USA, OR: Westward Whiskey files for Chapter 11 bankruptcy
American single malt Westward Whiskey has filed for Chapter 11 bankruptcy to restructure the business, after facing ‘significant liquidity challenges’, The Spirits Business reported on April 9.
Thomas Mooney, founder and CEO of House Spirits Distillery (which trades as Westward Whiskey), filed a voluntary petition under subchapter V of the bankruptcy code in the US Bankruptcy Court for the District of Delaware.
Subchapter V can only be used by small businesses to expedite bankruptcy procedures, enabling them to negotiate a reorganisation, retain control of the business, and increase oversight.
Westward, based in Portland, Oregon, was founded in 2004 as one of only 30 craft distilleries in the US.
The brand is known for being a pioneer in American single malt whiskey, which recently became a formal category.
Westward claims to be the leading independent American single malt brand, behind only Proximo Spirits’ Stranahan’s, Diageo-owned Bulleit and Suntory’s Clermont Steep.
The brand received investment from Diageo-backed Distill Ventures in 2018, when it also embarked on a US-wide expansion.
However, Diageo announced last month that it would no longer be bringing new brands into the Distill Ventures accelerator programme, which resulted in job losses.
According to the Chapter 11 filing, Westward is facing “significant liquidity challenges” and a “great strain” on its finances, caused by several factors.
The document cited issues such as a “general decline and softening of demand for alcohol and spirits products post-Covid, especially over the past two years”, and higher costs and inflation due to the global economy.
It also noted the “overproduction of whiskeys”, which led to a build-up of unsold inventory and “overcapacity after investing heavily in production capacity, hiring, and renting a large warehouse, only to have this capacity sit mostly idle”.
But, despite leadership and management teams “doing everything” to address these challenges, such as through cost-saving initiatives that lowered Westward’s cash used per month from US$1 million-plus to less than US$300,000, the company’s financial situation continued to worsen.
The company noted these issues were “further exacerbated by its inability to seek outside financing due to certain limitations in its operating agreement”.
However, the case filing noted these restrictions were recently lifted, and the firm is now “actively exploring its financing options”.
Westward was one of a number of whisky brands to gain investment from Distill Ventures, including Danish distiller Stauning, Australian producer Starward, Japanese whisky maker Kanosuke, and English brand Fielden.
When asked about Diageo’s investment in the business, Mooney told The Spirits Business: “Diageo still holds a minority of the voting shares in Westward.
“Westward is fundamentally sound but we still need additional growth capital. That will no longer come from Diageo, and we are considering a range of funding alternatives that include the founders and an outside investor. Diageo may wish to exit their position in Westward, but we cannot speak for them.”
Westward’s plans come just a week after Stauning cut approximately 25% of its workforce following Diageo’s departure from Distill Ventures. Stauning’s co-founder said at the time it was waiting to hear from Diageo about its exit plan from the investment.
Through the Chapter 11 process, Westward is aiming to “make necessary changes” to the business plan and axe “burdensome contracts and related obligations”.
In the coming months, the company intends to file a plan of reorganisation to “preserve” jobs and allow the business to “continue as a going concern”.
In a statement to The Spirits Business, Mooney said the Chapter 11 bankruptcy protection was “designed to allow small businesses to restructure for success in the future”.
He continued: “Though consumer interest in Westward grew last year, this is a necessary step as we explore financial and strategic alternatives to better position our company to thrive as an independent craft distiller.”
He added that the business would continue to operate as normal.
Explaining the decision to file the Chapter 11, Mooney noted: “The need for this restructuring process is driven by numerous challenges that have put a significant strain on our business: a decline in demand for bottled spirits in general; the rising cost of goods and services due to inflation that will only accelerate with tariffs; market access constraints that make it difficult for independent craft spirits producers to reach consumers; large obligations that we entered into, at a different time and under different circumstances; and significant investment toward increasing production and inventory.
“We have chosen to embark on this process because we are confident that Westward has a bright future, and restructuring will position us to compete and win in the marketplace as it exists today, not as it was in the past.”
According to the case filing, Westward’s current annual production capacity is equivalent to approximately 50,000 nine-litre cases of finished whiskey, or more than US$25 million of net future sales value at current prices.
The brand’s current inventory exceeds 6,800 barrels, said to be sufficient for more than 170,000 nine-litre cases of whiskey in the future, supporting a compound annual growth rate (CAGR) of over 60% over the next five years.
The case filing also noted that the ultra-premium American whiskey category (priced at US$60 and above) is booming, representing a US$839 million category over the last year, with annual growth of 4.6% compared to a 3.2% decline for whiskey priced under US$60.
In 2024, Westward focused on key markets in the US (Oregon and California) and abroad (Australia and Taiwan). The brand is showing growth in California, up by 16.1% versus the overall ultra-premium American whiskey growth of 15.6%, the document noted.
The document noted: “Going forward, Westward aims to become the most celebrated luxury American whiskey, and a top 10 American whiskey over US$75 per bottle, which includes its core range and quarterly innovations released through the brand’s club.”
The company said it was “well-positioned” to reach these goals through its maturing whiskey inventory, scalable sales opportunity, and awards that prove its quality.
Westward also noted it has additional capacity at its distillery to produce other spirits as a contract distiller.
The company can make more than 100,000 nine-litre cases a year of gin or other clear spirits.
House Spirits Distillery also developed American gin Aviation, which it sold to Davos Brands in 2016. The brand has since been acquired by Diageo and is backed by actor Ryan Reynolds.
As such, Westward believes it is “the go-to producer for anyone looking to develop a new gin brand”.
10 April, 2025
