Supply Chain Issues Stunting Recovery Of D.C.'s Booze-Based Businesses

Breweries, distilleries and bars have benefited from growing demand over the past several months as the newly vaccinated began to go out to socialize more, but their recovery has been hampered by issues with the supply chain and the labor market. 

These businesses, which often serve as anchors for developments and destinations to draw people to emerging neighborhoods, are still struggling to return to financial stability as new challenges have continued to mount over the past 19 months. 

The owners of two breweries, a distillery and an outdoor bar venue spoke last week on Bisnow's Northeast D.C. Update digital summit about the difficulties they are facing in sourcing materials and hiring labor.

The disruptions to the supply chain have become front and center in recent months as West Coast ports have grown increasingly congested and as the holiday season approaches, but breweries have been facing supply issues since the early days of the coronavirus pandemic, Atlas Brew Works CEO Justin Cox said. 

Many breweries shifted their business model last year to focus more on distributing cans of beer for pickup and delivery, as customers drank in their homes rather than in bars and taprooms. Cox said this trend, combined with more people stocking up on soda and other canned goods, contributed to a shortage in aluminum. 

"The aluminum market just went nuts, and it was already struggling due to some bigger brands coming into the market and putting their products in cans," Cox said. "And there were tariffs or threats of tariffs putting a lot of pressure on the supply side. Just finding aluminum is tough, especially when you're trying to come out with new products. It's been challenging on all fronts." 

Atlas has operated its original location on West Virginia Avenue in Northeast D.C.'s Ivy City neighborhood for eight years, and last year it opened its second location on Half Street SE near Nationals Park. The new space on the ground floor of JBG Smith's West Half building features an indoor brewery and taproom that serves Andy's Pizza and is connected to an outdoor patio seating area. 

As it was working to open the new location in the early summer of 2020, Cox said Atlas faced more supply chain-related roadblocks. 

"We’ve got a couple big garage doors that open up for that indoor-outdoor feel, and we were thinking about doing a modification to one of them, and I was talking to the garage door sales guy for what I thought would be a relatively minor change," Cox said. "The cost was going to be like $28K, and the lead time was 27 weeks."

"Wow," two other business owners on the panel responded in unison to Cox's anecdote, before sharing their own supply chain-related horror stories. 

Republic Restoratives Chief Financial Officer Sarah Mosbacher, whose distillery is also located in Ivy City, said the supply chain crisis forced the business to change the appearance of its latest release, Assembly Gin. 

"The Assembly Gin, as it's available now, has the wrong cap," Mosbacher said. "The caps we ordered were two months late and running, and this is the story of like 20 other items that we've needed over the past year."

"The caps are finally arriving tomorrow and we couldn't wait," she added. "So we're making sacrifices that are sometimes I think imperceptible, but other times I have this cringe feeling of, 'Oh that's not what we were aiming to present the public with.' It's just the way of life right now."

Two new venues that opened this year in Northeast D.C.'s Edgewood neighborhood were also forced to adapt to supply chain issues as they were building out their spaces. 

Metrobar, an outdoor bar concept at MRP Realty's new Bryant Street development, welcomed its first customers in June. The space features an old Metro train car that is planned to have indoor bar seating, but that portion of the venue has yet to open, and customers have instead sat at the picnic tables around the train car. 

"We will eventually be opening up the train car with a bar inside and with seating, but that has taken a little bit of delay because of the supply chain, getting materials has been really tough, so we’ve had to refocus ourselves," Metrobar co-owner Jesse Rauch said. 

Even with the train car closed, Metrobar's outdoor seating was often filled with customers on nice days this summer, and it has also hosted a series of events. But Rauch said it has faced a number of supply chain-related issues behind the scenes that aren't always evident to customers. 

"The cups we had been using since we opened fit our cocktail program well, and now they can’t be found," Rauch said. "We're trying to find an adequate substitute for the cups we’re using, and you’re having to make choices on quality of presentation. This is not how we wish to present ourselves, but our supply companies are saying, 'Well, this is what you’ve got.'"

He added that Metrobar's suppliers have sometimes even delivered less of a product than he ordered. 

"We may order five to 10 cases of X, and on the truck it's like, 'Wait, we only got one? Where's the rest of it?'" Rauch said. "So we're not getting much communication when supply issues are happening and when they hit our door."

Rauch said he was dealing with many of the supply chain issues detailed in a Washington City Paper report last week. The City Paper surveyed chefs and owners from 30 D.C. businesses and found that almost all products are 20% more expensive than before the pandemic, and protein costs have risen by as much as $4 a pound.

The alt-weekly compiled a list of more than 50 items restaurateurs said they are having trouble ordering, including various types of food products, condiments, drinks and utensils, plus items that commercial real estate owners are also competing for, like HVAC parts and furniture. 

“Dealing with shortages and price spikes has become my full-time job,” Baan Siam executive chef and co-owner Jeeraporn “P’Boom” Poksupthong told the City Paper. “It’s gotten to the point that items on our menu are in constant danger of having to be pulled. We already took off about six dishes.”  

City-State Brewing opened in June in Edgewood, a short walk up the Metropolitan Branch Trail from Metrobar, and it has also been forced to adapt to supply shortages, City-State CEO James Warner said. The 14K SF brewery includes 5K SF of taproom space. 

"We had to learn right from the start that we had to be planning two, three, four weeks out from our orders and do that from the start rather than adapt back," Warner said. "Repairs and upgrades take longer because of getting stainless steel or a particular part." 

In addition to construction materials for the build-out of the brewery, Warner also faced supply issues that affected the way he designed City-State's beer.

"Before we were open I was designing recipes, and they weren't designed around a particular ingredient or hop, so that as we got close to production and in production we could adapt to what was and wasn't available and which supplier would get to us," he said. "There were some malt suppliers that couldn't deliver to us, so we went another direction."

Supply shortages aren't the only issue that has made it harder for these businesses to recover from the pandemic. They have also had to face the shortage of labor as they have tried to hire or rehire employees. 

Mosbacher said that the difficulty of hiring people is one of the reasons why the distillery has yet to reopen its indoor bar and event space and instead has focused on distributing its alcohol products. 

"We've revisited this every few months, but there isn't a good financial argument for reopening," she said. "The labor market has changed a lot. The idea of rehiring a staff in hospitality right now when I hear what it’s been like for our fellow business owners is very intimidating."

Rauch said staffing up a new bar has been difficult this year, and he has sometimes had to turn to friends in the industry to pick up empty shifts at the last minute. 

"In this industry, you do have a lot of transition, someone moves onto something else and now that person who had three shifts a week and was a main part of your schedule, something comes up and they moved onto a different thing, now what do you do?" Rauch said. "We don’t always have that clamoring at the door, seven résumés deep saying 'I’ve got another person ready to go.' That’s definitely a challenge and still an ongoing challenge that we’re facing."

Cox said as Atlas has put out job postings over the past year, he has found the percentage of applicants who show up for interviews has fallen, indicating that they decided not to pursue the job. 

"A lot of people just left the hospitality industry and don’t plan to come back," he said. "That’s tough to deal with, especially as we’re seeing demand increase a little bit as we're coming out of this thing, but the labor shortage is a major challenge still."