Green Flash puts Virginia brewery up for sale and closes a taproom
Shocking news. A combination of too much debt and stalled growth has forced San Diego’s Green Flash Brewing to cease operations at its 100,000 barrel East Coast brewery in Virginia Beach, with the loss of 43 jobs in the process.
The decision to shutter the facility on 24 March 2018 comes one month after the craft brewer confirmed that it was over-leveraged and needed outside investment to keep the business running.
The Virginia Beach brewery, which was only opened at the end of 2016 and cost USD 20 million to build, is currently for sale. It reportedly produced 20,000 barrels (25,000 hl) beer in 2017. The sale includes the 58,000-square-foot brewery, a tasting room with 30 Green Flash beers on tap, a beer garden, a retail store and a private-event room and garden.
Not enough, Green Flash has had to resort to mass redundancies and scale back its distribution. Including the 33 individuals who were laid off by Green Flash in January this year, the craft brewer has laid off 76 employees this year or 34 percent of its workforce.
Green Flash, which used to distribute nationally, also said it would stop distributing to 42 states (out of 50). In 2016, it sold about 91,000 barrels beer. That figure included the Alpine Beer Company’s portfolio, a company it acquired in 2014.
Moving forward, the company’s beers will only be sold in Arizona, California, Colorado, Hawaii, Nevada, Texas, Utah, and Nebraska.
Despite closing its Virginia brewery and its Cellar 3 barrel-aging facility and taproom in Poway, California, a few days later, Green Flash said it still planned to open a brewhouse and eatery in Nebraska next month.
Green Flash was founded in 2002 by husband and wife team Mike and Lisa Hinkley. Green Flash had upwards of 50 investors, four of whom – including Mr Hinkley – collectively owned about 70 percent of the business. It was recently ranked by the Brewers Association as the 43rd-largest craft brewer in the US and the fourth-largest in San Diego.
A teaser document sent to potential investors earlier this year revealed that Green Flash had revenues of approximately USD 27 million in 2017, down from more than USD 29 million in 2016. The company also reported an adjusted EBITDA loss of USD 112,000 last year, despite earning more than USD 3.1 million in 2016 and more than USD 5.2 million in 2015.
Mr Hinkley blamed his company’s financial struggles on a decision to fund the Virginia Beach brewery expansion with debt instead of equity and characterised Green Flash’s current capital structure as “a bit of a mess.”
Like New Belgium, Sierra Nevada, Deschutes and Stone, Green Flash decided to build a brewery on the East Coast to shorten its route to market. It decided on the city of Virginia Beach, having been lured by a USD 275,000 grant. Fortunately, the grant does not have to be returned.
Today Green Flash is one of about a dozen breweries in Virginia Beach and the largest in the state in terms of production. Virginia now has more than 230 craft breweries. The growth is not slowing down, but smaller rather than larger breweries are opening these days. In 2017, the amount of beer produced in Virginia went up 14 percent over the previous year.
Nonetheless, the Green Flash story could be a cautionary tale for the state’s small and midsized craft breweries about taking risks and going multistate or national.
