After big expansion, iconic S.F. brewery files for Chapter 11 bankruptcy

Fresh off of a major expansion, iconic San Francisco craft brewery Magnolia Brewing Co. filed voluntarily for Chapter 11 bankruptcy protection last week, according to court documents.

Chapter 11 of the U.S. bankruptcy code usually provides for the reorganization of a company, letting the business stay open and pay creditors over time. So filing for this kind of bankruptcy doesn't necessarily spell disaster for Magnolia, but it could be a cautionary tale for growing food and beverage businesses in the Bay Area.

Dave McLean's Magnolia Brewing Co. runs Magnolia Pub & Brewery on Haight Street, as well as the newly opened Smokestack restaurant and brewery in San Francisco's Dogpatch neighborhood.

Dave McLean, owner of Magnolia Brewing Co. told the Business Times that the company has more debt than it can manage with its current cash flow, but was careful to emphasize that customers will not see any visible changes in operations.

"Our two restaurants are busy, sales are strong, and we're seeing really great growth in our beer distribution. We feel like this is the best course for all of our stakeholders and expect to emerge from this stronger than ever," McLean said. "From an operational perspective, we don't expect anything to change as we continue to brew, serve and distribute our beer, cook the food that we love as much as our guests seem to, and deliver the same experiences that we've always strived to do."

Magnolia opened in San Francisco in 1997. It has been part a recent resurgence of craft beer in the Bay Area and last year opened Smokestack at Magnolia Brewing, a $3 million, 10,000-square-foot restaurant and brewery in San Francisco's Dogpatch neighborhood. That's in addition to its smaller Haight Street location.

Before the expansion opened, McLean acknowledged the high cost of the project for the (then) $3.7 million company, but said he was confident that the increased output of the brewery — 4,000 barrels over what it could produce at the Haight Street location — would offset the costs of the new site.

In general, the craft beer market is a competitive one in California, said Tom McCormick, executive director of the California Craft Brewers Association.

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