The financially troubled Green Flash brewery in San Diego has been sold to a group of investors following a foreclosure by the company’s main lender, Comerica Bank.
Following the sale, which closed on Friday, a new ownership group calling itself WC IPA LLC is taking over and making a number of management changes.
Former Green Flash Brewing Company CEO Mike Hinkley will continue as vice president of the new company.
The announcement of the sale is coming just a week after Green Flash closed its Virginia Beach brewery, which had a shelf life of 16 months. There was more disturbing news last week as the brewery closed its Poway barrel aging facility, Cellar 3.
While Green Flash had ambitious plans to become a national craft beer force, distributing to all 50 states from its bases in San Diego and Virginia, it was unable to perform payments on the $20 million loan he had with Comerica.
“After a general downturn in the craft beer industry, coupled with intense competition and a downturn in our business, we were unable to repay the debt we incurred to build the Virginia Beach brewery, and early 2018, the company defaulted on its loans. with Comerica Bank,” Hinkley wrote in a note to Green Flash shareholders. “Although we have made considerable efforts to recapitalize the company over the past few months, before and after the bank default, we were ultimately unable to complete a transaction.”
Green Flash and Alpine breweries will continue to operate under new ownership, Hinkley added, but Green Flash Brewing Company and Alpine Beer, which Green Flash bought in 2014, will be dissolved. Also, Comerica is trying to sell the Virginia Beach brewery.
Alpine co-founder Pat McIlhenney said he heard from Hinkley on Monday.
McIlhenney and his wife – Val McIlhenney, who was vice president of the Alpine Beer division of Green Flash – will have no role in the new company. Their son, Shawn McIlhenney, remains under contract as the Green Flash brewer.
Hinkley and his wife, Lisa Hinkley, started Green Flash 16 years ago. A press release said he would lead the new company, although a California Department of Liquor Control document identifies him as vice president.
This development drew sharp comments from McIlhenney. “I don’t have a lot of confidence in management,” he said, “especially if they keep Mike in management.
“He has no business being in this business. His business prowess is abysmal.
Hinkley could not be reached for comment.
Despite the financial difficulties, the Green Flash Brewhouse & Eatery in Lincoln, Neb., will open its doors this month and brew specialty beers in service to the state of Nebraska.
The rise and fall of Green Flash reflects the peculiar state of the American craft beer industry, which is seeing record sales and experiencing an unprecedented number of failures. Last year saw the demise of 165 craft breweries (the term describes operations that are small, independent and devoted to traditional beer styles and ingredients).
At the same time, 997 breweries opened in the United States. There are approximately 5,600 craft breweries, operating from 6,622 locations.
“We’ve never seen these numbers in the history of our country,” said Julia Herz, director of the craft beer program for the Brewers Association, a Colorado-based national industry group. “It’s always the best time to be a beer drinker.”
But the rapid growth of breweries means fierce competition for shelf space in stores and tap handles in bars and restaurants. At the same time, industrial breweries like Anheuser-Busch and MillerCoors have bought up numerous craft breweries, using their nationwide distribution and sales networks to undermine independent competitors.
“It changes the environment and tips the scales,” Herz said. The business, she added, “is certainly more difficult than ever.”
Green Flash isn’t alone in fighting these changes. Last month, New Hampshire’s Smuttynose Brewing Co. was auctioned off to an investment group. Speakeasy Ales & Lagers in San Francisco was acquired by the former owner of a beer distributor last May, two months after it closed.
“There is still value in these companies,” said Bart Watson, chief economist at the Brewers Association. “Brands always have value for customers, so for the right price there is always interest.”
Although the craft beer sector continues to grow at a healthy 5% pace, that doesn’t mean there won’t be casualties yet as companies try to expand their brands outside of the local region. said David Barnett, Chicago-based senior research analyst for JLL, a commercial brokerage firm. who published “The Craft Beer Guidebook to Real Estate” last year.
“If you want to take that step to go from being a local player to a national player, you have to build brand loyalty by aligning with new customers, and you won’t see every company succeed in doing that, whether it’s acts of operations and distribution, name recognition and choosing the right location,” said Barnett, a San Diegan alumnus who at one time served as a server at Karl Strauss Brewing Company.
For now, the new company says the Green Flash brand will still be sold in eight states: California, Arizona, Colorado, Hawaii, Nevada, Texas, Utah and Nebraska. The Mira Mesa and Alpine breweries will continue to operate.
Dave Mills, a Ballast Point veteran in San Diego, has been named vice president of sales and business development. He replaces Jim Kenny, who held the position for eight years. Chris Ross, who had been president since 2016, is also leaving.
Erik Jensen, master brewer since 2015, retains his position as vice president of brewing operations.
The chairman of the new company is identified as Richard Alan Lobo, founding partner of Muirlands Capital, a San Diego private equity firm. Lobo has also been a board member of Green Flash since April last year.
The addition of Joshua Yelsey, formerly of Anheuser-Busch, as director of new owner Green Flash is raising some eyebrows in the craft beer community. Not only was he a director of the mergers and acquisitions department of Anheuser, but he also worked as a finance manager for craft breweries acquired by Anheuser such as Goose Island and Blue Point.
Since January, when Green Flash laid off dozens of employees, the company has shown signs of decline. For beer fans and friends of the Hinkleys, like San Diego Brewers Guild president Paul Sangster, it was hard to watch.
“I think all of us in San Diego are hoping that the Green Flash and Alpine brands will continue to be made as they have been recently,” Sangster said, “so we can continue to enjoy them.”
Pat Korn, a former Green Flash brewer who was Cellar 3’s barrelmaster, said the brewery made several fatal mistakes: expanding to the east coast before its west coast brewery reached peak production ; increase the prices of its beers; and tinkering with the recipe for its flagship beer, the West Coast IPA.
“West Coast built this Mira Mesa brewery,” Korn said, “and they decided to change it.”