West Virginia’s state revenue report for April was dripping in red numbers, as the coronavirus pandemic shutdown caused most business activity — and tax collections statewide — to plunge. But the suds still flowed.
In the midst of the $192 million (33%) shortfall for the month, one number stood out in that sea of red — beer tax collections of $860,000 came in 43% above estimates.
While that seemed to jibe with national reports of sales and consumption of alcoholic beverages increasing during the pandemic, West Virginia Beer and Wine Association lobbyist Phil Reale said the reality is not that clear-cut.
For one, rumor was that a major brewer was late paying March taxes, which showed up in the April report. March beer tax revenue of $184,000, indeed, was $306,000 below estimates, a larger shortfall than the $260,000 surplus for April.
Asked about the apparent late payment, Tax Department legal counsel Mark Morton cited taxpayer confidentiality rules, stating, “The Tax Department can neither confirm nor deny the statements set forth in your email.”
Reale said the reality for state beer distributors, who preferred that he speak for them, rather than to be interviewed directly, is that the past two months has been something of a financial roller coaster.
Reale said beer sales surged in mid-March, as Gov. Jim Justice ordered schools, casinos, restaurants, bars and clubs closed, and seemed to be moving toward a statewide stay-at-home order and closure of all nonessential businesses.
“There was panic buying for beer — and for wine and alcohol, too, I suspect,” he said.
Reale said beer drinkers might have been reacting to closure orders in states like Pennsylvania, where sales of alcoholic beverages were deemed non-essential, or they might have been taking part in some of the initial panic hording of consumer goods that left store shelves empty of products such as toilet paper.
However, after that surge, reality set in, he said.
“Some distributors had a huge increase in sales, but that soon dissipated,” Reale said.
With the combination of closed restaurants, bars and casinos, and beer drinkers who had stockpiled supplies of beer, distributors saw sales plummet in late March and early April, he said.
Sales to bars and restaurants make up about 20% of overall business for most distributors, he said. While many restaurants remained open for carryout and delivery, and while the state regulators relaxed rules to permit carryout sales of beer and wine, carryout sales of beer have been nominal, Reale said.
Meanwhile, distributors lost St. Patrick’s Day, which Reale said is the single biggest day of the year for beer consumption, and most had stocked up on kegs in preparation for the NCAA basketball tournament, the March Madness that keeps many bars hopping into early April.
With bars and restaurants closed, and social gatherings prohibited, the market for kegs completely disappeared, leaving distributors with inventories they cannot sell and which have relatively short shelf lives, he said.
For the state’s craft brewing industry, which with a few exceptions, rely entirely on sales of keg beer, the shutdown will be extremely tough, Reale said.
“Craft brewers, I think, have got to be really hurting,” he said.
Attempts to reach officers in the West Virginia Craft Brewers’ Guild were unsuccessful.
Reale said most distributors have seen sales drop from 1% to 9% during the pandemic shutdown, although those that distribute primarily to retail outlets, including grocery and convenience stores, have seen sales increase as much as 2% to 3%.
Likewise, he said, “There’s a few because of geography who are doing OK.”
He said distributors who have a lot of bar and restaurant customers, and particularly those that service casinos, have been hardest hit.
Going forward, he said there are concerns about how many bars and restaurants will not survive the shutdown.
“There’s going to be bars that don’t reopen. There’s no getting around that,” he said.
Reale added, “There’s a strong sensitivity among distributors for restaurant and bar owners and their employees.”