Investment deal forces shutdown.
Manhattan, Kansas-based Tallgrass Brewing Company has confirmed with MHK Business News that the production plant will suspend operations indefinitely after Friday, August 24. The employees of the regional brewery will be furloughed. The Tallgrass Tap House will remain in operation.
Tallgrass Brewing was founded in 2007, and through successful launches of popular brands like 8-Bit and Buffalo Sweat, the company experienced tremendous year-over-year growth. The regional demand for Tallgrass beers outpaced the capabilities of the existing brewery, and in 2015 the company set out to build a large-scale production brewery.
Through private investors and bank financing, the company invested $7.5 million into the production facility located at the Manhattan Business Park. The facility dramatically increased the brewery’s production capabilities allowing them to meet regional demand from their 18-state market.
“When I started this in 2007, there were 1,200 craft breweries in the country. Today, there are 6,600. The craft beer market is extremely challenging for smaller regional breweries right now,” said Jeff Gill, founder and former CEO of Tallgrass Brewing Company.
Increased competition from new microbreweries and specifically, local taprooms, were shifting craft beer drinkers’ habits. Tallgrass started to see a downturn in their largest craft beer markets in 2016.
“A few short years ago, craft beer drinkers were going to the liquor store to buy their beer. As craft beer became more prolific, people started frequenting their local taproom or brewery instead of buying regional or national craft brands from the liquor store. For a small, regional brewery like Tallgrass, that shift hit us really hard,” said Gill.
In 2017, Tallgrass embarked on a recapitalization effort through a private equity firm based on the East Coast. As a part of this effort, the firm had plans to leverage the existing equity in the Tallgrass brands to increase their national market share, and was going to purchase a majority equity stake in the company.
After a negotiation period of several months, Gill transitioned out of leadership as a part of the impending transition of ownership.
“Over the course of a long 14 months, we had been trying to recapitalize the brewery,” said Gill. “We thought the deal was going to close near the end of last winter, so I moved on. The deal continued to be delayed in negotiations and paperwork until finally, this week, it was determined that operations could not be sustained.”
The brewery is producing and shipping their final batches of beer. Over the next three weeks, the current ownership of Tallgrass Brewing Company will be exploring additional funding through private investors. If funding is not secured in that time, Tallgrass will be forced to shut down permanently, and their beer will no longer be available for purchase in liquor stores.
However, the shutdown of the production facility will have no impact on the Tallgrass Tap House in Downtown Manhattan. The Tap House is a standalone entity, owned by Icon Investments and operated by LOLO Hospitality. The Tap House has licenses for exclusive use of the Tallgrass brand and beer recipes and will continue to serve Tallgrass beer in the coming weeks.
“Our team at the Tap House is looking forward to being the warm and welcoming faces you have come to know from the Tallgrass brand,” said Evan Grier, managing partner of LOLO Hospitality.
“Through the Tap House, the Tallgrass brand will continue to be here for our local and regional beer drinkers. The Tap House will continue to serve the Tallgrass Brewing beers in the coming weeks and new creations from the Tap House team will be on rotation. Although this is not the outcome we hoped for, we’re glad that Tallgrass beer will still be enjoyed in the town where it all began.”
Employees, partners, and investors have been notified today. This story is still developing.