Epic Brewing, one of the most influential brands in the craft beer boom of the 21st century, is in liquidation.
Epic, founded by Luke Nicholas in 2007, is now in the hands of Waterstone Insolvency.
Nicholas and his wife Wendy, the co-owner of Epic, said the decision was made suddenly after a deal to build their own brewery and taproom in Mt Wellington fell through when an investment partner pulled out without notice.
Since its inception Epic has brewed under contract at Steam Brewing in Otahuhu but that business model was not viable in the long-term, so for the past two years Luke and Wendy had been working on plans for a new brewery.
“We’d been working on a project to set-up a brewery and a new taproom but we’ve been struggling to get it through Auckland Council — there were long delays getting resource consent,” Luke explained. “While we were waiting, our investor had been helping us with cashflow.”
That investor called Luke and Wendy to a meeting this week at which they thought they’d finally get the green light.
“We were literally expecting the resource consent to come through and we thought we were on the verge of making an announcement that it was all go but the meeting went the other way and the investor said they’d lost their appetite for the project.
“The last three months have not been the greatest for beer sales in supermarkets and it’s hurt our figures and he said: ‘things are not trending in the right direction, if we have to prop you up for another 12 months what does that look like?’ And we couldn’t answer that.
“If we had our own brewery we wouldn’t have to brew as much as we do, store as much as we do — there was so much upside. We were super-excited and to receive that body blow in that meeting was just devastating. Literally our finger was hovering over the ‘order now’ button for a new brew kit. We thought we were going to get the green light and the investor just said: ‘We can’t see the sun rising on this’ and that they couldn’t continue into the unknown.”
Without the investor’s backing for a cashflow “bridge”, Luke and Wendy looked at their books and realised they couldn’t pay all their bills this month or next and felt they couldn’t trade their way out of the financial hole quickly enough.
“We thought we had a plan, but the plan ended, but we don’t have enough time or resources to pull something out the bag because the market is so difficult.”
There’s been building unease in the brewing world post-Covid due to massive increases in costs: malt, carbon dioxide, excise tax, packaging and freight have all gone up massively in the past two years, driven by inflation and shortages. Added to that, sales have dropped off considerably according to scan data.
“Costs keep increasing and our margins are just skinnier and skinnier.”
Nicholas said the writing was the on the wall when he decided to increase the price of six-pack of Epic Thunder APA by $2. “Sales dropped by 40 per cent. We didn’t want to compromise on the ingredients in the beer — we could have pulled out a third of the hops to keep it at the same price but then it wouldn’t be the same beer.”
Most worryingly for other breweries using the same contract brewing model as Epic, Nicholas said: “That model doesn’t work anymore.”
Having their own brewery would have allowed Epic to free up cashflow by not having to brew in bulk, plus they would have saved money on freight and storage.
“We can’t capture enough money to stay in business. If we could have got to that place [of a new brewery] we would have been home and hosed, but we couldn’t get to that place fast enough.”
As soon as Epic decided to liquidate, they stopped production at Steam and the liquidators will sell off remaining stock and will even try to sell the brand.
The Epic taproom in Onehunga will be open this weekend but after that there’s no certainty.
Waterstone Insolvency director Adam Botterill told the NZ Herald they were looking for buyers for the brewer.
The liquidators said they were running the business as a going concern. “We’re still trading. We’ve engaged staff on a short-term basis to keep the business running so we can run a sale process,” said Waterstone Insolvency director Adam Botterill.
The liquidators will try to sell the brand, Botterill said.
“We think there is a lot of value in the company in terms of the brand. It’s a really well-known beer brand sold in supermarkets and [has] quite a lot of distribution. It’s got a big market presence.”
Epic became an iconic brand thanks to influential beers such as Armageddon IPA and Hop Zombie Double IPA. Armageddon remains New Zealand’s most-awarded IPA and is the beer that brought US West Coast-style IPA to Kiwis’ attention.
Epic started a hop-driven revolution in New Zealand beer with the release of Armageddon in 2008 as part of the inaugural Malthouse West Coast IPA Challenge.
They were the first to put a Double IPA into packaged format, with Hop Zombie.
Epic’s liquidation will be a huge shock in the New Zealand brewing world — at an order of magnitude higher than the collapse of Invercargill Brewing a few years ago.
When Epic was at its peak there were only 70 breweries in New Zealand, now there are more than three times that, with over 200.