C2 The BulleTin • Sunday, March 28, 2021
COVID-19
Breweries
Continued from C1
At Sunriver Brewing, with
most of the company’s sales
only in Oregon, the nine-year-
old brewery sold slightly less
sudsy brew in 2020 than the
year before, according to the
OLCC beer report. The com-
pany hopes to sell more than
16,000 barrel this year, said
Ryan Duley, Sunriver Brewing
director of sales and market-
ing. A barrel of beer is about 31
gallons.
It’s been a big unknown
when draft sales would ramp
back up, Duley said. But since
restaurants and bars have re-
opened, draft sales have been
steadily increasing in Sunriver,
Duley said. The brewery sells
about 60% of its beer in cans
and 40% in kegs, he said.
One of the biggest challenges
for breweries has been find-
ing employees as demand has
grown, he said. It’s not a quick
turnaround to make beer and
get newly hired employees on
board.
“We’ve actually been on an
upward growth since before
COVID,” Duley said. “Obvi-
ously sales dipped down early
on, but we’re now staffing com-
ing out of COVID.”
Because of the employee
shortage, Sunriver is shorting a
couple of distributors for draft
beer to maintain production
in cans. The rationale is that
they can get on tap in a month
or two especially since tap
handles are generally rotated.
Keeping shelf space in front of
the consumer is important to
maintaining sales.
“There’s strength in both
draft and can sales,” Duley said.
“We have an opportunity right
now to get another product in
a can. It was strategic in a way
for us to release our rotation of
seasonal beers in a can.”
The rotational beers are rec-
ipes the brewery had been de-
veloping for draft in the pubs,
Duley said. Now it’s in a can, a
decision made in part because
of COVID-19, but also a way
to increase capacity.
“The pandemic hasn’t af-
fected too much,” Duley said.
“We have always been able to
zig and zag. We’re definitely set
up for crisis aversion now and
are prepared for something
like that. We know we can ma-
neuver when a disruption hap-
pens.”
e e
Reporter: 541-633-2117,
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Whiskey
Continued from C1
American whiskey makers
have been caught up in the
trans-Atlantic trade dispute
since mid-2018, when the EU
imposed tariffs on American
whiskey and other U.S. prod-
ucts in response to Trump’s
decision to slap tariffs on Euro-
pean steel and aluminum.
Since then, American whis-
key exports to the EU are
down by 37%, costing whiskey
distillers hundreds of millions
in revenue between 2018 and
2020, the council said. Amer-
ican whiskey exports to the
UK, the industry’s fourth-larg-
est market, have fallen by 53%
since 2018, it said.
The tariffs amount to a tax,
which whiskey producers can
either absorb in reduced prof-
its or pass along to customers
through higher prices — and
risk losing market share in
highly competitive markets.
Amir Peay, owner of the
Lexington, Kentucky-based
James E. Pepper Distillery, said
American whiskey has become
“collateral damage” in the trade
disputes. It’s cost him about
three-fourths of his European
business, and the looming 50%
EU tariff threatens to drain
what’s left.
“That could possibly end
our business in Europe as
Wave of expected bankruptcies fell short
BY LAURENCE DARMIENTO
Los Angeles Times
The pandemic produced the kind
of fallout that gives economists night-
mares. An initial drop in economic
output that exceeded the Great Depres-
sion. Sudden job losses that outpaced
modern records.
But there’s one economic bellwether
that has seemingly painted an even
rosy picture: bankruptcies, which have
so far lagged behind their total in the
year before the pandemic.
Yes, the number of personal and
business bankruptcies filed last year
in the country fell by nearly 30% from
2019 despite COVID-19. The decline
was largely driven by a roughly 31%
fall in personal bankruptcies but also
a nearly 5% slide in filings due to busi-
ness debts, according to U.S. Bank-
ruptcy Court statistics.
The different outcomes are hardly
atypical: Big companies that died have
tended to go to Bankruptcy Court,
while an unknown number of smaller
businesses simply shut down.
Business filings would have been
even lower if not for a rise in Chapter
11 cases, which allow companies to
reorganize. And many of those cases
were filed in a handful of courts fa-
vored by large corporations with com-
plicated businesses that required sepa-
rate filings for individual subsidiaries.
Two-thirds of U.S. Bankruptcy Court
districts saw no increase in Chapter 11
filings.
The biggest bankruptcy last year was
Hertz, which had amassed some $23
billion in debt after business and per-
sonal travel screeched to a halt early on
in the pandemic. Other notable bank-
ruptcies included retailers J.C. Penney
and Neiman Marcus — two retailers
already struggling because of online
rivals — and Chesapeake Energy, a vic-
tim of depressed demand for oil and
gas.
There was one record set last year,
which was by the 62 public and private
companies that had assets of $1 billion
or more before filing for bankruptcy.
That topped the 58 in 2009, according
to New Generation Research, a Boston
firm that operates the BankruptcyData
website.
However, a broader measure of cor-
porate distress was less dire: There
were only 110 publicly traded com-
panies — including smaller ones not
traded on major exchanges — that
filed for bankruptcy. That was more
than the 64 in 2019 but well under the
211 in 2009 amid the Great Recession
or the 263 in 2001 after the tech bust,
we’ve known it over the years,”
Peay said in a phone interview
Thursday.
He’s already curtailed some
whiskey shipments to Europe
as a hedge against the potential
doubling of the EU tariff. His
distillery’s signature bourbon
and rye brand is James E. Pep-
per 1776.
Peay spent years and signif-
icant money cultivating Eu-
ropean markets, especially in
Germany, France and the UK.
He was planning to double his
European business before the
trade disputes hit.
“The way things are going,
everything that we invested to
date looks like it could be de-
stroyed,” he said.
The tariffs have hurt spirits
industry giants as well.
“We estimate that our com-
pany … has borne roughly
15% of the entire tariff bill lev-
ied against the U.S. in response
to steel and aluminum tariffs,”
Lawson Whiting, president
and CEO of Louisville, Ken-
tucky-based Brown-Forman
Corp., said recently. “They
have become a big problem for
us and it’s imperative that we
get it resolved as soon as pos-
sible.”
Brown-Forman’s lead-
ing product is Jack Daniel’s
Tennessee Whiskey, a global
brand.
For Kentucky bourbon pro-
David Tonelson/Dreamstime
After the pandemic hit, Garden Fresh Restaurant Corp., owner of the Souplantation
chain, decided to file for federal bankruptcy protection, selling off its assets and han-
dling its creditors in court.
the BankruptcyData numbers show.
“For a while, I was very convinced
that (filings) were going to pop down
the line, but 12 months into this they
haven’t,” said Ed Flynn, a consultant
with the American Bankruptcy Insti-
tute, who notes national filings were
still down in the middle of March by
some 45% compared with the same pe-
riod last year when the pandemic-re-
lated shutdowns started.
“They are down to levels we haven’t
seen since the mid-1980s,” he said.
There are some obvious reasons
that help explain the counterintuitive
trend, especially the deluge of cash the
U.S. government has pumped into the
economy to help keep entire indus-
tries and businesses afloat — and put
money directly into consumers’ pock-
ets through higher unemployment
benefits, as well as stimulus checks
showered on even middle-class fami-
lies, including the $1,400 that landed
this month.
Other measures to protect individ-
uals from the pandemic turmoil also
have probably lowered the rate of per-
sonal bankruptcies, including eviction
bans, foreclosure moratoriums and
federal student-loan payment freezes
— which were extended by the Biden
administration but are still set to expire
this year.
“Clearly people, mainly through
government actions, have not yet felt
the pain, and have not had the type of
event that would precipitate a bank-
ruptcy. They may not be paying their
rent or their mortgage, but they are not
being foreclosed on yet,” Flynn said.
ducers, tariffs slashed their
exports by 35% in 2020, with
shipments to the EU plummet-
ing by nearly 50%, the Ken-
tucky Distillers’ Association
said.
The EU had traditionally
been the largest global market
for Kentucky distilleries, ac-
counting for 56% of all exports
in 2017. It’s now about 40%,
the association said.
“Our signature bourbon in-
dustry has sustained significant
damage for more than two
years because of a trade war
that has nothing to do with
whiskey,” KDA President Eric
Gregory said. “And it will get
much worse if we can’t deesca-
late this dispute.”
Kentucky distilleries craft
95% of the world’s bourbon
supply, the association esti-
mates.
The thaw in the U.S. dis-
putes with the EU and UK
were part of an effort to resolve
a longstanding Airbus-Boeing
dispute. The tariff suspensions
applied to duties that had been
imposed on some spirits pro-
ducers on both sides of the At-
lantic. But the breakthroughs
left plenty unresolved, includ-
ing disputes that led to the
retaliatory tariffs still hitting
American whiskey.
The suspended tariffs mean
some European spirits produc-
ers can ship their products into
And for those debts not subject to
any governmental restraint on collec-
tions there have been practical consid-
erations, including a pandemic-related
backlog in California state courts that
have made it challenging for creditors
to get judgments, L.A.-area bankruptcy
attorneys say.
Unless debtors are facing an imme-
diate threat — such as a seizure of as-
sets or garnishment of a wage — they
will often avoid bankruptcy, which is
costly and time-consuming in itself.
Still, that doesn’t mean there hasn’t
been economic pain that has stretched
for months.
However, the damage was mostly
felt at the lower end of the labor mar-
ket, as 80% of 9.6 million net jobs lost
were occupied by workers in the bot-
tom quartile of wage earners, accord-
ing to a report by the Economic Policy
Institute.
Those are the kinds of jobs offered
by the hard-hit hospitality and restau-
rant industries, where workers typi-
cally don’t file for bankruptcy. Flynn
notes that personal bankruptcy fil-
ings are often made by middle-class
people seeking to protect homes and
other assets, as opposed to those with
less wealth, who may have few assets
to protect and less ability to cover the
costs of the process.
The National Restaurant Association
estimated in December that more than
110,000 restaurants had closed either
temporarily or permanently. Coresight
Research reports there were 8,736 an-
nounced store closures last year and
only 3,300 announced openings —
the U.S. duty free, while Amer-
ican whiskey makers are still
subject to tariffs, Whiting said.
“We just want a level playing
field for American whiskey,”
he said.
with about 1,500 of the new stores in
the dollar store category.
Yet, there has been a well-docu-
mented boom in online sales, and new
business formation dropped only 14%
during the first year of the pandemic,
according to Yelp, with about 487,500
new business openings from March
11, 2020, through March 1 of this year.
About 76,000 were restaurant and food
businesses, while nearly 287,000 were
professional, local, home and auto
businesses, down only 1%.
Comprehensive numbers on total
business closures, either permanent
or temporary, are hard to come by for
some of the same reasons that Bank-
ruptcy Court filings may not reflect the
true extent of the damage suffered by
business owners.
Economist Chris Thornberg,
founder of Beacon Economics in L.A.,
thinks a key reason there has been no
bankruptcy tsunami is simply that the
extent of the economic damage has
been overstated.
Unlike the lead-up to the Great Reces-
sion, when the housing market collapsed
amid unsustainable debt loads, he notes
that personal debt loads were at historic
lows early last year, even for low-income
workers. He estimates that perhaps 7
million people have been absorbing the
brunt of the economic pain during the
pandemic, while the huge stimulus has
thrown off so much cash that better-off
Americans have paid down debts or
dumped it into the stock and housing
markets, which have taken off.
“The vast majority of people who
are screaming ‘End of the world,’ ‘Sky is
falling’ were using the lens of the Great
Recession,” he said, noting that slow-
down dragged on for years.
By contrast, 12 months after the
pandemic started, the forecast this year
is for strong economic growth, with
the Federal Reserve this month boost-
ing its estimate to 6.5%, up from its
4.2% forecast in December.
In December, Mark Zandi, chief
economist at Moody’s Analytics, fig-
ured that the government’s support to
the economy was simply kicking the
problem down the road. He went so far
as to say it was like “morphine that will
wear off at some point” and that “there
will be pain.”
He expects bankruptcies will rise
and credit problems will emerge once
the moratoriums are lifted and the
government support is depleted, but
strong economic growth should return
bankruptcies to normal levels.
“It will be very modest in the grand
scheme of things,” Zandi said.
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