The rise and fall of a top craft brewery, as told by the comments section
Exploring the industry's frothy recent past via Modern Times Beer's 2019 crowdfunding site
Times are tough for Modern Times Beer. The one-time juggernaut hailing from San Diego’s venerable craft brewing scene expanded like gangbusters over the past decade, fueled by industry tailwinds and a whole lotta debt. Then came Covid; then came the resignation of founder and CEO Jacob McKean in the face of allegations of a toxic, nepotistic workplace; then came the closure of four of the brewery’s eight taprooms. This Friday, Modern Times will go up for auction to the highest bidder, and the stalking horse offer from fellow Pacific-side player Maui Brewing Company is a scant $7.62 million.
To the average observer, the firm’s fall may recall Icarus’s sun-scorched plunge. Industry insiders have a more modern cautionary tale to reference: Ballast Point. The House That Grapefruit Scuplin Built sold for a cool billion to Constellation Brands in 2015, the height of the American craft beer business’s salad days, only to be hocked in 2019 for dimes on the dollar (or was it nickels?) For many in the beer business, Ballast Point became a parable about overvaluing craft breweries—but not, apparently, for Modern Times.
Kate Bernot @kbernot$7.6 million. https://t.co/gl8wzHzDUN https://t.co/5sxyFyQWfr
In 2019, the brewery launched a campaign on the Wefunder crowdfunding platform, offering rank-and-file drinkers the opportunity to invest in its then-fast-growing operation. The fundraise implied a valuation of $264 million, a figure that Modern Times arrived at using a… ah… dubious benchmark. Reported Brewbound at the time (emphasis mine):
According to the Wefunder documents, Modern Times arrived at its $264 million valuation by using a similar multiplier ($3,448 per barrel) to the one used for Constellation Brands’ $1 billion purchase of a much larger Ballast Point Brewing Company in 2015.
That’s right: four years after Constellation’s billion-dollar buy-out of Ballast Point—during which course the conglomerate took a pair of impairments on the craft brewer’s trademarks, tacitly admitting that they’d overpaid for it—Modern Times was pitching the drinking public on shares pegged to that boondoggle’s bananas price-per-barrel. Not great, particularly considering that in the intervening time, the number of craft breweries leapt from 4,847 to 8,530, and a little something called hard seltzer hit its mainstream stride. That’s a shitload of new competition with a massive shift in customer preference on top! But even as tailwinds turned to headwinds, Modern Times turned to the industry’s frothiest watermark on record for a valuation—then “formally invited” unaccredited would-be investors “to the party” in a pitch video.
To be clear, I’m not alleging that Modern Times improperly disclosed the risks of investment in its equity offering, which, by the way, would go on to raise $1,224,431 in 2019 dollars from 1,189 investors, according to the still-live Wefunder page. (That works out to an average per-person investment of over $1,000.) But I do wonder whether the average Modern Times fan—at least some of whom were likely unaware of Constellation’s Ballast discharge and broader industry trends the time—really absorbed those risks. Or, I did wonder… until I found the comments.