Green Flash Brewing Company rose to prominence through their style-defining West Coast IPA. Founded in Vista in 2002, the company had outgrown that location, which was capable of producing 14,000 barrels of beer per year, in less than a decade. The new Mira Mesa facility, with a production capacity of 100,000 barrels per year, was the site of a grand opening party on July 23, 2011.
The month prior, on June 1, then-Mayor Jerry Sanders took to a podium in the tasting room to declare June as “Craft Beer Month” in the City of San Diego. At the time, around 35 breweries were operating countywide.
One year later, in June 2012, Green Flash announced the “Brewing It Forward” series of beers that supported grassroots charities in San Diego. A portion of proceeds from case purchases of 30th Street Pale Ale, Park West Porter, and East Village Pilsner went to locals like David “Water Man” Ross, a longtime homeless advocate who died on April 9 at the age of 83.
In January 2013, the Hop Odyssey lineup of six bi-monthly beers was unveiled, including a cedar-aged version of 30th Street Pale Ale.
Two months later, Green Flash announced plans to build a $20 million brewery capable of producing 100,000 barrels per year in Virginia Beach. At the time, The Virginian-Pilot reported that Green Flash would buy the land from the Virginia Beach Development Authority (VBDA) for $1.35 million, and in 2018 The Virginian-Pilot confirmed that VBDA gave Green Flash a $275,000 grant for fulfilling specific investment terms. Additionally, the state gave VBDA $500,000 to build Craft Lane leading up to the site.
In November 2013, with a “handshake agreement” between Green Flash’s CEO Mike Hinkley and Alpine Beer Co’s co-founder Pat McIlhenney, the former began brewing the latter’s recipes to help satiate demand for wider distribution of Alpine’s prized hoppy beers. One year later, Green Flash purchased Alpine outright.
In July 2014, European production and distribution of West Coast IPA began via another handshake agreement, this time with Belgium-based St-Feuillien. The two companies had created a series of collaboration beers together since 2010.
In February 2015, Green Flash presented plans for a barrel-aging facility in Poway called Cellar 3. Just three months later, Cellar 3 opened with barrelmaster Pat Korn at the helm.
In September 2015, Green Flash brewmaster Chuck Silva resigned, electing to move back to San Luis Obispo County, his birthplace, to build a brewery and be closer to family. Silva had overseen production at Green Flash since 2004, and many credited his recipes and skills for spurring Green Flash’s growth.
On November 12, 2016, on the cusp of opening the Virginia Beach brewery, Hinkley commented on a story for the San Diego Reader. “When we start [brewing in Virginia], the San Diego brewery will have the opportunity to slow down, which is a good thing — it will enable a few upgrades we’ve been talking about.” When asked if layoffs could be a consequence, Hinkley replied, “Absolutely not.” He added, “We don’t have a staff reduction of any kind coming. As a matter of fact, we have positions we’re trying to fill both in San Diego and Virginia right now.”
Two months later, in mid-January 2017, reports surfaced from multiple employees that approximately 25 people, mainly in the administrative and marketing departments, were let go. At the time, Mike Hinkley stated, “We do not make statements about specific personnel changes. Green Flash is not reducing the number of employees. In fact we will continue to increase the number of employees.”
However, a year later, in mid-January 2018, a “strategic re-focus” resulted in 15% “of the Company’s work-force transitioning out of the Company,” including Cellar 3 barrelmaster Pat Korn and 32 others. Green Flash also pulled distribution from 32 states.
One month after that, on February 20, Hinkley described the company’s current capital structure to Brewbound as “a bit of mess” and the decision to finance Virginia Beach with debt instead of equity as a “mistake.” The website noted that Green Flash was “on the hunt for new investment” with the help of SSG Capital Advisors. “However Green Flash goes forward, I will be here, and I’m not selling,” Hinkley also told Brewbound, adding, “We got caught in what everyone is referring to as the squeeze. Our direct competitors were getting bigger at the same time as the broad market below was becoming more crowded.”
Just over one month later, on March 24, The Full Pint reported that Green Flash’s Virginia Beach brewery was up for auction. The Virginian-Pilot spoke with employees who were caught off guard. “This all happened so fast and no communication whatsoever so lots of people standing around confused,” one employee texted the newspaper, on the condition of anonymity.
On March 26, just over 16 months after opening, the news of Virginia Beach’s closure was confirmed with a press release that also included mention of a “transaction involving a new investor group committed to maintaining Green Flash’s status as an iconic independent craft-brewing interest.”
“We have faced a host of significant challenges since expanding our operations to the East Coast and, though a rewarding endeavor in many ways, we feel this course-correction is prudent at this time and will ensure the independence, fiscal viability, identity and quality of the Green Flash and Alpine brands,” Hinkley said in the release.
Four days later, on March 30, Cellar 3 in Poway closed and Comerica Bank foreclosed on Green Flash’s loans, selling the assets to investor group WC IPA LLC. Hinkley notified shareholders that “in early 2018, the Company defaulted on its loans with Comerica Bank. While we took substantial efforts to recapitalize the Company over the past several months, both before and after the bank default, we were ultimately unable to close a transaction.” The Virginia Beach brewing equipment was sold in a separate transaction to Atlanta-based New Realm Brewing.
Richard Lobo, president of WC IPA LLC, spoke to West Coaster about “misconceptions” circulating since the acquisition.
“One misconception out there is that something is happening with the Alpine brands, which is just not true,” Lobo said, referring to recent conversations at bars and restaurants where industry members believed that Green Flash, and specifically Alpine, were shuttered or in the process of shuttering. “We acquired all of the West Coast brewing operations, including the assets in Alpine and the assets at the Green Flash brewery, and we’re planning to continue to make the same great beers that both companies have been making.”
As for the future of the company, Lobo told The San Diego Union-Tribune (U-T) that WC IPA LLC “has no intent” to sell Green Flash to Anheuser-Busch InBev (ABI). “We have zero intention to sell the business to them or to anybody,” Lobo told West Coaster, adding that he’d learned Green Flash’s distribution setup “is not aligned at all with Anheuser-Busch.”
Still, locals expressed concern over the inclusion of Josh Yelsey on WC IPA LLC’s board of directors. Yelsey previously worked as a manager in ABI’s mergers and acquisitions department, as well as head of finance for craft breweries bought by ABI.
“Josh has been out of AB InBev for a few years,” Lobo told the U-T. “He came on to help all of us understand the opportunities here.”
“Josh came in to help us understand the business and the industry, generally. There weren’t specific opportunities that we asked him to evaluate,” Lobo told West Coaster, describing how he came to join the board: Yelsey works for a WC IPA LLC investor.
“When that investor was interested in evaluating the company, he asked if a guy that happens to work for him that used to be in the craft division of Anheuser-Busch could poke around a little bit to help him decide if it was a good opportunity. And that was Josh’s role. And because he knows the industry pretty well from his prior experience at Anheuser-Busch, we thought he’d be a great value added board member for us.”
Lobo elaborated on the makeup of WC IPA LLC: “The investor group Muirlands Capital — that’s me. There’s one person at Muirlands Capital, and that’s Rich Lobo,” he said. “Muirlands Capital, the entity, is not an investor. Rich Lobo is, along with about 20 other individual investors. There’s not one institutional or corporate owner. So the idea that a venture capital firm or a private equity firm bought the company is also not true.”
According to his LinkedIn page, Lobo joined Green Flash’s board in April 2017. He told West Coaster that he resigned from that position earlier this year.
Lobo would not disclose details of the investor group’s asset purchase. At time of publication, WC IPA LLC employed nearly 150 people, and the goal now is to “re-focus” on its core market after “an unsuccessful attempt to go national.”
That effort was led by Hinkley, who oversaw growth for years, including breaking into the Brewers Association’s list of the top 50 craft breweries by sales volume in 2014, remaining on the list each year since, and reaching as high as #37 in 2016.
Currently, Hinkley is a vice president on the new board, which gives no solace to original GFBC, Inc. investors whose shares were zeroed out when Comerica Bank foreclosed.
“Mike’s ultimate role is evolving,” Lobo said. “Mike, as we know, is the founder of the business. I think he did a lot of great things building the company, and I think there’s an important role for him within the company. We haven’t quite figured out exactly what that is.”
Since the foreclosure, Alpine co-founder Pat McIlhenney made guest appearances on three Southern California podcasts — YEW!, The Full Pint, and San Diego BeerTalk Radio — to express deep displeasure with the company, even before the public troubles. He discussed owing more than $200,000 in 2017 federal tax liability from an employment contract buyout, which included cash and stock.
McIlhenney brought up selling shares with Hinkley, and told West Coaster that “in February, when I checked in with him to see if I was still on track to cash in on the stock, I was flat told ‘no’ and that ‘we’ll have to get together again’ — another promise to get together and explain it to me. He never made an attempt to contact me to resolve the issues of why this needed to happen and why I had to take a hit for it.”
In response, Mike Hinkley told West Coaster, “The McIlhenney’s sold Alpine Beer Company for over $2 million in cash. They also received about 2% of GFBC, Inc. stock, which didn’t turn out as the McIlhenney’s, or any other shareholders, hoped it would.”
Shareholder Joe Cooke, who lost around $68,000 worth of shares, declined to speak on behalf of all shareholders, but said, “All I can say for a handful of small investors local to San Diego, that none of us saw it coming.” Cooke further commented, “They are not closing. All they did was take all the money from the first set of investors and give it to a richer set of investors.”
“Pat pocketed over $2 million selling his company, and Mike Hinkley never sold one share of stock,” said Richard Lobo after listening to the podcast on The Full Pint. “So it’s a bit frustrating to have someone like Pat out there acting like the victim, when he sold his business. He cashed out. And now he seems to regret selling. I’m not sure what his motivation is now.”
McIlhenney noted that “the taxes were over 50%, so the take-home was far less than that.” He added, “Just so we’re clear, I don’t regret selling the company. I regret the quality of the beer that they were putting out. I regret the dumb decisions that they made. I regret the stupidity of the way the business was run to the point that it failed miserably.”
“I basically handed the keys to a Lamborghini to them,” he told Danny “Full Pint” Becker. “I knew that the demand was outrageously strong. I knew it was because of the quality of the beer.”
McIlhenney further claimed to West Coaster that Mike Hinkley “also handed out stock to not only me but to other employees, to entice the sales people to stay, fully knowing that the stock was going to become worthless.”
“That is completely false,” Hinkley responded. Richard Lobo added, “This is another inflammatory and untrue statement. As is common in private companies, Green Flash rewarded certain employees with stock compensation over time. The expectation was always that the value of these shares would grow as the company grew. No one is more disappointed by how things unfolded than Mike.”
McIlhenney further argued, “It was all premeditated and it started with his [Hinkley’s] move to Florida. He moved to Florida because that state does not confiscate your personal property when you face a bankruptcy. That’s the sole reason that he moved to Florida – to protect his personal assets.”
“That is completely false. I have no reason to file for bankruptcy,” replied Hinkley. Lobo added that neither Green Flash nor Alpine filed for any type of bankruptcy proceeding.
As of late April, WC IPA LLC was moving forward with plans announced in August 2017 to open a Lincoln, Nebraska brewpub within the next few weeks.
This post was updated to include mention of Pat McIlhenney’s appearance on San Diego BeerTalk Radio.