What Is Going on With Green Flash’s Contraction and its Unnamed “New Investors”?

Drink Features Green Flash Brewing
What Is Going on With Green Flash’s Contraction and its Unnamed “New Investors”?

To say that San Diego’s Green Flash Brewing Co. has been having a bad year is perhaps the biggest understatement that one can make in the beer industry right now. At the beginning of 2018 the brand was available in all 50 states, as the brewery continued making a play to ascend from “regional” to “national” craft brand in the same tier as New Belgium or Sierra Nevada. That expansion got them to #43 on the Brewers Association’s list of the largest craft breweries by production in 2017. But it’s now safe to say that experiment failed, and failed badly.

Not only did Green Flash struggle to sell beer in many of those far-away markets, competing against more nimble and hyped local competition, it racked up so much debt in the construction and opening of its East Coast headquarters brewery at Virginia Beach that it ultimately had no choice but to abandon almost every aspect of its national expansion. In January, the brand was pulled out of 33 states in a massive contraction. Now it’s been pulled out of another 9, meaning that it will remain in only eight markets: Arizona, California, Colorado, Hawaii, Nevada, Texas, Utah and Nebraska, where they’re still hoping to open a new brewpub in 2018.

Making headlines among all these woes was the announcement that Green Flash would also be seeking a buyer for its Virginia Beach brewery. That’s not a headline we bothered to write up ourselves, by the way—lots of other beer news sites covered it fully. But the really concerning news, in our estimation, is the piece that showed up earlier this week. In addition to all the contraction, Green Flash also quietly announced that it had taken on new investment to provide an infusion of funds.

And … that’s all they announced. The company provided no information as to who or what was making an investment in Green Flash, nor did they imply the degree of ownership transfer. Naturally, there’s no mention of any of this—even the closure of the Virginia brewery—on any of the company’s social media accounts. Just read the empty marketing babble in the press release:

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.

Brewbound attempted to get more information on what exactly any of these words mean, but CEO and co-founder Mike Hinkley—who Paste has also interviewed in the past—”declined an opportunity to be interviewed.” They could ultimately only report that the company “secured capital from a new but undisclosed investor group,” and say “it’s unclear how the recent capital infusion will impact the company’s ownership structure.” Looking for some kind of clarity here, Paste also reached out, but our request for comment wasn’t immediately returned.

Other publications simply repeated whatever mantra they were given to repeat, like this one, which says Green Flash obtained “an influx of funding to allow the craft-beer interest to remain independent.” It goes on to say that “Hinkley announced that he has secured funding from a group of investors who, in addition to providing financial support, will also aid in a strategic overhaul of the company’s operations and distribution. Contraction will be the name of the game where both are concerned.”

There are so many frightening words in those few sentences. Among them:

— What does “remain independent” mean? Whose definition of independence are we talking about? The Brewers Association’s? I don’t know. I do know that if you ask someone at any of AB InBev’s former craft breweries (such as Goose Island, Golden Road, Wicked Weed, etc.) if they get to “operate independently,” their cheery response will be “we sure do!” I’m not trying to imply that Green Flash has been partially acquired by some arm of Big Beer, but I will contend that a word like “independent” needs a definition.

— The new investors will “aid in a strategic overhaul of the company’s operations”? That’s not the kind of thing someone with a 5% stake in the company gets to do, right? That sounds more like “our new ownership will be running things their way.”

When Brewbound last spoke with Hinkley in February, he apparently owned 30% of the company. In fact, four total investors (Hinkley included) owned about 70% of the total company, with the remaining split between more than 50 total investors. They then “tapped SSG Capital Advisors” to help find new investors, which presumably led (eventually) to the just-announced infusion of cash.

So the question is: Who now wields the power at Green Flash as the company embarks on a drastic series of contractions, layoffs and cost-cutting? Who is calling the shots of the upcoming “strategic overhaul of the company’s operations”? Are they on-board with the opening of the company’s new brewpub in Nebraska? What will the new ownership mean for the beer itself? Pretty much everything regarding this company seems to be up in the air at the moment, and it highlights the dangerous landscape facing regional craft brewers in 2018. As we can see in the Brewers Association’s just-released statistics for 2017, this is a scary time to be a mid-sized American craft brewery. As only the smallest and most nimble segment of the market struggles to keep overall industry growth going, it’s the Green Flashes of the world that have felt the pinch most strongly. Let’s hope that whichever new partial ownership they’ve found works out for the best—but some more information would be great, too.

Jim Vorel is a Paste staff writer and resident beer guru. You can follow him on Twitter for more drink writing.

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