After taking on “too much debt” to build an expansive East Coast brewery, San Diego’s Green Flash Brewing today announced that it would cease operations at its 58,000 sq. ft. Virginia Beach production facility and terminate 43 employees in the process.
The decision to shutter the facility, which opened at the end of 2016, comes one month after the craft brewery confirmed that it was over-leveraged and needed outside investment to keep the business running.
The Virginia Beach brewery, which cost approximately $20 million to build and is capable of being scaled to 100,000 barrels, is currently for sale as part of an online auction run by Heritage Global Partners.
In a press release, Green Flash, which also owns the Alpine Beer Company brands, said it had secured capital from a new but undisclosed investor group that is “committed to maintaining Green Flash’s status as an iconic independent craft-brewing interest.”
In addition to shutting down its Virginia Beach plant, Green Flash – which stopped distributing to 32 states in January — said it would pull out of an additional 10 states.
Moving forward, the company’s beers will only be sold in Arizona, California, Colorado, Hawaii, Nevada, Texas, Utah, and Nebraska, the press release stated.
“We have faced a host of significant challenges since expanding our operations to the East Coast and, though a rewarding endeavor in many ways, we feel this course-correction is prudent at this time and will ensure the independence, fiscal viability, identity, and quality of the Green Flash and Alpine brands,” Green Flash co-founder and CEO Mike Hinkley said via the release.
Hinkley, who declined an opportunity to be interviewed for this story, added that he was “deeply saddened” to have to close the Virginia Beach brewing facility and “say goodbye to 36 employees” who worked on-site.
“I hope another brewery will move in and operate this wonderful facility with and for the people of Virginia Beach,” he said in the release.
Including the 33 individuals who were laid off in January, Green Flash has terminated 76 employees this year — about 34 percent of the company’s workforce.
Despite closing its Virginia brewery, Green Flash said it still planned to open a brewhouse and eatery in Nebraska next month.
Founded in 2002, Green Flash was recently ranked by the Brewers Association as the 43rd largest craft brewery in the U.S.
A teaser document sent to potential investors earlier this year revealed that Green Flash had revenue of approximately $27 million in 2017, down from more than $29 million the prior year. The company also reported an adjusted EBITDA loss of $112,000 last year, despite earning more than $3.1 million in 2016 and more than $5.2 million in 2015.
Speaking to Brewbound in February, Hinkley, who owned 30 percent of the company at the time, blamed his company’s financial struggles on a decision to fund the Virginia Beach brewery expansion with debt instead of equity.
“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,” he said last month.
After a deal that would have brought an influx of cash to the business fell through at the end of last year, the company tapped SSG Capital Advisors — a boutique investment banking firm that specializes in mergers, acquisitions, restructurings and often works with “companies facing complex or challenging situations,” according to its website – to help it identify a new partner.
“We were pretty close in late 2017, but the same faction of our ownership that didn’t like the equity dilution to begin with, didn’t like it on the second go-round when it was even more obvious that it was the right answer,” Hinkley told Brewbound.
At the time it was seeking new investment, Green Flash had upwards of 50 investors, four of whom – including Hinkley – collectively owned about 70 percent of the business.
As of press time, it’s unclear how the recent capital infusion will impact the company’s ownership structure.
A press release with additional information is included below.
Green Flash Brewing Announces Transaction Which Will Provide a Successful Return to Southwest Roots
Award-winning San Diego brewery to strategically streamline and consolidate operations utilizing resources and expertise of new investors
SAN DIEGO — San Diego-based Green Flash Brewing Company is excited to announce a transaction involving a new investor group committed to maintaining Green Flash’s status as an iconic independent craft-brewing interest. With this new financial backing and focus, Green Flash will return to its Southern California roots, while consolidating distribution of its beers and those of sister-brand Alpine Beer Company to San Diego County and the greater Southwest.
As a part of this strategy, Green Flash Brewing Company will cease operations at its production brewery in Virginia Beach, Va. Over the past two years, the company has been under significant pressure due to the cost and complexity of bi-coastal operations. With a stabilized financial position and streamlined operation, the focus will be on brewing exceptional beer, connecting with customers, and building the brands in the core markets of Arizona, California, Colorado, Hawaii, Nevada, Texas, Utah, and Nebraska.
“We have faced a host of significant challenges since expanding our operations to the East Coast and, though a rewarding endeavor in many ways, we feel this course-correction is prudent at this time and will ensure the independence, fiscal viability, identity and quality of the Green Flash and Alpine brands,” says Green Flash co-founder and CEO Mike Hinkley. “That said, I am deeply saddened to close our Virginia Beach facility and say goodbye to 36 employees who worked hard to make our amazing brewery, tasting room and beer garden a special place. I hope another brewery will move in and operate this wonderful facility with and for the people of Virginia Beach.”
Distribution into all East Coast markets will also be discontinued, resulting in the elimination of seven sales positions. “I am very disappointed to stop sending Green Flash and Alpine beer to our East Coast distribution partners, retailers, and fans. I have enjoyed so many great relationships that I am sad to see come to an end,” says Hinkley. “Our salespeople are best-in-class and I encourage local breweries in their regions to hire them right away.”
The Green Flash and Alpine breweries will continue to operate in San Diego and Alpine, respectively. Meanwhile, the Green Flash Brewhouse & Eatery in Lincoln, Neb. will open as scheduled in April and will brew specialty beers serving the state of Nebraska. This brewery will serve as the model for future customer connection points in the Southwestern United States.
About Green Flash Brewing Co.
Green Flash Brewing Co. is headquartered in San Diego, California. Established in 2002 by co-founders Mike and Lisa Hinkley, it has grown into the 43rd largest craft brewing company in the country behind iconic brands such as West Coast IPA, an award-winning beer whose wide acceptance helped define one of the most popular style categories of all time. Brewmaster Erik Jensen leads brewing operations for beers within the Green Flash portfolio as well as those of Alpine, Calif.-based Alpine Beer Co., which the company acquired in 2014. For more information, visit www.greenflashbrew.com.