Buellton-based craft brewer Figueroa Mountain Brewing Co. filed for Chapter 11 bankruptcy reorganization on Oct. 5, as the region’s second largest craft brewer announced plans to restructure its debts and bring in a new financial partner.
“While it is a difficult decision to go down this path, we believe this will be the best direction for Figueroa Mountain Brewing Co. to move forward,” Jaime Dietenhofer, Figueroa Mountain’s president and co-founder, said in a news release announcing the filing.
The company did not provide any financial details with its announcement, and the filing was not immediately available on U.S. Bankruptcy Court’s records website.
A debt reorganization will allow Figueroa Mountain to restructure its company to focus on sales of packaged beer, Dietenhofer said, as the COVID-19 pandemic and the associated restaurant and bar shutdowns put a deep dent in draft beer sales.
“That’s why we’re going into this this format, because this will allow us to restructure our debt and allow us to move forward, because we want to keep up with the growing demand,” Dietenhofer told the Business Times.
Figueroa Mountain has already secured a new round of funding from New York-based Creekstone, LLC. Dietenhofer said he believes the new partnership will allow the company to continue its expansion in both retail and wholesale, noting that the current demand is “higher than we can produce” with the current company structure and financing.
Figueroa Mountain intends to continue all restaurant and brewery operations and will not discontinue any of its current beers. Dietenhofer said the reorganization means the company will avoid layoffs and could even be hiring more people in the near future.
“We’ll see immediate growth after this,” Dietenhofer said, adding that he foresees business getting better after the filing, as the economy improves.
Founded in 2010, Figueroa Mountain grew quickly with beers such as the Hoppy Poppy, Lizard’s Mouth and Point Conception IPAs.
In 2019 the company produced 23,145 barrels of beer, ranking No. 2 in the region to Firestone Walker, which shipped 340,000 barrels. Figueroa Mountain could hit 27,000 barrels in 2021, Dietenhofer said.
The craft beer industry has seen a drop-off in draft beer sales as many taprooms, including Figueroa Mountain’s, were closed for months due to the pandemic and are just now beginning to open at limited capacities.
“All the accounts we sold to that are draft, from Los Angeles to San Francisco, they all suffered,” Dietenhofer said.
As a result, Figueroa Mountain shifted its focus to packaged beer. In the early days of the COVID-19 pandemic, about 80 percent of the company’s sales were in packaged beer. Dietenhofer said he’d like to see that ratio closer to 60/40.
There is also a shortage in the brewing industry for raw materials for packaged beers, especially aluminum for cans.
“We wanted to make sure we can free up the capital and get the new investment towards spending on raw materials and ensuring that we can meet the demand,” Dietenhofer said.
Figueroa Mountain saw a double-digit percentage drop in revenue from the first to third quarters of this year. Dietenhofer said he expects, however, for the fourth quarter of the year to be up to pre-COVID standards.