It has been a dark period for beer drinkers. First, the Bud Light controversy made beer drinking — something most people associate with fun — political. That has been followed by a general downturn in beer drinking, especially among younger drinkers.

It's not that nobody drinks beer, but the alcoholic beverage has been fighting a number of trends. Hard seltzer and canned cocktails have seen their market share grow significantly.

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That has included major players, including Coca-Cola (KO) , entering the market offering a boozy version of its Topo Chico seltzer and partnering with Brown Forman (BFA) to bring Jack Daniels and Coke to market in ready-to-drink  (RTD) cans. Shelves have gotten crowded with options that are not beer, which seems to appeal to younger drinkers.

In addition, beer companies have also suffered from a declining market. That's something the Beer Marketing Industry (BMI) shared in its annual report on the state of the industry.

"The report reveals that beer shipments have fallen by 5% in the first three quarters of 2023, and were on track to fall below 200 million barrels for the whole year. As a result, this would be the lowest level of beer consumption in the USA since 1999, and against a 23% population growth since the turn of the Millennium," The Drinks Business reported.

Another brewery appears to be gone for good

The downturn in beer sales, along with debt caused by the covid pandemic, has caused a massive problem for the craft beer business. A number of local and regional breweries have shut their doors because they can't service the debt they had to take on when they were shut down for months during the pandemic.

Casualties have included huge names, including San Francisco's Anchor Brewing, a nationally known brewery. A number of other regional favorites of varying sizes, including Chicago’s Metropolitan Brewing, New Jersey’s Flying Fish, Denver’s Joyride Brewing, Tampa’s Zydeco Brew Werks, and Cleveland’s Terrestrial Brewing, have also filed for bankruptcy.

It's a sort of beerpocalypse that does not appear to be slowing down as another regional favorite brewery, 7 Mile Brewery of Rio Grande, NJ has filed for Chapter 11 bankruptcy protection. The company, which closed in May, filed for bankruptcy in late -February.

The company did share a goodbye on its Facebook page after its last day of operations in May.

"Well that’s a wrap. Thank you to all that came out this weekend to support us. Thank you to all of you for sharing your memories and sending well wishes. We will miss you all. We would also like to thank all our amazing employees through the years. 7 Mile Brewery was all because of you," the company shared.

7 Mile finally files Chapter 11 bankruptcy

It remains unclear why 7 Mile Brewery waited this long to file as it did not appear to be working toward a plan to reopen. The company reported liabilities of $601,000 and assets of $135,000, which is mainly in brewing equipment.

Filing for Chapter 11 bankruptcy protection might allow the company's owners to work out a plan to keep that equipment. That could, in theory, allow them to open in another location or brew beer to sell to wholesalers. 

A local radio station, 92.3 The Buzz shared what it believes to be the reason for the filing. 

"The craft brewer closed down its operation in May 2023 but has gone to court seeking protection after landlord threats of on-site auctions to sell the property outright.

7 Mile and the other breweries named above are not the only beer brands and breweries that have gone bankrupt and, in many cases, closed their doors.

Deadwords and Persimmon Hollow, two Florida breweries also filed for Chapter 11 bankruptcy earlier this year. Both of those beer brands are trying to stay open. 

Forgotten Boardwalk Brewing in New Jersey was not as lucky, having closed down in February. That was the same fate met by The Alementary Brewing Co., another New Jersey brewery which closed after a bankruptcy filing. 

In addition, franchise retail chain Craft Beer Cellar filed for Chapter 7 bankruptcy to liquidate its assets, after suffering from financial distress and failing to sell its business.

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I was very lucky to attend the Harvard Business School Owner/ Presidents Management program over the three years to 2006. In my class of 100 mature–age students, around half were from the U.S., and the remainder were from several other countries. I know it is a gross generalisation, but it would be fair to say the U.S. students excelled at any “marketing” related case studies but noticeably under-performed in any case studies related to “accounting”. 

It is with that backdrop that I thought it worthwhile analysing the data released from the U.S. Treasury, post the release last week for the month of February, and the fiscal year to date being the five months to February 2024. In short, the data, on an annualised basis, is showing a budget deficit of U.S.$2.0 trillion (which exceeds 8 per cent of gross domestic product (GDP) of U.S.$24.6 trillion), whilst the interest expense component of that deficit is running at U.S.$840 billion, or 42 per cent of the annualised budget deficit. 

The U.S. Government Debt is now expected to hit U.S.$35.5 trillion at the end of the fiscal year (30 September 2024), around 144 per cent of GDP, and the trouble is this indebtedness is forecast to grow at a much faster rate than GDP over the medium-term.  

The graph above illustrates a 10.4-fold increase in U.S. public debt over 33 years to 2023, with an average annual growth rate exceeding 7 per cent. While various governments may blame COVID-19, the cost of defence, demographics, health, welfare, or net migration, neither U.S. political party has striven for a budget surplus over the past 25 years. The problem associated with the increasing level of government indebtedness means any budget deficit will be starting the new fiscal year at close to U.S.$1 trillion in the red (or around 4 per cent of GDP), assuming reasonably steady interest rates.  

Dissipating confidence in the U.S. dollar may be one of the reasons gold and bitcoin are challenging their record highs. And at some stage, “the market” may demand a higher premium over the level of inflationary expectations when lending the U.S. government funds. If the confidence level in U.S. bonds eventually comes under pressure, so logically, there will be many asset valuations.  

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Operators of nursing homes and senior living facilities were severely impacted during the Covid-19 pandemic in 2020 as about 40% of residents had or likely had Covid-19 that year and over 1,300 nursing homes had infection rates of 75% or higher during surge periods, the U.S. Department of Health and Human Services Office of the Inspector General reported.

The high infection rates led to severe staffing challenges, including significant loss of staff and substantial difficulties in hiring, training and retraining new staff, according to a February 2024 report. Those staffing challenges, however, continue today, as rising inflation makes it more expensive to compensate these essential workers.

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In addition to staffing challenges, operators have also faced a number of economic issues that have driven some of these companies to file for bankruptcy or, in some cases, shut down facilities. Rising inflation, which affects products, supplies and employee wages, and higher interest rates over the past couple years have severely impacted operators' budgets. On top of those economic issues, operators are battling inadequate Medicare, Medicaid and insurance reimbursements that can lead to capital shortfalls.

Senior care facility bankruptcies rise

Financial hardship has led dozens of operators of senior facilities to file for bankruptcy over the past three years, with 13 companies filing petitions in 2021, 12 debtors filing in 2022 and 15 more in 2023, according to Gibbins Advisors.

Notable Chapter 11 filings over the past year have included Evangelical Retirement Homes of Greater Chicago, which filed Chapter 11 in the U.S. Bankruptcy Court for the Northern District of Illinois in June 2023 to sell its assets at auction. Also, Windsor Terrace Health, an operator of 32 nursing homes in California and three in Arizona, filed its petition in the U.S. Bankruptcy Court for the Central District of California in August 2023 listing $1 million to $10 million in assets and liabilities and unable to pay its debts.

More recently, Magnolia Senior Living, an operator of four facilities in Georgia, filed for Chapter 11 protection on March. 19 in the U.S. Bankruptcy Court for the Northern District of Georgia.

Loan defaults, ransomware attack force Petersen into bankruptcy 

Finally, Petersen Health Care, operator of about 100 nursing homes, assisted-living and long-term care facilities in Illinois, Iowa and Missouri, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware on March 20, suffering financial distress from increased overhead, low reimbursements and a ransomware attack in October 2023 that interrupted the company's efforts to bill patients and insurance companies.

The company's financial problems worsened as it defaulted in on payments on over $50 million in loans that led to 19 of the company's facilities to be placed into receivership. 

Petersen asserted in a March 21 statement that it will continue to operate its business as normal, as it is seeking court approval of a $45 million debtor-in-possession financing commitment from lenders to fund post-petition operating expenses and working capital.

“Petersen will operate as usual, and our team remains committed to continuing to provide first-rate care for our residents,” CEO David Campbell said in a statement. “We will emerge from restructuring as a stronger company with a more flexible capital structure. This will enable us to continue as a first-choice care provider and a reliable employer for our staff.”

The Peoria, Ill.,-based company, which was founded in 1974, operates skilled-nursing facilities, assisted/independent living communities, memory care services and homes for the developmentally disabled.

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