As the drinking and dining industry celebrates victories like better-than-anticipated sales and the July 1 full reopening of New York City’s leisure and hospitality businesses, most bar and restaurant owners are still struggling mightily to financially recover from the Covid-19 pandemic. Though they got direct relief from the Biden Administration’s American Rescue Plan Act of 2021 in March, they and their supplier partners continue to lobby for the Hospitality and Commerce Job Recovery Act of 2021, including a lesser-known provision that would cover losses for the food and beverages they had to throw away during successive lockdowns last year.
A dozen congressional representatives from both parties have signed on as co-sponsors of the bill in the last ten days, encouraging a newly formed advocacy group called the Perishable Food and Beverage Coalition, composed of 20 trade associations from the National Potato Council to the country’s three primary organizations that represent commercial beer interests.
“When the pandemic forced an abrupt halt last March, countless perishable food and beverage products were left stranded at restaurants, bars, entertainment venues, sports arenas and more. As shutdowns continued, small businesses suffered significant losses in spoiled inventory that could no longer be sold or repurposed for charity,” says coalition leader John Bodnovich, executive director of American Beverage Licensees, which counts retail alcohol merchants as its members.
The coalition reports $900 million worth of losses from unmerchantable inventory nationwide. On top of this, sales of beer wine and spirits sales dropped by $74 billion at bars and restaurants from March to December 2020, as compared with the year prior. This equates to 6.7 billion 12-ounce servings of beer; 3.3 billion 5-ounce glasses of wine; and 8.8 billion 1.5-ounce shots.
The perishable food and beverage provision allows affected businesses to take a one-time 90% tax credit for food items that went bad or expired because of shutdowns between March 13 and September 30, 2020.
“As a result of the shutdowns, breweries and other businesses in the food and beverage industry have experienced significant losses in inventory due to the lack of merchantability of food and beverage products that spoiled, expired or were no longer suitable for human consumption. The legislation seeks to jumpstart hospitality industry businesses like breweries as American consumers begin to return to regular business and leisure travel,” writes Bob Pease, president and CEO of the Brewers Association craft brewery trade group.
While some beer producers and distributors did take draft beer back from retailers, most of it remained scattered and going stale throughout the system, sometimes for months. Breweries and wholesalers that did accept returns would have then shown it as a loss on their ledgers, as they couldn’t sell it themselves either, whether at other venues or in breweries’ own taprooms. What’s more, many of the nation’s more than 8,000 breweries sell their own food and found themselves in the same position as their on-premise retail partners each time sudden lockdown orders were issued.
The second round of Paycheck Protection Program (PPP) loans does allow recipients to use disbursements to repay themselves for nonmerchantable food, and the $28.6 billion Restaurants Revitalization Fund, which opens for applications Monday, allows its beneficiaries to use the grant money for nearly any Covid-related expense. What’s more, some critics also argue, hospitality businesses have claimed a bigger share of the relief pie than others, like arts and culture venues, that suffered just as much from closures and capacity restrictions, if not more.
But not only does the International Association of Venue Managers form part of the coalition as representative of a sector that also sells food and drinks, neither the PPP nor the restaurant fund is expected to cover nearly all of the claims.
Bodnovich adds that this one-time tax credit provides a remedy that’s at once narrower and broader than the prior funding mechanisms.
“Bars and taverns were planning St. Patrick’s Day events and all food they purchased as well as a lot of the draft beer went to spoil. They suffered those shock losses that were the beginning of a lot of hurt for a lot of people all the way up the supply chain: fisheries, bakers, so on and so forth,” he says. “This extends to all these other affected industries.”
As with the previous federal Covid-relief packages for small businesses, this provision specifically prohibits “double-dipping” by claiming a deduction for something already covered by a previous federal Covid-19 program.