Bad Shepherd Brewing Co, based in the Melbourne Bayside suburb of Cheltenham, have this week entered voluntary administration as they seek "to facilitate a financial restructuring of the business".
Founders Dereck and Diti Hales (pictured above) said they had taken the decision to enter voluntary administration to deal with the financial losses the business has faced over the last few years from the COVID-19 pandemic and lockdowns. Their intention is to retain ownership of the brewing company, as they explained it was very much business as usual as they seek a way forward.
Diti told The Crafty Pint: "It's probably the same story a lot of SMEs have. We took on debt positions to get through the COVID pandemic and our issue is that legacy COVID debt, and the softening and downturn in the market and the cost of living pressures.
"We've never been able to get ahead of that legacy debt; if it was gone, we actually run a profitable business. The challenge is that, looking at everything in the industry and projecting for the next 18 months to two years, it's not looking great for a while.
"In the current climate, we will never get ahead of that debt position and that becomes an unmanageable burden."
Bad Shepherd appointed Sydney-based DBA Reconstruction and Advisory yesterday, as per a notice filed with the Australian Securities & Investments Commission (ASIC).
Dereck says: "We've made the very tough decision to enter this as a means to address the fact that our debt position is inconsistent with the profit level that we generate. We are profitable and are in a strong position moving forward.
"We just need to go through the next three-and-a-half weeks with the intention that the business will be returned to us.
"We feel that it's very different to other VAs and consolidations that we've seen. This is our dream and our business. We've no intention of going anywhere. There's no change to our business. We opened the doors to our brewpub last night and will open them today. We're still servicing customers and making beer."
Their brewery becomes the latest local operation to go into administration in the past 13 months, at a time when the industry has been facing significant financial and economic challenges, which have followed on from the turbulence of the COVID pandemic.
In 2023 alone, Brisbane-based brewing companies Ballistic Beer Co and Parched Brewery have both gone into voluntary administration, the former now part of a consortium led by Catchment Brewing, the latter sold. Also this year, Tribe Breweries in Goulburn, NSW, and Running With Thieves in Fremantle have followed similar paths, with drinks marketplace Kaddy also entering administration in May.
In the case of Running With Thieves, the brewery told The Crafty Pint the decision was made to refinance debt built up due to the difficult trading conditions caused by COVID and the impacts of inflation. The management team remains at the helm as they continue operating as normal, while their administrators have received a proposal for the brewery's future to take to creditors.
Over the past 12 months, other brewing companies have ceased operations, among them Exit Brewing and Fury & Son in Melbourne, who both decided to call it a day earlier in the year; Pioneer Brewing in country NSW and Burleigh Barrels on the Gold Coast announced they were closing on the same day in August.
In August, we spoke to Dereck for an article about breweries changing their focus and direction to survive in the current economic climate.
At the time, he said they were training their focus on hyperlocal: "Rather than compete with white label or big breweries, I think it's more important to focus on your reason for being, which is for us for a brewpub, and it's about the community around us."
Speaking today, Diti said: "It's business as usual: our doors are open; we're cooking BBQ and brewing beer; our production schedule is full and our tanks are full. We've got a really strong team in place.
"This is a chance for us to reset and then move forward positively."
Bad Shepherd's Media Release
Bad Shepherd Brewing Co. enters voluntary administration to facilitate a financial restructuring of the business
Bad Shepherd Brewing Co., Cheltenham based craft brewery and brewpub operator, has announced their decision to appoint an administrator to help facilitate a financial restructuring of the business.
DBA Advisory as Administrator is supporting the continued operation of the business, so Bad Shepherd’s employees and customers should consider it business as usual. There will be no impact to ongoing production and hospitality operations as a result of this appointment.
Business owners Dereck and Diti Hales have taken this step to deal with the financial losses the business has faced over the last few years from the COVID-19 pandemic and lockdowns. Dereck and Diti are working with the Administrator on a Deed of Company Arrangement (DOCA) proposal, which will provide the framework for the restructuring of the business. They are confident the financial restructuring will result in a stronger and more resilient business emerging from administration.
Dereck said “This has been a difficult period for the business, but we see this as an opportunity to reset and look forward to better times ahead.”
Bad Shepherd Brewing Co. remains committed to maintaining a high standard of service and open communication with all stakeholders during this restructuring process.