1) Why did 47Hops file Chapter 11? Why did 47Hops file Chapter 11 right now?

The growth in the craft beer market in the United States has slowed from 18% per year in 2014 to its current level of 5-6% growth per year. Unfortunately, during the past several years, brewers fuelled by optimism contracted for more hops than they now need due to that slower rate of growth. Based on our contracts with brewers, we, in turn, contracted with suppliers to cover our brewer contracts. Based on late brewer payments, it seems a good portion of those hops are simply not necessary in today’s market. 47Hops has attempted to renegotiate its contracts with several larger suppliers. Unfortunately, some of them were not willing or able to renegotiate their contracts with us to the extent necessary to match the declining needs of the market.

During the past year, a sizeable number of brewers with whom 47Hops has contracts have delayed payment for and delivery of their hops. Payments for some contracted hops are one year behind schedule. Some brewers have stopped responding to calls and emails altogether. We understand that is likely a result of reduced beer sales and cash flow problems in their businesses and not something they are doing with malicious intent. However, this has caused the accumulation of two things at 47Hops: 1) purchased aroma inventory in the warehouses, and 2) debt as a result of purchasing that inventory.

The slow or non-existent payment for contracted hops increases the cost, risk and burden of financing to an already risky business. As 47Hops is a family-owned business, this creates substantial disadvantages in our cost structure that revenue from once-profitable contracts simply cannot cover. The uncertainty as to the ability of our brewery customers to pay for and take delivery of future contracted inventory created an uncertain future that was very likely unsustainable without drastic action. We decided, therefore, to proactively deal with the problem rather than wait until the situation caused irreparable harm to the company and left us with no options.

47Hops remains committed to working as quickly and efficiently as possible to appropriately restructure its finances so it can emerge from Chapter 11 well-positioned to compete effectively in the marketplace.

2) Will 47Hops continue to operate if you are in Chapter 11?

47Hops is not going out of business, but rather is attempting to restructure, and become more nimble and responsive to the market. While the legal process may be long and complicated, it should not interfere with our ability to continue to supply brewers with the high quality hops they need.

3) I have a contract with 47Hops to supply hops. Will the contract be honored, assumed or rejected?

Decisions about specific contracts or actions will be made shortly. We have already spoken with several of our closest suppliers. They are willing and ready to stick by our side through the journey ahead. If you are a brewer and have contracts with 47Hops, your supply of hops is secure. We want to work together with our brewery customers to find a solution that works for everybody. We believe we can bring currently contracted volumes in line with actual brewery demand. Holding firm to previous contract levels if those contracts cannot be fulfilled is not a sustainable way for anybody to do business. The Chapter 11 process will enable 47Hops to make necessary changes that ultimately will be good for the market.