Brewery founder reveals secret crisis behind company collapse
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Once a burgeoning field of entrepreneurial success and innovation, the craft beer industry has recently been hit with a wave of challenges that have left even the most passionate brewers struggling to keep their heads above water.
The latest casualty in this series of unfortunate events is Lotus Beer Co, the Geelong-based craft beer company known for its Valhalla Taproom and Valhalla Brewhall.
The company's descent into voluntary administration has sent ripples through the industry and raised questions about the future of craft brewing in Australia.
Scott Hunt, the founder of Lotus Beer Co, came forward with a candid explanation of the factors that led to this difficult decision.
The company, which has been a staple in the Geelong craft beer scene, has been grappling with a perfect storm of skyrocketing operational costs and a significant downturn in demand.
These challenges have proven impossible, leading to the appointment of Scott Andersen and Matthew Kucianski from insolvency firm Worrells as administrators.
‘We understand Lotus entered voluntary administration due to rising cost-of-living pressures, which ultimately led to a reduced demand for the company’s products,’ Andersen said.
‘It was also experiencing increased production costs in operating its businesses.'
The administrators will meet with creditors next Wednesday to discuss the business's viability and explore potential paths forward.
The hope is that a suitable buyer or investor can keep the business afloat and preserve its legacy.
Valhalla's journey began in 2016, with the opening of the Valhalla Taproom in Geelong in 2018.
The brand's beer range, particularly the award-winning Obsidian stout, garnered a loyal following.
However, the recent opening of Valhalla Brewing and Brewhall in North Geelong in 2023 was met with disappointing sales, falling far short of expectations.
‘In the past two years, we have seen almost every aspect of running a small business become more expensive — in particular ongoing increases in rent, insurance premiums, and essential expenses such as fuel, electricity, ingredients, and freight,’ Hunt said.
‘Then, on the other side of the ledger, we have a massive decline in spending at our hospitality venues over the past 12 months.’
‘Sales at our original Union St taproom in the Geelong CBD are down 50 per cent on the same time last year, and sales at the new brewhall at the Federal Mills are less than 50 per cent of what we believed was easily achievable when we signed the lease two years ago.’
Hunt pointed to the broader economic landscape as a contributing factor, with the lingering effects of the pandemic leading to a shift in work habits and a reduction in foot traffic.
'Since the end of lockdowns in 2021, many people have not returned from working from home. Or if they have, it is only for two or three days a week,' Hunt explained.
This change in consumer behaviour, coupled with the general tightening of belts due to cost-of-living pressures, has profoundly impacted spending at hospitality venues.
Valhalla is not the only brewery feeling the impact of the pandemic. Sydney’s Malt Shovel Brewery announced it will cease operations in August due to rising living costs.
In addition, Sou’West Brewery in Torquay on Victoria’s Surf Coast went into administration in May.
The same month, Melbourne's Deeds Brewery closed after a failed two-month search for a buyer during its administration.
Several other Victorian breweries have faced financial challenges, including Hawkers, which successfully restructured its finances after entering administration.
Deeds Brewing and Dainton Brewery also encountered difficulties.
Further afield, Queensland’s Black Hops, with multiple venues, entered voluntary administration in March.
This followed the closure of Perth’s Golden West Brewing Co. in late February and the administration of Sydney's Wayward Brewing Co. in January.
In related news, Hiro Brands, a leading manufacturer of popular Australian home cleaning and personal care products, entered voluntary administration.
Klynveld Peat Marwick Goerdeler (KPMG) Australia's administrators took control, halting operations and terminating approximately 120 employees. Read more about this development here.
Have you noticed changes in your local craft beer scene? How do you think the industry can overcome these hurdles? We’d love to hear your thoughts and opinions in the comments below.
The latest casualty in this series of unfortunate events is Lotus Beer Co, the Geelong-based craft beer company known for its Valhalla Taproom and Valhalla Brewhall.
The company's descent into voluntary administration has sent ripples through the industry and raised questions about the future of craft brewing in Australia.
Scott Hunt, the founder of Lotus Beer Co, came forward with a candid explanation of the factors that led to this difficult decision.
The company, which has been a staple in the Geelong craft beer scene, has been grappling with a perfect storm of skyrocketing operational costs and a significant downturn in demand.
These challenges have proven impossible, leading to the appointment of Scott Andersen and Matthew Kucianski from insolvency firm Worrells as administrators.
Lotus Beer Co, behind Valhalla Taproom and Valhallow Brewhall, entered voluntary administration due to rising costs and reduced demand. Credit: @valhalla_brewing / Instagram
‘We understand Lotus entered voluntary administration due to rising cost-of-living pressures, which ultimately led to a reduced demand for the company’s products,’ Andersen said.
‘It was also experiencing increased production costs in operating its businesses.'
The administrators will meet with creditors next Wednesday to discuss the business's viability and explore potential paths forward.
The hope is that a suitable buyer or investor can keep the business afloat and preserve its legacy.
Valhalla's journey began in 2016, with the opening of the Valhalla Taproom in Geelong in 2018.
The brand's beer range, particularly the award-winning Obsidian stout, garnered a loyal following.
However, the recent opening of Valhalla Brewing and Brewhall in North Geelong in 2023 was met with disappointing sales, falling far short of expectations.
‘In the past two years, we have seen almost every aspect of running a small business become more expensive — in particular ongoing increases in rent, insurance premiums, and essential expenses such as fuel, electricity, ingredients, and freight,’ Hunt said.
‘Then, on the other side of the ledger, we have a massive decline in spending at our hospitality venues over the past 12 months.’
‘Sales at our original Union St taproom in the Geelong CBD are down 50 per cent on the same time last year, and sales at the new brewhall at the Federal Mills are less than 50 per cent of what we believed was easily achievable when we signed the lease two years ago.’
Hunt pointed to the broader economic landscape as a contributing factor, with the lingering effects of the pandemic leading to a shift in work habits and a reduction in foot traffic.
'Since the end of lockdowns in 2021, many people have not returned from working from home. Or if they have, it is only for two or three days a week,' Hunt explained.
This change in consumer behaviour, coupled with the general tightening of belts due to cost-of-living pressures, has profoundly impacted spending at hospitality venues.
Valhalla is not the only brewery feeling the impact of the pandemic. Sydney’s Malt Shovel Brewery announced it will cease operations in August due to rising living costs.
In addition, Sou’West Brewery in Torquay on Victoria’s Surf Coast went into administration in May.
The same month, Melbourne's Deeds Brewery closed after a failed two-month search for a buyer during its administration.
Several other Victorian breweries have faced financial challenges, including Hawkers, which successfully restructured its finances after entering administration.
Deeds Brewing and Dainton Brewery also encountered difficulties.
Further afield, Queensland’s Black Hops, with multiple venues, entered voluntary administration in March.
This followed the closure of Perth’s Golden West Brewing Co. in late February and the administration of Sydney's Wayward Brewing Co. in January.
In related news, Hiro Brands, a leading manufacturer of popular Australian home cleaning and personal care products, entered voluntary administration.
Klynveld Peat Marwick Goerdeler (KPMG) Australia's administrators took control, halting operations and terminating approximately 120 employees. Read more about this development here.
