USA, VA: Green Flash closes brewery in Virginia Beach

Green Flash’s brewery in Virginia Beach has closed, and according to a news release from CEO and founder Mike Hinkley, the company will stop distributing its beer to the East Coast, the Virginian-Pilot reported on March 26.

Hinkley confirmed that the brewery did not open on March 26, and notices taped to the gates outside the tasting room and beer garden read “out of business” with instructions on how to return kegs.

Any mention of the Virginia Beach location had been removed from the company’s website by the afternoon of March 26.

Green Flash opened its 58,000-square-foot brewery and taproom off General Booth Boulevard in November 2016. It had plans to put out 100,000 barrels each year. All the Green Flash beer sent east of the Mississippi River was to come out of the Virginia Beach brewery.

The company will now focus on its roots in California, the news release said. Green Flash also owns Alpine Beer Co., which will also stop distributing its beer to the East Coast.

“Over the past two years, the company has been under significant pressure due to the cost and complexity of bicoastal operations,” the release said. It went on to say that the company will now focus on breweries in Arizona, California, Colorado, Hawaii, Nevada, Texas, Utah and Nebraska.

The company announced “a transaction involving a new investor group” in Green Flash, though it did not name the investor.

Ending East Coast distribution and closing the brewery means the elimination of 36 jobs at the brewery and seven sales jobs, according to the release.

“I hope another brewery will move in and operate this wonderful facility with and for the people of Virginia Beach,” Hinkley said in the release.

Jerry Miller, the CEO of Miller Group, which owns Green Flash’s Virginia Beach facility, told The Pilot on March 26 that the brewery stopped paying rent after January. He said he sent a notice of default. Last week Green Flash’s lender, Comerica bank, started paying the rent but not the backpay that was owed, Miller said.

Now Miller is in discussions about what will happen next – whether another company will move in, or if he’ll buy the equipment himself and hire someone to run a brewery there. He said he’s gotten a lot of interest from local and national breweries over the past few days.

On March 24, all the brewing equipment – essentially everything but the building and the land – was listed for sale online.

Despite the closure in Virginia Beach, the company intends to open the Green Flash Brewhouse & Eatery in Lincoln, Neb., in April, according to the release.

The Virginia Beach closure comes two months after Green Flash laid off 15 percent of its employees and scaled back distribution from 50 states to 18.

Hinkley said the company’s decision to finance the Virginia Beach brewery with debt instead of equity was a “mistake” and characterized the Green Flash’s current capital structure as “a bit of a mess,” according to the beer news website Brewbound.

The story referenced a teaser sheet Green Flash sent to potential investors that said borrowing for the Virginia Beach plant had hurt the company’s profitability. “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,” Brewbound quoted from the teaser.

Court records show that trouble was brewing even before that. A lawsuit filed by a Green Flash Brewing investor late last year indicates the company was looking to sell the business as early as November 2016.

Kent McKinney claims in the lawsuit filed in San Diego Superior Court that he agreed to loan the company $500,000 plus $50,000 interest based on repeated promises from Hinkley “that the company would be sold (no matter the price).” The suit quotes from emails between McKinney and Hinkley in late October 2017, when the loan came due and only $200,000 had been repaid.

In Hinkley’s response to McKinney’s email, he said, “The company intends to pay you back as part of a recapitalization event that I believe will be complete within ninety days.”

In another email from Nov. 10, Hinkley notes that one of the company’s attorneys was “busy working on the recapitalization/sale of the company,” warning McKinney that “taking action that interferes with our transaction could do irreparable harm to the company and shareholder value.”

Green Flash paid McKinney $38,250 in interest but as of the filing on Dec. 11, 2017, the company hadn’t paid any of the remaining principal balance.

In Virginia Beach, the news has been a shock to those who follow the craft beer scene closely.

Grape & Gourmet, a bottle shop on Virginia Beach Boulevard, has been carrying Green Flash since the shop opened in 2006. Owners Kevin and Deborah Aylesworth said when the local brewery opened, the price went down, but higher prices won’t stop them from getting it shipped from the West Coast as they did before.

1608 Crafthouse, which has a large selection of local craft beer, usually has Green Flash on tap.

Owner Kevin Sharkey said he’s sad for the brewery’s employees and said he hates to see anyone go out of business. And he knows whatever Green Flash beer he gets in the coming weeks will be in limited supply.

27 March, 2018