Oktoberfest: How Pinoy craft beer brewers adapt to the pandemic

Art Fuentes, ABS-CBN News

Posted at Oct 18 2020 06:00 AM | Updated as of Oct 18 2020 08:51 AM

Several varieties of Philippine craft beer. Photo by Art Fuentes, ABS-CBN News

MANILA - October is normally a frenetic time for the small but growing community of craft beer aficionados and brewers in the Philippines. Like in many other countries around the world, the arrival of this month sends thousands of beer drinkers into Oktoberfest events, which means free-flowing sales for small artisanal brewers around the country.

But like nearly every major festival these days, Oktoberfest events have been canceled because of the COVID-19 pandemic.

“Last year we participated in, I think, three beer festivals in the month of October,” said Fred Calope, CEO of Boondocks Brewing Co.

“And so the revenue from that is going to be sorely missed,” Calope added.

Jun Flores, president of the Craft Beer Association of the Philippines (CBAP), said they had to abandon plans for a beer expo and two beer festivals.

“Last year before the pandemic came, we were actually expecting to double the growth of the industry this year,” said Flores.

Fred Calope, founder of Boondocks Brewing Co. shows two of his craft beer products in his brewery in Brgy. Concepcion Uno, Marikina City, October 6, 2020. Photo by Art Fuentes, ABS-CBN News

The craft beer industry had been growing at a brisk clip for almost a decade, with the number of brewers tripling almost every year to serve a drinking public whose tastes in beer have been increasingly getting more sophisticated.

The pandemic however came and flattened that growth curve, and left many small brewers struggling.

“We were actually planning to do an expansion. And it was planned this year, until the pandemic hit,” said Raoul Masangcay who runs Elias Wicked Ales and Spirits.

WHAT IS CRAFT BEER?

For those unfamiliar with it, craft beer is very different from the major beer brands we usually find in supermarkets, groceries and sari-sari-stores.

Craft beers are not made by big corporations using giant tanks and machinery that turn out millions of bottles each year. Craft breweries are independently owned, and they produce just a fraction of the volume pumped out by the Philippines’ two major brewers. As the moniker suggests, many of these brewers also see beer brewing more as a complex craft to perfect than a simple business to run.

All of them are also MSMEs (medium, small, micro enterprises) that usually employ just a handful of staff.

Raoul Masangcay, founder of Elias Wicked Ales and Spirits, samples one of the beers he is making in his brewery in Sta. Mesa Heights, Quezon City, Oct. 2, 2020. Photo by Art Fuentes, ABS-CBN News

While commercial beers often limit their offerings to pilsners, craft brewers offer a dizzying variety of styles ranging from bitter IPAs (India pale ale), malty stouts, easy-drinking blonde ales and dozens more.

In the United States, craft beers accounted for roughly a quarter of total sales last year, up from just 10 percent in 2012, according to industry tracker Statista.

A craft beer drinker samples a "beer flight" or a small serving of various beers. Photo by Art Fuentes, ABS-CBN News

In the Philippines, craft beers now also make up 12.3 percent of the peso value of all beers consumed in the country, the CBAP said.

The craft beer brewing community has also grown from just 2 brewers in 2010 to more than 60 craft breweries across the country by 2018.

Andrew Chinalpan, founder of Cerveza Sagada Craft Brewery, served beer during the 2019 Manila Craft Beer Festival. Photo by Kara Santos

From Baguio, Sagada, Baler, Cebu, Bacolod, Puerto Princesa, El Nido and even Iligan in Mindanao--there are local craft brewers producing unique beers for an increasingly discerning beer drinking community.

Along with the number of brewers, the independent marketing and sales networks dedicated to craft beer were also expanding.

Earlier this year, beer blogger Richard Ng rented out a space in San Juan to put up his own craft beer store and bar. He had just finished renovating the space for his bar “Drink It Now Pare” when the world was turned upside down by the pandemic.

Richard Ng, founder of "Drink It Now Pare" beer shop shows the Filipino craft beers he sells. Photo by Art Fuentes, ABS-CBN News

“I rented this space out in February. Tapos nag-renovate. March 12 or 13 tinurn-over sa akin ng contractor. Parang 2 days after, nag-lockdown,” Ng said.

(I had the place renovated. On March 12 or 13, it was turned over to me. But 2 days after, the lockdown was implemented.)

Along with the lockdown came liquor bans.

SURVIVING, ADAPTING TO THE NEW NORMAL

“Noong nag-implement na ng liquor ban here in Metro Manila and even other major cities in the Philippines, talagang apektado yung business,” Flores said.

(When the liquor bans were implemented in Metro Manila and even other major cities in the Philippines, business was really affected.)

Jun Flores, president of the Craft Beer Association of the Philippines samples a beer at "Elias Wicked Ales and Spirits in Quezon City, Oct 2, 2020. Photo by Art Fuentes, ABS-CBN News

Calope, Flores, Masangcay and Ng all said they understood the need for drastic measures to contain COVID-19.

Masangcay even used his skills and equipment to help out in the fight against COVID-19 by producing disinfectant alcohol, when supplies of it were running low.

But they also point out how small businesses like theirs were severely affected by the strict quarantine measures. The closure of bars cut off a crucial distribution point for small brewers.

“So the lockdown, it cut our revenue, maybe we were getting only 25 percent, or 20 to 25 percent of our revenue (before),” said Masangcay, comparing their sales to pre-pandemic levels.

They survived by selling non-alcoholic beverages and food online.

Still, cash flow was a big issue, according to Masangcay as they were barely making enough for operations. They also had to repay a bank loan used to upgrade their facilities for their previously planned expansion.

Ng also said that he had to keep paying his loan with the bank, despite the Bayanihan law, as deferring it may impact his credit rating.

It's Friday night but only a few customers were present at the restobar of Elias Wicked Ales and Spirits in Sta. Mesa Heights, Quezon City, Oct. 2, 2020. Photo by Art Fuentes, ABS-CBN News

Calope did not have to worry about repaying bank loans as his company was financed by private investors. But like the others, he also felt the squeeze of the pandemic.

“Cash flow has been fairly difficult. We have about a month, a month a half, two months' worth of revenues tied up in accounts payable from bars and restaurants that ordered kegs before the pandemic,” said Calope.

Unlike big companies like San Miguel and Asia Brewery which can sell their beers in bottles and cans in big groceries and small stores, most craft breweries distribute their beers through kegs in restaurants and bars. After these bars closed because of quarantine restrictions, revenues also dried up for many small brewers.

“Yung mga revenues na dapat would be in our coffers to pay for continuing operational expenses namin, naka-tie up sa collection,” said Calope.

(Revenues that should have been in our coffers to pay for continuing operational expenses were instead tied up in collection.)

Jun Flores, president of the Craft Beer Association of the Philippines, waits for his order at "Elias Wicked Ales and Spirits" in Sta. Mesa Heights, Quezon City, Oct. 2, 2020. Photo by Art Fuentes, ABS-CBN News

Masangcay meanwhile got creative. He sold gift certificates with discounts to customers who could redeem them later once the liquor bans were lifted. This was a way to generate sales for Elias Wicked Ales even while they were still not allowed to sell beer.

When liquor sales were allowed again, they adapted to the new normal. With bars staying shut, craft brewers turned to direct selling--they put their beers in cans and sold them online.

“Because of the pandemic, we’ve had to pivot our company to selling directly to consumers more. Luckily for us, canning our beers has been a godsend and replaced a significant portion of our revenues,” Calope said.

“We created a website and there we started selling our beers,” said Masangcay.

Fred Calope, founder of Boondocks Brewing Co. also handles the social media and e-commerce duties for his seven-person company. Brgy. Concepcion Uno, Marikina, Oct. 6 2020. Photo by Art Fuentes, ABS-CBN News

Things improved thanks to their pivot to direct-to-consumer sales. The two brewers said they are now hitting around 80 percent of their pre-pandemic revenues.

Flores also noted that bigger craft brewers who sell online managed to almost double their sales during the lockdown. He said that by forcing craft brewers to embrace e-commerce, the pandemic may have even given the industry a new avenue for growth.

“Kasi ang problema namin sa craft beer before is availability,” said Flores. With e-commerce, craft beers can now become more widely available, said Flores.

Masangcay said online sales now account for 70 percent of their revenues.

“Right now it's starting to pick up,” he said.

OUTLOOK FOR THE INDUSTRY

To entice consumers, many craft brewers have put out discount promos to entice consumers to celebrate Oktoberfest even in just their homes. They are also hoping that the coming Christmas season will boost sales and further help them recover lost ground.

Flores said he expects things to get better as alcohol, especially beer, has become a staple in any celebration.

Ng meanwhile is hoping that there won’t be another liquor ban.

“Ok lang ituloy natin yung new normal for the safety of everyone, but let’s not do another liquor ban,” Ng said. Otherwise, he said he and many other small businesses may be forced to close shop because he can’t absorb any more losses.

A bartender at "Elias Wicked Ales and Spirits" serves a beer sampler. Photo by Art Fuentes, ABS-CBN News

Calope said Boondocks Brewing isn't even thinking about profits this year.

"As far as profits are concerned, I think our main focus is to be able to survive until things normalize or go back to the way they were," Calope said.

Masangcay said he is also wary because of the uncertainties still lingering as to when the pandemic will end. He said that after the holidays, many businesses, including craft breweries would again face difficulties.

“I believe that next year... there will be another wave of businesses that will be affected when the holiday season is over. And we’re preparing for that,” Masangcay said.

Meanwhile, despite the difficulties they’ve faced, Calope is optimistic that Filipinos will be drinking beer together again once the pandemic is checked.

“I’m banking on the fact that people are social animals. Yes it’s nice to consume beers at home in the comforts of your home, but enjoying alcoholic beverages is by nature a social event, whether its hanging out with 2 or 3 close friends or having a group of people to celebrate an occasion,” said Calope.

In the meantime, Filipino craft brewers continue making beers for a growing public of drinkers who demand more from their ales.