The Happy Hour Show: The Alcohol Industry & What to Expect Coming Out of the Pandemic

9/01/2022

The Happy Hour Show Podcast By Spiritus Law

Season 2; Episode 1

"The Alcohol Industry & What to Expect Coming Out of the Pandemic" Hosted by Marbet Lewis and Robert Lewis.

You can now listen to the full podcast episode by accessing the segment here: Season 2; Episode 1 on Buzzsprout.

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DISCLAIMER **This show is intended for entertainment purposes only and is not intended as legal advice.

Read full segment transcription below: 

M: Hello everyone, I'm Marbet Lewis with Spiritus Law and this is…

R: Rob Lewis with Spiritus Law!

M: And welcome back to the Happy Hour Show we've taken a little bit of a hiatus to get us through the pandemic and as we started to gear up and back by popular demand we're here today to talk to you about the industry's recovery, what's going on in the industry how they are handling recovery and what are the major obstacles that most of our clients are facing. 

R: It's true and it's good to be back. Today we are focusing on what's challenging in the industry it just seems like coming out of the pandemic we had this beautiful resurgence of business opportunity throughout the country for the hospitality industry and now were are kind of headed into some difficult financial times. And I think it's going to be challenging to see how as an industry we move through that and get past it. 

M: I think that's a great point Rob. I think towards the end of 2021 all of us that are in the hospitality industry and especially us alcohol lawyers saw a surge in client need and the amount of work that was filtering in and coming in. I mean I know we as a law firm have expanded a lot and we've seen our clients expand throughout that time just to adjust to the new customer demands the new normal as we call it and really what the priorities are for patrons and the consumers at large at this point. We're seeing brands rebranding and shifting their focus in terms of who their target audience is going to be as we still work out and see whose going to really win that battle if it's Gen Z or the Millennials who are really going to start trend-setting moving forward as we come out of this as well as the lessons that have been learned from it. Rob, you're really on the front lines of dealing with a lot of our retailer clients especially down here in Coral Gables. So what have you seen let's do kind of a good and bad. What do you think was the best thing that came out of the pandemic that clients are benefitting from right now? 

R: I think the best thing that came out of the pandemic is a resurgence in consumer demand. I think the realization that being cooped up for so long dealing with the pandemic, you know, caused people to really want to get out there and get back into the socialization aspects of the alcohol entertainment industry. And I think that's primary and I think that's been great so for restaurants and other on-premise and off-premise venues that have been struggling and wondering if they are going to survive you know the pandemic and how long that will last and what that will mean for them as a business. You know, those fears have been put to rest. They can see the patronage is picking back up and customers coming back and even with all of our clients rather it's the restaurants, the bars, the nightclubs, or even the movie theaters where we thought that entire industry could crumble as a result of the pandemic and streaming and other issues that occurred during that time, we see that people want to go back. And that is great and I think that has been the biggest positive. But then dealing with some of these demands with respect to patronage and respect to service, the industry really wasn't able to get the products that they need in order to service these clients so we then kind of shaped into a concern of how do we meet this demand, how do I get the goods that we need. How do we get the supplies that we need to supply the same level of service? And not only about the goods and consumer items that we need but how do we get the staffing? You know because people used the pandemic in order to kind of evaluate where they are in their lives and what they want to do for a living and a lot of people left the hospitality industry to pursue other endeavors. And I think those were kind of the immediate challenges, so we saw the immediate relief of customers wanting to go back and then we saw immediate problems and how do we deal with them.

M: Yeah so, it's the basic problem of supply and demand. Right now, there seems to be an increased demand for everything hospitality related, and we've all witnessed that if you try to get a reservation anywhere. Especially down here in South Florida, you know good luck try it have fun. So, the demand for all of these services people were deprived of for so long has just skyrocketed but the industry is really struggling and having a hard time keeping up with that so I think one of the biggest challenges you know we talk about is the goods you know I guess the reconnection I think the general public at large is having with hospitality and entertainment venues. You know even right before the pandemic we were almost falling into the Netflix era of everyone kind of wanting to stay at home and this new ability to have whatever you wanted just with the hit of a button be that of delivery of groceries or even alcohol delivery that was happening before the pandemic all of that has really skyrocketed and is now part of most people's day-to-day lives. I can't remember the last time that I personally went shopping at the supermarket because now there's Instacart and so now I can just order what I want and have it delivered to my door and I think the expectation was that was going to die down after the pandemic but we haven't seen that die down during the pandemic and we've still seen an increase of people getting out. I think the obstacle and the bad that comes with that is how the industry meets that challenge, especially with dwindling workforces because of what you just mentioned. A lot of people that were furloughed or had to leave the hospitality industry because of the economic drain the industry was going through kind of moved on to other endeavors and things. So, you have two major problems, a small workforce and challenges filling spots, and secondly is the training gap that it takes to get people who are entering the hospitality industry to get them up to par with the professionals that were there before that had been in a certain position for 10 or 15 years. So, it's a tough lesson learned I think for a lot of our clients and for the industry at large in terms of the value and the investment that you make in people and how you need those people to continue with your business and continue providing a certain service that your patronage is used to. 

R: I think you touched on so many great points, but it's really about balance and patience really. It's a balance I mean it's consumerism you know it's not just a touch of a button and staying at home in your own cocoon it's about how people really want both. They want the option to stay in and they want the option to be able to go out and enjoy that hospitality industry but how do you deal with the lack of service, the lack of training it's about patience. Going into your favorite restaurant and understanding that maybe for a while the service isn't going to be exactly what you expect of what you experienced in the past. That there's going to be this training adjustment and it's about balance. Kind of being more understanding that things need to realign themselves. 

M: And we personally just experienced that recently, we were vacationing with our kids and there was a group of people walking with us and talking about how they were just dying to go back to their room and order room service which we had done the night before and it took like an exorbitant amount of time to get there and we just understood and our comment to them was, “great plan, but hopefully you're not looking to eat anytime soon.” You know, just have patience and it takes a little bit more planning and cooperation with our favorite venues and our favorite hot spots to understand while it may seem from the outside eye that everything is back to normal and things are returning to normal there's a whole behind the scenes aspect to that which is filled with obstacles and hurdles that also of these venues are still dealing with and we kind of focused on the retail side but I think we also think we are seeing that a lot on the manufacturing side. In particular especially with those foreign manufacturers that are having trouble bringing products in but even domestically with raw materials, finding supplies that are needed for packaging not just only on the production side with immediate ingredients but also packaging materials have been scarce. And costs have risen. So, if we want to move on to find another con I think the industry is still dealing with at large rising costs and inflation are just affecting everyone down the line and you can see how that snowballs because with inflation and rising costs there's really less money to invest in a workforce. There's less money to increase salaries. And when the industry has to put their money where their mouth is and start increasing salaries and taking on those costs, those costs end up shifting over to the customers. It's kind of like what came first the chicken or the egg you know is the inflation and the rising costs leading to the inability of our clients to hire more staff and invest in more staff or is it that they did invest in more staff or raise salaries that are now creating the inflation because those costs are being trickled down to customers to you to us really. 

R: Well unfortunately the customers end up paying in the end. You know? Regardless of the vicious cycle, I think we also have to keep in mind that the pandemic really affected different countries differently. Being in the US and Being in Florida, we had I think a better opportunity and advantage to recover quickly whereas other countries that were affected that didn't have access to vaccines or similar things were more affected and that affects the global economy. So that creates our shortages, it creates our demands, rates are increased and then also now sort of heading into an inflationary crisis what does that do to consumer spending? We have to realize that consumer spending habits are going to change, and that discretionary income is going to decrease. We are sort of in this economic bubble in certain areas like in Miami where everyone has a glitzy car and you know high-income net worth as a whole but that's not reflective of the country as a whole, it's not reflective of the state as a whole. And I think the alcohol and entertainment industry really needs to really see this and make some adjustments so they can continue to thrive and succeed as inflationary stages continue.

M: And I think that we are seeing that across the board with a lot of consumer incentives starting to come back in to show people. A lot of our clients have been absorbing that really trying to come up with programs or discounts and opportunities that are still available despite the added cost that every family in America is dealing with right now. I think globally it really is a global problem with costs starting to spike up, so it is interesting to see what folds first. Is it going to be the rising prices of everything or is it going to be the consumers that reach a point that we are going to drop our spending then? You know? Until the system kind of adjusts itself. It's going to work out and how it plays out. So, we've talked about the good and bad that's come out and how it's impacting our clients. There are some other good things that came out of the pandemic that impacted the alcohol industry as a whole from my perspective and rob I don't know if you'll agree but I think there's a heavier emphasis right now on deregulation than there ever was before because during the pandemic so much responsibility was given to the alcohol industry as a whole to allow them to operate and allow them to add different services like cocktail-to-go for example and flexibility on direct shipping that it's hard to put all those privileges back in the box after we experienced them they saved the industry in a lot of ways and we didn't see the mass mayhem everyone was worried about with these privileges. So I definitely think that's a good thing that has come out of the pandemic. 

R: Yeah I agree with you completely as I always say, "It's very hard to put the genie back in the bottle. And when the restaurant industry, in particular, was affected very seriously by the pandemic it was kind of anything to survive. And we kind of had regulators and regulatory agencies kind of you know be as flexible as possible so they can survive. And now the issues are we really need to continue these privileges and that's where you started to see states allow cocktails-to-go and other issues and flexibilities that realistically need to stay. Because the restaurant industry is still recovering, we are still in a sense of recovery and I think we still need to provide packages and incentives and grants to the hospitality industry to kind of keep them on the right path especially as we head into inflationary times. So, you know hopefully they won't go away, and hopefully, legislatures when they take a look at this and looking at the hospitality industry they continue to be generous in respect to flexibilities and relaxing of regulations because realistically as you mentioned that fear of what if we give these privileges to the hospitality/alcohol industry what will happen? Will it be a slippery slope to disaster? And I think the answer is no it's not. You know? And I think if it's reasonable and responsible regulation, we should be able to do it. That the industry should be able to thrive based on this relaxation of regulation. 

M: And I think the need for immediate action back then, while it fed into some fears that even the industry had itself for example down here in Florida we have Quota Licenses. With a lot of these privileges, a lot of quota licenses were concerned about the devaluation of their licenses because there were more cocktails-to-go privileges or services were being expanded to some businesses that had different license types that weren't available before. I don't think we have seen that happen. I don't think we've seen those fears truly manifest into negative consequences and negative outcomes. I would say the only con that's kind of come out of that flexibility and privileges and the fact that it really was all done based on emergency orders and need is that the regulations are very unclear. What has now come to be cocktails-to-go is somewhat convoluted in some states and even here in Florida there's a lot of room for clarity and simplification in what the process is there seems to be a lot of unnecessary steps and requirements to be able to really benefit from that privilege so hopefully with inflation and with the industry now also starting to cry out for more relief because of you know the inflation we are facing and the potential financial crisis we are facing, part of that will hopefully lead to some clarification in our legislation and maybe some revamping and re-drafting of a lot of those rules that were originally drafted to serve as emergency measures whereas they have really become day-to-day business practices. 

R: Agreed, but I look at it like this: every legislative session is a new opportunity to help and to clarify as you say I think it was more about getting a law passed through the books. These are really novel concepts of allowing cocktails-to-go and other package-released privileges for restaurant licenses. For example here in Florida, so it was more like getting those rules out there, getting the governor's order out there, and then basically codifying that statutorily so that privilege can continue I think without thinking through all the steps and kind of also not thinking through all the business issues that go along with opening up and creating additional privileges for those licensees going forward to be able to make those corrections and maybe even add additional flexibilities to help restaurants and help other segments of the alcohol industry to continue to thrive and to get through uncertain financial times.

M: Absolutely, and I'm hoping that's what we going to see in the upcoming months is kind of revisiting some of that legislation that passed some of that flexibility that was adding it and either codifying it where it hasn't been yet or clarifying it where it has been.  Also, hopefully removing some of those restrictions in terms of you have to have a meal with the drink and you have to have this with that. That really is a significant burden on an industry that's already struggling because that takes implementing new technology within your own systems to make sure there are no errors in terms of the sale and incorporating that technology and revamping that which may really benefit maybe the industry as a whole if you just clarified and simplified the process better that also aides with compliance. When the industry understands what's required it's much more likely that they are going to comply with it. 

R: That's true.

M: If you need to hire a lawyer to read a basic statute for you that statute is not clear. It's really not.

R: Good for the lawyers but not clear. 

M: Yes, exactly. Exactly. Good for the lawyers but not good for the industry at large. 

R: But I think that what's also important too and one of the side benefits of the pandemic was technology as you mentioned and having sort of this forced pivot with respect to creating technology and different methods by which consumers can access food, alcohol, and other items is really another one of the great side benefits of the pandemic.

M: Well for you in particular, you learned how to use Instacart!

R: It's true! before the pandemic, I would have never needed Instacart.

M: That's beneficial for all of us actually! It really helps. And so those are really just some of the issues that we're dealing with as attorneys in this area and with our client base really being 95% based in the alcohol or hospitality industry in some sense. There seem to be recurring themes we hear on a weekly basis with people who are either implementing a new program or struggling to meet demand. We get a lot of calls in terms of can we adjust our services, can we adjust our menus to deal with the shortage of supplies and raw materials. And that all comes with its own regulations because every business is regulated differently depending on where they are but also depending on the approvals that they obtained at the time they got their license. 

R: That was so confusing with respect to different license types not only in Florida but throughout the country that had certain menu requirements.

M: Exactly.

R: And then what happens if you don't have access to those ingredients and you can't supply and provide the number of entrees you will need? Does that mean you stop selling? Are they out of compliance or is there really a good fade element to these regulations? How do we deal with that as an industry we are really not prepared to go back to full compliance because the ingredients due to difficulties that we just discussed really put some licensees in different parts of the country in a really bad situation.

M: Yeah and I think that's something that regulators should cross subordinating to look at. I mean today we are talking kind of about the pros and cons that have manifested as a result of the pandemic and where the industry stands today. I think that's something that regulators across the board need to acknowledge and understand. You know? There is kind of this perception that things are back to normal that we are now dealing with everything open, everyone is getting out but you know there really is this underlying struggle that the industry is dealing with as a whole and the fix to that has to come from our alcohol regulators. 

R: That is so true and one of the things too is enforcement. What's really difficult is if you have a real lacks of enforcement on various issues in order to help the industry then all of a sudden BOOM strict enforcement the next day. You are going to catch retailers. You are going to catch industry members completely off guard without an understanding as to why. It's about education, it's about informing the industry. You know that hey look, you know we've given you flexibility and now really it's a legislative process to give you more as opposed to this emergency situation. It's a tough adjustment. 

M: Really it is. So, I think of it as empathy on the regulator's side because you have to understand and look at things holistically especially when we are dealing with businesses who are recovering and the world is recovering still from this. There are a lot of things while regulators might think well we have to get back to enforcement because if you don't enforce it's almost like the rules don't exist, but I think regulators also have to have a common sense component to that. What is the evil that is caused by not enforcing this provision right now? What is the evil that will come out of continuing the flexibility, especially in respect to a lot of requirements in particular in a lot of places. You know? Enforcing those rules right now for an industry that's recovering the impacts of it trickle down the line. Because now if they have to come into compliance, this forced compliance, not being compliant doesn't really hurt anybody. Um, and they are forced to be compliant not this time well it hurts them not just on their profit margin it will trickle down to their employees it will trickle down to the amount of people they are able to hire and bring back into the industry. It's going to trickle down into the cost of things that we are paying. So, I think regulators on the whole need to take a step back and really think about what is it that we are doing and why is it that we are pushing enforcement on these particular issues that seem to have no victim to it.

R: It's a delicate dance. It really is from an enforcement perspective. Um, you know under these circumstances. It's kind of like victimless crimes. should they really be forced and who are they going to hurt? And the idea looking at it historically is that look, every law matters in certain respects, but I think it's all about discretion and it's really about what is important at the time. And what is the best for the industry perspective as a whole? Certainly, there's latitude and understanding in the industry. 

M: And this is the point where Rob and I disagree. Rob being a former regulatory has a little bit of a different perspective than I have.

R: It's in the blood.

M: On these issues where I see clients struggling and I see businesses, some small businesses some national businesses, some worldwide/international businesses struggling with the same issue, and you have to think about well what is the harm? What is the damage in allowing this flexibility to continue or revamping those rules and using this as an opportunity in the pandemic how we operate and how we work? Because everyone has gone through a fundamental change coming out of the pandemic. On our next episode, actually, we will be discussing how we as a law firm have changed and how we've changed even our policies and even something as simple as changing the titles that everyone has to really rebuild our culture and empathize with the new struggles that our team is facing on a day-to-day basis with inflation with rising costs with lack of child care all of those issues that our team has been dealing with, we've adjusted as a small business. And so on the industry side, it's not just for the industry members to adjust and recover. It's really for our regulators and our government agencies to take the lead in assisting and providing funds or relief funds is just one aspect of that. And I think that sometimes gets lost through the course of things. People think if I give you money or if I just raise everyone's salaries that's enough and money while it helps, isn't the solution to every problem. 

R: It's a partnership it's a collaborative effort and it takes both sides for success. Both enforcement and regulators in the industry. 

M: Absolutely, so as we head into a new legislative session and into a new year very soon. We are here in August but it will be the new year quickly approaching hopefully the industry can come together to identify those issues and main problem areas that are just a barrier right now to really realizing for recovery so that we can work through that either through relief efforts or legislative remedies which in my view and I'll say it again which I really think needs to go through the process of heavy deregulation on the alcohol side. There are still a lot of regulations out there that you know inhibit enjoying full privileges, especially those that came out of the pandemic but a lot that have just been historically on the books for too long and no longer serve a purpose today,

R: You really touched on the core of all alcohol regulation. Is it outdated and does it need to be modernized? Things have changed since the end of the prohibition many years ago. But yes, I think there's certainly opportunity and I think that clear direction and clear guidance are really the key I think to success and being able to move forward. 

M: Absolutely, I think this has been a great comeback to us today. Back to the Happy Hour Show. A lot of heavy topics because it has been a very heavy time for us as an alcohol law firm, for our colleges, and for the alcohol industry at large. So next episode we will be talking a little bit more about our office and what we have done at Spiritus Law. So, thank you for joining us. We will see you again at the next Happy Hour!

R: Thank you!

 

End of segment.