Case Study - Craft Distillers

THE CHALLENGE

Craft Distillers, Inc., Alambic, Inc. and their related companies have spirits products recognized for decades as world class, but the Companies faced a liquidity crisis as they expanded their product offerings and marketing efforts. The Companies were constrained by lack of financing and the industry’s “three-tier distribution system” which was designed to handle large volume, low margin commodity brands, such as Jack Daniels, Absolut, Johnnie Walker, etc. Low volume, but high margin, craft brands have a difficult time penetrating the three-tiered distribution system, and there are few distributors who can handle craft brands profitably. The Companies’ major asset was the Germain Robin brandy, which is considered by many to be the finest in the USA and one of the best in the world, confirmed by its many awards over the last several decades.

THE METHOD

Devonshire was approached in 2015 to give advice on financing and restructuring. William T. Nolan was asked to join the Boards of Directors of both Companies and to help prepare the Companies for a possible financing to expand capacity and to fund the marketing efforts. In order to strengthen management, we introduced an interim COO/CFO to improve operations and the financial structure to achieve profitability and attract potential investors. Asset sales were considered to improve liquidity, since Craft Distillers had successfully done so in the past. Previously, Craft Distillers had created and developed a craft vodka, Hangar One, which it sold for $31,000,000. The proceeds were shared 50/50 with the distiller, St. George’s Spirits. The Company believed there would be similar opportunities with its other brands.

THE RESULT

Due to the continued liquidity issues, asset sales were pursued aggressively. E. & J. Gallo Winery recognized the superb quality of the Germain Robin brandy and its global reputation. The Germain Robin brand, inventory and all intellectual property and rights were sold to Gallo, who will continue the development of the brand worldwide. Consequently, the Companies were able to liquidate all financial obligations and continue in business.