can-makers such as Ball are adding facilities to improve production capabilities, Thompson said.

It’s the bigger beer and soda manufacturers that are feeling the squeeze more than Fernson.

“I think the big soda canners have limited their production to mainly their mainstays,” Thompson said.

Zierdt and his crew have one advantage over other breweries in that Lupulin uses mostly 16-ounce cans, except for their Blissful Ignorance double IPA.

However, they are also anticipating what comes next, when the major suppliers of aluminum cans such as Colorado-based Ball Corporation start running out of 12-ouncers.

He and his business partner at Lupulin are looking at ordering inventory for the long-term, he said.

“We’re going to try to stay ahead of the game,” Zierdt said. “We don’t know what we don’t know.”

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