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How coronavirus is impacting local breweries

Started in 2010, Untappd is a social platform which keeps track and rates various beers, also giving personalized recommendations and alert to users about local craft beer events. Greg Avola, Untappd’s Founder and Chief Creative Officer, joins The Final Round to discuss the company’s tenth anniversary, how the it’s managing through coronavirus, and what to expect from its growth.

Video Transcript

- Let's switch gears here and talk about the beer industry, because the coronavirus pandemic has really shifted consumer behavior. And it's something that we've been exploring here on Yahoo Finance. And Americans, we've talked about, have been buying more alcohol during the pandemic. But craft brewers, though, continue to struggle because many of those tap rooms and many of the bars remain closed or are operating at just a limited capacity, so at least half or even less capacity than they are usually able to operate, so certainly putting them under some financial strain.

So for more on this, we want to bring in Greg Avola. He's the co-founder and chief technology officer at the app Untappd. And this is an app that helps people discover and share their favorite beer.

And Greg, it's great to have you on the show. We'll talk about the app in a minute. But I'm just curious just to get your thoughts on, I guess, how COVID has impacted the beer industry, because on one hand, some of the bigger distributors have probably been able to weather the downturn relatively well. But it's those small local breweries, I would think, are having the most trouble at this point.

GREG AVOLA: Absolutely. I think it comes to the fact that, basically, when you talk about the craft beer revolution, people get most of their money when they're at the tap rooms itself. And because the tap rooms have to close, they lose the opportunity to have that kind of revenue coming in.

When we look at Untappd, people checking in at particular locations, we saw about a 93% decrease in overall check-ins at public venues, including breweries, right when the lockdown started. And it's actually been a crazy amount to see all that numbers go all the way through. It's coming back, but again, you talked about it earlier, this ordinance that we have on the number of people that are allowed in these locations.

If you are just a brewery that has-- just sells beer, you're not offering any food or anything else, it's hard to have them actually go inside because of those ordinances. So hopefully, over time, those things will increase. But it's interesting to see those numbers kind of come back from the perils of the bottom there right after lockdown.

- So Greg, what kind of impact has this had on your business? Because your app really is focused on helping people discover more beers, share their favorite beers-- a lot of times they do this when they're out at bars. If they're not out at bars, how are you pivoting your business, then, as a result?

GREG AVOLA: Absolutely, we have two sides that are kind of impacted. We do sell software. It's a service to bars and restaurants to control things like menus and digital boards. That is impacted significantly, obviously, with the closures of some of these businesses.

But we've pivoted a lot to doing a lot of QR code scanning on our application now. People that are actually go out to these places, you can use the app to QR code and get the menu. So that helps with the fact of having these menus not being touched by everybody.

But on the other side, too, we've encouraged more home drinking. We've added a new venue called Untappd at Home, when people can tag when they're entertaining at their own houses. And that's increased a lot of users checking in that they mainly wouldn't do before because, like you said, Untappd's used for more out in the world exploration, but with new venue, kind of creates more excitement around the platform. People can just tag where they are and share it with friends.

RICK NEWMAN: Hey, Greg, Rick Newman here. I'm wondering if people are really that bored they're tagging when they're logging in from home. But let me ask you kind of an industry question.

GREG AVOLA: Sure.

RICK NEWMAN: So Boston Beer Company, the brewer of Sam Adams, they just reported a big quarter, big earnings, but there was a huge boost in sales of stuff that's not beer-- seltzer and hard tea and things like that. So we all know where this-- what this trend is there. Are people drinking less craft beer and more of this other trendy stuff?

GREG AVOLA: I think it comes down to a couple things. And the major one to look at here is kind of the expansion of the industry. And I think that when you said not beer, you know, most people would consider hard seltzer to be in the category, from an industry perspective, of beer. And Sam Adams is--

RICK NEWMAN: No!

GREG AVOLA: [INAUDIBLE].

RICK NEWMAN: Oh, no, no. Beer drinkers will never accept that. Come on, you know that.

GREG AVOLA: It's true. But I'll look at the data to show you that we look at hard seltzer on our platform, which is heavily on the beer side, as you know. We see huge amounts of check-in, over 500% year-over-year increase, in check-ins on hard seltzer.

So I think it expands the market, but I don't think it hurts it from your perspective, like you mentioned. It brings new people that maybe are not into the beer area into that perspective, trying a beer like Truly, which is part of the Sam Adams brand, maybe get roped in to actually having some of the other beers as seltzer.

I don't think it's going anywhere. It's also a healthier alternative, or it's marketed that way for a lot of people who are drinking these things. So I think it's something that's just going to stick around. The question is, will it permeate those hard seltzer drinkers to become beer drinkers, as you mentioned, after this pandemic is over, or will people stick to the hard seltzer?

- Greg, you talked about the decline in check-ins that you saw in the early days of the pandemic. I think you said more than 90%. How many of those breweries that you work with are still open? How many have actually closed? I'm just curious how sustainable this is when you can't operate at full capacity.

GREG AVOLA: A lot of breweries have shifted from to be e-commerce platforms, so a lot of the breweries that we work with have closed down from a people perspective but they've shifted to doing online orders. A lot of states have changed laws now, distributing beer directly to the consumer. For example, Threes Brewing up in Brooklyn, New York is now shipping out all of New York state. So a lot of them are shifting to more e-commerce platforms using Untappd as that kind of guide people out there to find out where the beer is.

But they're moving to more the e-commerce side. It's going to be an interesting perspective when we look at when this reopening happens and how breweries will kind of maintain those things. But the most part, I think most of the e-commerce platforms are the way that brewers are thinking about as they move forward in this pandemic.

- Greg, that's interesting. So is this more of a permanent shift, do you think? So it accelerated maybe some of the changes that we would have seen in the beer industry five 10, 15 years down the road, and now we're seeing that this year as a result of the pandemic?

GREG AVOLA: I think it's actually going to change a lot of laws and regulations, like you mentioned. I think really when it comes down to it, a lot of breweries have a hard time selling direct to consumer through the laws that we have in the United States. And I think this pandemic has actually pushed the boundaries of those and potentially changing them forever. And I think that these delivery offerings now brewers are having to ship direct to consumer from home to home may be something that not only are they giving to the breweries now to help survive this pandemic but could last after and really change the market as a whole for getting beers all over the country.

- And do you think we'll see more M&A as a result of this, just because we know that some of the larger distributors have been going after these smaller craft brewers now for quite some time? Many of them have pushed back. They didn't want to be acquired by some of these bigger names. But maybe now they're in a position where they have to take that type of buyout.

GREG AVOLA: It's definitely a situation I think-- it should be talked about, because I think AB-- Anheuser-Busch has kind of stopped some of the acquisitions that they've done, just because of the pandemic from that perspective. But now, a lot of these breweries are trying to come back up from this issue, and they may have to find a following for those expectations.

But I think for, the most part, a lot of brewers won't survive, and the only way they can do this now is through some of the government funding they get and also being able to switch to an e-commerce platform, maybe deliver. I know where I live in Connecticut, for example, they just changed the law where people can ship direct to consumers. And I think that helps a lot when you can't open your tap room for a long period of time.

- All right, Greg Avola, co-founder and chief technology officer of the app Untappd. And we have to mention you have balloons behind you because it's your 10-year anniversary. Congratulations on 10 years.

GREG AVOLA: Thank you very much.