Green Flash Brewing Co. is seeking new investors to tackle its mounting debt.

Green Flash Brewing Co. is seeking new investors to tackle its mounting debt.

Green Flash Brewing Seeks New Investors

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Another craft brewery is feeling the sting of a contracting marketplace that is the beer industry. With millions of dollars in debt on its balance sheet, Green Flash Brewing Co. is now seeking new investment to push through these difficult times.

It wasn’t too long ago that Green Flash was quite the success story. As the craft beer marketplace mushroomed, the San Diego-based brewery had grown into a national presence. Their beers could be found in 33 states and in 2015 the brewery built a second production facility in Virginia Beach.

According to a document used to entice outside investors, overall revenue declined from $29 million in 2016 to $27 million in 2017. And the new production facility has saddled the brewery with $20 million in debt.

A statement from the document by co-founder Mike Hinkley reads “The debt drawn to fund the construction of the East Coast facility coupled with a reduction in capacity utilization by adding a second plant has negatively impacted liquidity and profitability.”

Immediate Changes

To tackle the problem, the brewery is abandoning its plans to distribute their beers in all 50 states.

“The plan to go to 50 states, in the way we did, seemed to be working really well when the industry itself was expanding and Green Flash was growing at 35 percent a year. We recognize now that it wasn’t the best decision, and we should have been building our home markets at the time,” said co-founder Mike Hinkley to Brewbound.

They’ve reduced their footprint from 33 states to 17 and will continue to sell in Arizona, California, Colorado, Delaware, Hawaii, Maryland, Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Utah, and Virginia.

Green Flash also owns Alpine Beer Co. and will be recalling the brand from weaker markets as well.

“We were doing pretty well close to the breweries and in some strategic markets, we had some strongholds. But we had a lot of territory that was in pretty steady decline,” he went on to say. “Rather than to continue to fight that battle, we took the resources from out there and brought ’em all into a smaller territory. As much as we could, anyway.”

The brewery will also be reducing its overall workforce by 15 percent. And they will no longer sell 22 oz. bombers and focus solely on distributing smaller packing.

Curiously enough, even as the brewery is contracting its presence across the country, they are expanding their business in one area. Green Flash has purchased the former Ploughshare Brewing Co. in Lincoln, Nebraska. This location will be the first in what Green Flash hopes to become a chain of brewpubs.

The Debt Problem and the Future

While the aforementioned changes are important, the brewery will not be able to continue without outside investment.

Mike Hinkley admitted building the underutilized production facility in Virginia was a mistake. “We know that we have too much debt to go forward, and the business itself cannot support the extra debt that we took on to build Virginia Beach,” Hinkley said.

“The debt drawn to fund the construction of the East Coast facility coupled with a reduction in capacity utilization by adding a second plant has negatively impacted liquidity and profitability.”

And to set itself up for future success, Green Flash is seeking a new financial partner. The company has retained the services of SSG Capital Advisors to help in its exploration of “strategic alternatives”.

And while they are seeking options to pay down their debt, they have no intent to sell. “However Green Flash goes forward, I will be here, and I’m not selling,” Mike Hinkley said.

Breweries Stuck in the Middle

Recapitalization, sell-offs, and contraction are recurring themes in the national brewing landscape. And Green Flash isn’t the only brewery caught between Big Beer and the smaller breweries constantly nipping at its business.

Breweries such as Pabst and New Belgium have ordered a round of layoffs. Smuttynose Brewing is on the auction block. The Boston Beer Company has seen its revenue decline.

“We got caught in what everyone is referring to as the squeeze,” Hinkley said. “Our direct competitors were getting bigger at the same time as the broad market below was becoming more crowded.”

Indeed, the craft beer marketplace is very crowded. There are more options than ever and loyalty is fickle. The brewery that becomes too large is no longer one of the cool kids and its brand interest can quickly erode.

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