Can failures during transit to China led to Deep Creek Brewing's downfall

The liquidator for troubled Deep Creek Brewing says a defective shipment of cans to China has caused the New Zealand brewery to go bust.

The appointed liquidator, Derek Ah Sam from Rodgers Reidy, said the issue was two-pronged.

‘The Chinese rejected all that’

Deep Creek was exporting its craft beer to China, and the major issue was a canning fault during shipment.

“They had shipped containers to China. But when the containers arrived, the seals on the cans broke. They’ve broken just through the pressure in transit," Ah Sam said.

“And so basically, the Chinese rejected all that."

He said Deep Creek was looking at about $200,000 worth of product being rejected, and it couldn’t sustain the loss.

“They had tried to raise capital, but unfortunately, it's fallen over.”

When BusinessDesk asked if insurance would cover the loss, Ah Sam wasn’t sure as he hadn’t investigated it yet but intended to as it “might have been something untoward”.

He hadn’t looked at the company's policies yet and wasn’t sure if the brewery had the right cover in place.

But Ah Sam did say the director Jarred Maclachlan told him insurance wouldn’t cover it.

(Image: Deep Creek)

‘Nail in the coffin’

Ah Sam said taking on the loss was probably the nail in the coffin for Deep Creek as they couldn’t trade with a loss of about $700,000 to $800,000. Plus, the payroll was $30,000 a week for its 21 staff, he said.

Deep Creek ceased trading last Thursday and told staff not to come to work as all options had run out.

Financial records show that ASB Bank held security against Deep Creek.

Ah Sam said the major assets are plant-fixed on-site. They’re currently looking for buyers, but as it is fixed, in order to sell and remove, the roof of the brewery will need to be lifted off. 

So, trying to find a market for the assets will prove difficult, he said.

Another asset Deep Creek has is stock, and he is trying to negotiate buyers for it, but with a limited shelf life, that could be hard.

The liquidation came at an unfortunate time, as the upcoming summer season is usually the busiest time for Deep Creek.

Ah Sam also said the craft beer industry was taking a real hit lately and the craft space has become crowded and competitive with business a lot quieter and it's not selling the volumes that it used to.

“And then it's expensive craft beer is not the cheapest beer out there.”

‘Crushed’

Ah Sam said Maclachlan was crushed, but there was also a sense of relief because the impending situation was now “out of his hands”.

Maclachlan is a 26% shareholder in the company.

“He’s been doing this job for over a decade now, and before the liquidation, he was in denial, like, ‘this can't be happening. I had this go wrong so quickly.’

“And that doesn't take a lot to happen, actually.”

He said Maclachlan had hoped to put enough money into the business to keep it going so it could trade in the busy season but couldn’t raise capital to generate more cashflow.

Ah Sam said it was very early days but was hoping to find a purchaser for the plant to get some return to creditors.

“But it's probably a little bit too early to tell how much is going to come out of this. 

“If anything, we would like to try to get the staff paid because it's unfortunate, and it's not their fault.”

He would have a better idea in about two to three weeks in terms of people expressing interest in the plan.

“You know, the best scenario for us would be somebody wants to come and lease the building and leaves the plant, but a lot of these breweries already have their own sites.

"Maybe some may want to increase capacity.”

The liquidator originally said upwards of $500,000 worth of product had been rejected. This story has been updated with the correct figure, about $200,000.