Heritage Distilling to close tasting rooms, transition spirits production

Heritage Distilling (IPST) announced a significant restructuring of its operations, including the closure of all company-owned tasting rooms and a transition of spirits production to third-party partners effective December 31. The decision follows an extensive strategic review by company leadership, the board of directors, and advisors in response to shifting market dynamics, financial realities affecting the alcoholic beverage industry and a challenging tax and regulatory environment in Washington and Oregon. After the new year, Heritage Distilling plans to focus its resources on brand development, product innovation, continued direct-to-consumer sales, wholesale expansion, partnerships with more tribes for branded tasting rooms in and near their casino properties under the Tribal Beverage Network program, and contract production partnerships. The restructuring is expected to reduce the company’s annual spirits revenues by approximately $3M and related operating expenses by more than $5M once fully implemented, including the elimination of more than $1.1M in unabsorbed production overhead costs per year, with an anticipated net reduction in working capital needs of more than $2M annually. These newly identified savings are in addition to the $19.3M in liability reductions and related elimination of more than $2M in annual interest and other expenses previously identified and disclosed by the company after its recent PIPE transaction. In conjunction with the restructuring of its operations, the company also expects to record one-time expense associated with the sale or write-off of assets and leases associated with the eliminated operations, as those plans are solidified and the net expenses are more readily estimable.