Member Article

North East brewing company enters liquidation

North East-based Delaval Brewery Limited has ceased trading after failing to raise sufficient funds to continue operations as a craft beers distributer.

Delaval’s, which also operated the National Trust Beer Club, had been supported by NEL Fund Managers and attracted significant publicity as it developed.

Greg Whitehead, of Northpoint Insolvency Practitioners, is dealing with the Liquidation. He said: “The company has been exploring fund raising and sale options for some time but these have not ultimately proved successful.”

“Five employees have been made redundant as a result of the closure and it is expected that creditors will receive no return.”

A Director’s Statement read:

The directors have reflected on why the business has failed and state their beliefs below:

Insufficient traction rate – the Company was not able to attract enough members to the Beer Club in order to be self-sufficient. The traction rate was simply too low. Reasons for this include insufficient marketing support and marketing campaigns and a lack of dedicated sales staff (under resourced). Sales of standalone bottles of beer were also insufficient; pricing was extremely competitive and the market was becoming saturated with providers of beer

Undercapitalised at the outset - on reflection, the Company should have raised a higher amount at the outset. This would have allowed for a far greater level of sales & marketing activities. The Company’s monthly burn rate was in the order of £15,000 pcm of which staff costs account for c. £10,000 pcm; loan stock and NED fees account for c. £3,000 pcm; rent & incidentals c. £1,500. It is clear from these numbers alone that no real marketing budget exists and that, in our opinion, is reflected in the sales / member numbers to date

Was the market ready for this type of offering? – the directors believe that in time, craft beer purchased online / mail order will increase in volume in much the same way that the wine club market has developed. However, the directors believe that any such type of operation would require a sizeable marketing budget, perhaps even in the millions of pounds. In the meantime, a simple conclusion to draw would be that consumers are content with buying cheap beer from the supermarkets despite their relative limited range

Overstretched / Lack of Focus - The Company has been stretched on numerous occasions throughout the year and has possibly tried to do too many things. This is primarily as a function of there being numerous opportunities as the dynamics of the craft beer market become clearer.

Ran out of cash before Management Buy-In could be completed – the directors had an offer on the table in early May which they supported in the interests of keeping the Company going. Although heads of terms were signed in early May, the acquirer ultimately reneged on the deal. No further buyers could be found in time.

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →