As Novac/Matea Grbac writes on the 13th of May, 2020, the coronavirus pandemic has dealt a heavy blow to the Croatian craft beer industry, who claim that they cannot survive with so much less traffic and online sales.
”We’re doing business, but it isn’t enough. It’s better than nothing, but it’s still far from the real numbers,” Davor Simisis, the owner of the the Varionica pivovara (brewery), explained the current state of the Croatian craft beer industry in a brief statement, which, like most other industries, has been hit by the crisis.
According to estimates, the Croatian craft beer industry, more specifically their breweries, make up just over two percent of the beer industry in Croatia. Despite that, this industry annually pumps just over 4.2 billion kuna in gross added value directly and indirectly into the state treasury. Due to their narrow niche, smaller facilities and strong connection to the HoReCa system, Croatian craft breweries have run into major problems due to the closure of hotels and restaurants. As Miroslav Suvak from Nova Runda points out, catering/hospitality facilities and hotels accounted for about 90 percent of their business.
A moratorium on credit
”We may be in a slightly different position from other craft breweries because draught beer is our main source of income. Of course, the cans we launched last year have improved the company’s financial stability, so they are now giving us a ‘cold drive’. If we look at the numbers, we recorded a 30 percent drop in March given that the bars were still open for part the month. April, on the other hand, shows a completely different picture and a drop of 80 percent is visible. In addition, we recently had an investment of approximately 5.4 million kuna, for which we have so far received a moratorium on credit, but the question is what will happen when the measure ends,” he said.
Other brewers have faced similar problems. So that they wouldn’t have to put their keys in their respective locks because of the pandemic that affected the whole world, they decided to turn to the internet instead of the previous way of making sales in bars.
”After the closure of cafes and restaurants, we introduced online sales through our distributors and partners. That channel partially compensated us for what we lost, so we’re currently at 50 percent of traffic when compared to before all this,” added Bruno Blazicko, co-owner of the PriMarius brewery.
Suvak also found one positive side to this bizarre situation, and that is turning consumers towards online shopping.
”Like other colleagues, we launched online sales through our partners, which is why the sale of our cans jumped more than expected. The great thing is that people are now aware of the fact that buying online doesn’t necessarily have to be bad. I can order anything without any problems from the comfort of my home, and without having to stand around waiting in lines. But despite the positive results, this type of sale cannot replace cafes,” he explained.
Despite all, the entrepreneurs working in the Croatian craft beer industry decided to keep hold of all of their employees despite the abrupt closing of one entire sales channel.
Webshops provided some form of security, albeit it much less than cafes could…
”We’ve withdrawn the support measures adopted by the government and they’ve greatly eased this situation for us. In addition to measures to preserve jobs, we requested a moratorium on the main loan by which we launched a new plant. Apart from that, we had other investments, such as leasing for our own vehicles, which we’re still paying for. How long we can cover this and what kind of future awaits us, we cannot know at the moment because in a situation like this, it’s impossible to create a plan. Still, we’re not living from today to tomorrow and we always have financial reserves, but we can’t live off a mere 30 percent of the business. This is how we’re working and it’s good that we are still working, but that’s not the point of doing this sort of business,” explained Andrej Capka, the owner of Zmajska pivovara.
”Unlike our colleagues, one of the largest and first craft breweries in Croatia, the Zagreb brewery Medvedgrad, found itself in a slightly different position, Igor Mijic explained. Namely, this brewery, in addition to the plant, owns restaurants where it sells more than a thousand litres of its draught beer per day. Since March the 19th, 2020, when the decision to close down such facilities came into force, the revenues of that brewery have fallen by 50 percent, and the reason for a slightly smaller decline than that experienced by others lies in online sales, the brewery pointed out.
”In just seven days, we managed to enable our webshop and turn to online sales, which now make up 80 percent of our business, and we deliver throughout Croatia. In addition, we’ve established cooperation with Wolt and Glovo, who deliver the beer with our food,” said Mijic, adding that they hope for some kind of recovery after the re-opening of cafes, bars and restaurants.
”We will definitely open our restaurants. Luckily, we have large terraces so we can adapt to the new situation, but we cannot know for sure what awaits us. Currently, it’s difficult for me to predict anything,” he pointed out.
Other breweries are also hoping for a recovery in the form of the re-opening of restaurants and bars, but with great caution. Capka is optimistic about it all, but he believes that this move also raises the question of how long those in the hospitality and catering business will be able to operate properly with such rigorous measures still in place.
”The situation will certainly be better than it is now, but the Croatian craft beer industry and their breweries depend on the hospitality and catering industry. Neither we nor they can know how long doing business in such a way will be sustainable, ie, whether cafes and restaurants will work for only a few weeks in this way or will continue to work normally over time,” he said, adding that this situation also causes consumption problems.
”Craft beer belongs to the segment of premium products. This fact entails two thing. One is that buyers of such products have the opportunity to continue to purchase premium products, and the other is that they can cut them out if they need to first,” he explained.
Although he supports the opening of cafes, bars and other facilities, the owner of Nova Runda sees another problem in the new situation.
”Due to the strict measures, the question of the survival of people in the catering and hospitality sector is being raised. Many of them only have small terraces, what will happen to them? Will they open their facilities or will they simply close their doors forever?” he asked.
Due to the still undefined rules and a very uncertain future, those in the Croatian craft beer industry and other brewers believe that they will have to start looking for new business channels. One of them, as Blazicko explained, is entering into negotiations with retail chains and exporting beer to foreign markets.
”We have started intense negotiations with retail chains and we’re planning to go even deeper into that network, we have to compensate for our losses in some sense,” said Blazicko.
And while a large number of them are not hoping for such a quick return to the old way of doing business, they pointed out that they hope the picture will be a bit better next year.
”Yes, we can practically write off this year because everything is shrouded in secrecy. We can’t develop concrete plans because we still have only questions, questions and more questions,” concluded Capka.
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