It took 18 months, but Port Brewing/The Lost Abbey has finally bought out its disgraced former CFO, James Comstock.
Comstock, a founding partner in the Port Brewing/Lost Abbey business, was arrested on Dec. 18, 2013 on charges that he took more than $200,000 from a San Diego-area nonprofit, ArtSplash, where he served as treasurer. Following his arrest, Comstock was immediately let go from the beer company and eventually pleaded guilty to embezzlement charges last July. He was sentenced to three years probation.
Since terminating Comstock as CFO, Port Brewing/The Lost Abbey owners Tomme Arthur, Vince Marsaglia and Gina Marsaglia have been working to repurchase Comstock’s stake in the business.
Specific terms of the repurchase, which was completed on July 3, were not disclosed. Arthur said the company financed the buyback with a combination of bank debt and cash flow.
“It certainly took a lot of work to get from point A to point C,” he added.
The company has yet to bring on a new CFO or financial manager, Arthur said, but hopes to eventually fill the open position.
Port Brewing/The Lost Abbey’s founding partners originally included Arthur, Comstock, and the Marsaglias, who bought into the brewing venture via their Grain To Green Inc. enterprise — the parent company behind the popular Pizza Port chain of breweries and pizzerias.
Comstock, the company’s founding CFO, had received a minority stake in the company in exchange for various “back of the house” financial duties. That ownership stake became an issue after his arrest, as the company was subjected to extra scrutiny from the California Department of Alcoholic Beverage Control while it was trying to obtain licensing for a new tasting room in Encinitas, Calif.
“There was a sense that he could not own as much of the company as he did,” Arthur told Brewbound.
The company’s investor dilemma hasn’t negatively impacted business, however. Sales of both the Lost Abbey and Port Brewing brands are up about 15 percent, Arthur said.
“We turned the corner on our six month window right on schedule with forecasts, and our revenue numbers are right on pace,” he said. “On a production basis, Wipeout IPA and Mongo IPA are two of the big drivers and, on a dollar basis, a lot of the new value is coming from the new Hop Freshener series.”
Arthur said he expects the Port Brewing label to account for about 65 percent of total sales, with Lost Abbey and Hop Concept brands making up the other 35 percent. Production is currently up 20 percent and the company is eyeing 17,000 total barrels in 2015 (it produced 14,935 barrels last year)
Although the company distributes products to 10 U.S. states and across Europe, 75 percent of sales are still concentrated in California, Arthur said.
“I keep getting told that is too high,” he said. “But it is getting more difficult to sell beer further away from home, so part of me thinks that it is good to be that deep in California.”
Expansion on Tap
The installation of a new bottling line (currently in transit) and two more fermentation tanks, which are schedule to arrive in October, will help the company temporarily increase production capacity. But in order to truly expand, Port Brewing/The Lost Abbey will need to find more space.
It is currently looking into the feasibility of relocating the tasting room and sour/wild beer aging into a separate facility across the street from its current brewery in a San Marcos, Calif., industrial park. That would give the company more room to expand production capabilities, Arthur said.
“Our real estate broker and the tenants currently occupying the building are talking and, if they are able to move, it would give us the ability to create a separate tasting area,” he added.
That’s a top priority for the company, Arthur said, because the “experiential” component of selling craft beer in San Diego has changed considerably since the company laid down roots in 2005.
“We just need to make sure that when people are coming to Lost Abbey, they are getting the full experience,” he said, adding that he thinks the brewery could eventually produce upwards of 30,000 barrels in the combined footprint.