THE GIST
Ten days after announcing Modern Times would close four of its eight taprooms and lay off 73 people, the brewery’s CEO says the company is looking for an investor or potential buyer to put it back on sound financial footing.
“If there was a buyer, we would definitely entertain them,” says CEO Jennifer Briggs. “There’s a lot of consolidation happening with other breweries, so can we be a part of something as companies look at their growth? It’s a possibility.”
Briggs joined the San Diego-based brewery’s board of directors in July 2021, was made interim CEO in October, and officially took over the role in January. Prior CEO Jacob McKean stepped down amid reports that the company fostered a hostile work culture where harassment went unchecked. As Briggs was given more access to the company’s financials in November and December, she says she became aware that it faced high debt loads stemming from years of taproom and distribution expansion that weren’t actually supported by growing revenues. (Briggs declined to quantify the debt load.)
“It’s very much like every day feels like I’ve lived a week,” she says, noting that she takes pride in being people-focused and that coming into the company as CEO without full knowledge of its financial difficulties has been trying. "And so to have come in and do something that’s this drastic and hurtful to so many people … it keeps me up at night."
Overconfident forecasting, COVID-related sales declines, and fallout from revelations of a toxic work environment contributed to the brewery’s current financial peril.
Briggs says the $264 million valuation Modern Times gave itself prior to a crowdfunding raise in 2019 struck her as being at the tail end of a time when the beer industry saw only big potential and bigger dollar signs. Unfortunately, that was likely an “echo of the Ballast Point era,” she says, in which that San Diego brewery sold to Constellation Brands for $1 billion in 2015.
At the time of the fundraising effort, Modern Times valued itself at a higher per-barrel rate than Ballast Point, but did have five tasting rooms, three breweries, three kitchens, and a coffee roastery:
Modern Times, 2019: $3,755 per BBL (70,300 BBLs annual production)
Ballast Point, 2015: $3,600 per BBL (277,152 BBLs annual production)
Briggs says she doesn’t have a current valuation for Modern Times. As part of its Employee Stock Ownership Program, which controls 30% of the company, Modern Times will revalue itself in May or June of this year.
WHY IT MATTERS
With its production and sales declining, Modern Times will need to take dramatic steps to right its finances, Briggs says, in a move that would mean nothing less than a total reorientation for the company. It was the 40th-largest craft brewery by volume in 2020, as defined by the Brewers Association, a rapid expansion from when it was #174 in 2016. By the end of 2021, Modern Times had amassed eight taprooms and nearly a dozen states of distribution in the Western U.S. Its chain retail sales, as tracked by IRI, grew from $4.6 million in 2018 to $8.3 million in 2020 before dropping to $6.9 million in 2021.
Going forward, Briggs says the company will constrict to four taprooms in Southern California and will retrench behind distribution closer to its home base in that region. Contrary to its expansionist history, Modern Times now aims to position itself as a smaller, nimbler, Southern California-focused brewery, with a brand identity that’s “fun, active, and joyful,” she says.
Other regional breweries have made similar decisions to pull back sales closer to their home markets in recent years, including San Diego’s Green Flash Brewing Co. (before its sale to SweetWater Brewing/Tilray), and Durango, Colorado’s Ska Brewing.
“I think some of those communities [in the Pacific Northwest] perceived us to be more like a regional franchise. And I think we’re seeing those kinds of business models just not succeed in this craft industry, unless you’re part of a bigger consortium,” Briggs says.
And joining a consortium, or a larger company, is certainly on the table. In addition to providing a cash infusion for the strapped brewery and greater buying power amid supply chain difficulties, it would provide an exit ramp for Modern Times founder and former CEO Jacob McKean. (A sale, especially to a larger brewery, would be a 180-degree turn for McKean, who wrote an impassioned blog post arguing against craft brewery sales to multinational beer companies in 2016.) McKean did not respond to a request for comment.
“Jacob [McKean] is still the majority owner of the company. He still cares a lot about this company. I guess that’s the bottom line, but I also think he’s ready to move on to something else,” Briggs says. “So yeah, how do we recapitalize?”
Briggs says she expects that Modern Times’ valuation this spring will be “pretty low” as a result of the taproom closures and general competition within the beer industry. Though she is skeptical of Modern Times’ 2019 valuation of $264 million, she says this was part of the mindset in the company and broader industry at the time. (The Modern Times blog post announcing the taproom closures references “unanchored optimism of the past.”)
“I think they were chasing growth and given some of the signs, the early signs, can you blame them?” Briggs says. “I mean, it’s almost a mindset, [that] approach to the industry. It just wouldn’t have been mine. I thought those valuations were always too high.”
Briggs’ task is now to right-size the struggling brewery, whose revenue is split evenly between taproom sales and sales in distribution, with about 6% of sales coming from its coffee line. She pledges to strengthen relationships with wholesalers, to refocus on customers in Southern California, and to make leadership development for employees a priority. She says leaders have emerged from within the company that are committed to “turning it around,” and that the company will be more transparent with employees about its finances and future.
This is part of a culture shift Briggs hopes to foster at the brewery, one that doesn’t pursue growth without attention to employees. Building a more transparent and inclusive culture, she says, requires hard work every day.
“Even if you have a great culture going into it, when you grow fast, you will dilute the culture unless you really, really, really invest in it—like, serious investment,” Briggs says. “Then if you haven’t really, fully developed a culture and you grow fast, it’s that vacuum effect. And I think we all know nature abhors a vacuum.”
Recent changes haven’t been easy, and Briggs is eager to see this difficult period in the rearview. She says having to make so many layoffs so early in her tenure “keeps her up at night,” but that she’s also energized by the chance to essentially reinvent the company.
“When I look to the future and look at how we get a chance to regenerate this company, that’s actually exciting and challenging,” Briggs says. “I get excited to talk about the future, to talk about field marketing, to talk about what our life is … as a new company.”
Words by Kate Bernot