Deep Creek Brewing went into liquidation last week owing more than $4 million.

The first report from liquidator Rodgers Reidy noted that Deep Creek Brewing Operations Ltd owed unsecured creditors around $3.5 million. They also owed ASB $603,845.

Money owed to secured creditors, which including fellow brewery Cassels, was not available at the time of the report.

The liquidators said they would hold a public auction to sell off plant and equipment with a book value of $866,065 — mostly comprised of the brewery hardware.

The brewery was owed $540,906 and had inventory on-hand of approximately $300,000. Staff were owed $116,000.

Liquidator Derek Ah Sam told Pursuit of Hoppiness that the $3.5 million owed to unsecured creditors included $2.6 million in shareholder advances, meaning around $900,000 was owed to third parties, including a number of industry players such as Gladfield Malt, NZ Hops Ltd, Froth Tech, Konvoy Kegs, Brewers Coop, Brewshop, Brewtown, Clayton Hops, Freestyle Hops, Craft Beer Capital, The Beer Spot, Rapid Labels and others.

Liquidators restated the reason for the insolvency: “The Directors have advised due to a one-off can seaming issue on the production line the company had to issue credits on a large shipment which impacted cashflow. The company was unable to secure additional funding to cover the shortfall. The result of this was the company was unable to pay its debts as they fell due.”

Deep Creek ceased trading on October 26 — one day shy of their 12th birthday after being incorporated on October 27, 2011. They went into liquidation on October 31. Following the liquidation and sale of Epic, and Brothers Beer going into voluntary administration, it came as another hammer blow for the industry as Deep Creek was an established brand and an important part of the brewing industry — regularly winning awards.

Deep Creek Brewing Operations is owned by Waiake Holdings Ltd, which is largely owned by Deep Creek co-founder Jarred MacLauchlan. Another company owned by Waiake Holdings Ltd, Deep Creek IP Ltd, is not in liquidation.

Deep Creek co-founder Paul Brown told Pursuit of Hoppiness that a quality failure on a large export to China resulted in a product recall and a subsequent cancelled order that put the brewery in a financial hole they couldn’t get out of.

“The seams were leaking on some of the cans,” Brown explained. “We had a failure and the quality control was not good enough.

“When we do exports to China we like to have them really fresh so we were running 14-hour days full noise and didn’t pick up on it.”

Brown said the seaming issue had also occurred on a batch of the brewery’s multi-award-winning sour beer, Aloha.

Hit with “cash flow stress”, Brown said Deep Creek looked at obtaining finance from various sources “and couldn’t achieve it. On Thursday we got final confirmation we couldn’t get what we wanted and we more or less ceased trading on Thursday.”

He said the brewery had survived “a rough couple of years and we’d been climbing out of it, but this broke the back.”

The brewery posted to Instagram:

“Today is a sad day for our Deep Creek team.

“After more than 12 years of Deep Creek serving up flavour fuelled brews in NZ, the decision has been taken to liquidate our company.

“Although we battled through the covid period, this was a difficult time for the company due to market pressures in NZ and also in our key export market of China. In 2023 the Chinese market rebounded strongly but very recently we had a can seaming issue that required our beer to be recalled from the market.

“The cash flow impact of this recall was significant and proved to be a step too large for our team to overcome.

“We are deeply saddened by this.

“We would like to thank our amazing customers and fans for the many years of support, from entertaining festivals, parties at our bars and votes for people’s choice awards in numerous competitions, it has been a privilege to serve flavour fuelled beer to everyone.

“We also want to thank our amazing staff who have consistently gone above and beyond in order to bring Deep Creek beer to the masses. They are a big team of legends.”

Their liquidation comes just weeks after Deep Creek had put in an unsuccessful bid to buy Epic, and just days after they announced an agreement with Christchurch brewery Cassels to share sales staff in the North Island.

Deep Creek started as a small brewpub in Browns Bay in Auckland’s East Coast Bays area in 2011, set up by MacLauchlan, Paul Brown and Scott Taylor.

Deep Creek sold the brewpub to move into a full production brewery in Silverdale in 2019. The business was split into Deep Creek Brewing Operations and Deep Creek IP with Waiake Holdings the ultimate holding company. MacLauchlan and other members of the MacLauchlan family are the main shareholders of Waiake Holdings, with Brown having a 9.48% and Ken Brown owning 8.38%. There are a number of other small shareholders including Taylor and head brewer Hamish Ward.

MacLauchlan and Brown are the directors of all companies.

In 2021, Deep Creek upgraded their brewery with a million-dollar investment designed to double their production to at least 5 million litres per year, with a potential capacity of 7 million litres. Part of the reason they tried to buy Epic was to fill the unused production capacity. That almost-new brewery will now be sold.

Deep Creek have consistently produced some of New Zealand’s best beers.

Their standing is reflected in their performance at the Australian International Beer Awards where they have been Champion Small International Brewery (2017) Champion Medium International Brewery (2019 and 2022) and won the Champion Beer title with Sauvage, a barrel-aged saison, in 2021 — the same year they were mistakenly awarded the Champion Large International Brewery title.

Earlier this month, Deep Creek announced they had joined forces with Cassels in a sales and distribution partnership across the North Island.

Under this plan, Deep Creek was to be the distributor of Cassels products in the North Island, bolstered by an expanded sales team. The brands said at the time this would increase their representation at the store level, which would translate into greater on-shelf presence.

Zak Cassels, co-founder of Cassels Brewing, said: “We’re thrilled to unveil this partnership with Deep Creek. It’s been a long time in the making, and we truly believe Deep Creek is the perfect match — an independently owned company sharing our values, along with a fantastic range of beers that complement our own.”