THREE OAKS — Other than the early days of launching Journeyman Distillery LLC, founder Bill Welter cannot recall a more difficult business environment than the present.
For nearly two months, the Three Oaks-based craft distillery has had to close its tasting room and restaurant in compliance with social distancing guidelines. While the craft distillery distributes its portfolio of spirits to 19 states, the nationwide closure of bars and restaurants to combat the spread of COVID-19 has eliminated what’s typically 50 percent of Journeyman’s revenues.
Meanwhile, sales to consumers have trended toward larger format bottles and familiar value brands, and not craft products, leading to an overall “substantial decrease in distribution” revenue, Welter said.
The current situation has “certainly stunted” Journeyman’s growth plans, which had included a second location in Valparaiso, Ind., where the company planned to redevelop an old industrial facility into a pilot distillery, restaurant and brewery, as well as a possible theater and hotel.
“We were exploring the idea of opening a second location in Valparaiso, but now we need to think about how is it that we get reopened and survive in the new environment,” Welter said. “We’ve gone from looking at a second location to survival mode.”
In the early days of the shutdown, Journeyman repurposed its operations to make hand sanitizer and was one of the first to market with a Michigan-made product. While demand was brisk initially, as more local companies started to make sanitizer and as normal suppliers began to replenish their stocks of product, “we saw the demand drop considerably.”
“We looked at hand sanitizer as a tourniquet on a gaping wound, and the tourniquet appears to have loosened up as the sanitizer market is getting filled by major corporations,” Welter said, acknowledging that he was grateful for the opportunity to keep some people employed in making sanitizer products.
Manufacturing sanitizer also allowed the company to contribute to “a higher purpose” in helping out frontline health care workers, but Welter said the company has since transitioned back into making spirits.
“We’re taking a risk that we’ll be allowed to open up at some time in the near future and that things will return to some level of normalcy — or whatever that looks like,” he said. “The hardest thing in all this, we’re preparing to reopen the business but in a lot of ways we don’t know when and how. It’s like sitting down and playing chess but we don’t know the rules. Because we don’t know the rules, we don’t know what the first move is. Establishing rules for hospitality and reopening would make our lives easier.”
He also worries what capacity reductions for restaurants could mean for the industry, given its “notoriously low profit margins, and that’s when they’re at 100-percent capacity and things are running well.” Additionally, he said existing relief programs such as the U.S. Small Business Administration’s Paycheck Protection Plan “are not beneficial to the restaurant industry,” particularly in Michigan because companies do not yet know when they will be able to reopen and rehire people and qualify for loan forgiveness.
“Our family was in the banking business for 40 years, and the thing you don’t need when you have no revenue coming in is more debt,” Welter said.
Despite the challenging environment, Welter said he’s “actually optimistic” for a quick economic recovery once people can get back to work and companies can reopen.
“What we’re experiencing is all driven by response to the coronavirus, and I think it’s very possible this could be a short-term response to the coronavirus and then we’ll see it return to normal by the end of the year,” he said. “I’m not really very political, but I think the country needs to get on the same page, put politics aside and do what’s best for the people of the nation and for small businesses. We need to work toward getting things open and getting back to people having a positive work experience, positive social interaction again.”
News coverage in the food/agribusiness section of MiBiz is made possible by advertising support from Dan Vos Construction Company. Dan Vos Construction strives to serve people and to enhance life, while maintaining long-term relationships with customers, sub-contractors and employees. This advertisement has no effect on editorial consideration in MiBiz.