Lightning Brewery (still) open for business

When news broke in June that Lightning Brewery had sold its assets to Orange County–based Cismontane Brewing Co., rumor spread that the 11-year-old brewery had joined the ranks of San Diego ex-breweries. But reports of Lightning's demise were premature.

Lightning's Poway tasting room remains open and continues to produce beer, with no plans stop. However, it's sizing down operations and shifting its focus from packaged distribution to tasting-room sales. As of this week its bottle cooler, once well-stocked with popular Lightning beers such as Elemental Pilsner and Thunderweizen wheat beer, is nearly empty.

"We are no longer bottling," confirms founder and brewer Jim Crute. "The plan is to identify and then purchase nanobrewing equipment…and then simply sell directly to the public."

Crute announced he would be selling Lightning late last year due to debt obligations he attributes to a disastrous attempt to sell beer through distributors. Initially signing with Stone Distributing Company, Lightning used financing to expand operations to meet wholesale demand.

"We had scaled up," Crute recalls. "We actually had made a lot of investments here, anticipating significantly greater sales through Stone that didn't materialize. Then we were kind of caught behind things."

When Stone dropped the brand without warning, Crute says Lightning burned through its cash reserves while coping with the loss of income that came with an abrupt surplus of inventory. "We went with another distributor who wound up being a disaster," he continues. "Our sales got shrunk in half."

When Crute put Lightning on the market, he was open to selling the business outright, or selling the brand and assets and staying on as a brewing employee. Ultimately, Cismontane paid an undisclosed sum to purchase the bulk of Lightning's assets, ranging from 80 barrel-brewing vessels to its cold box, forklift, and delivery van.

"The amount that we got out of that essentially satisfied our debt," Crute explains. "It didn't get me any money back or our investors any money back, but it got us out of a situation where we could be closed down for foreclosure."

Most of the items have been moved out of Lightning's brewery and tasting room, which occupy adjacent business-park suites. However, Crute retained or rented back enough to continue brewing — what he calls "the dribs and drabs you need to run a little brewery." He expects everything left to go by the end of September, at which point he'll give up his brewery's original suite and move everything into the tasting-room side, where Lightning will continue on, working at 10 percent its previous capacity.

Crute says because the craft-beer market has grown and changed since he opened in 2006, pouring beer directly for customers on this scale is the only way for a small brewery to survive. "I can tell you honestly, I never made a cent off of anything I ever sold to a distributor," he says. However, the higher margins from tasting-room sales should be enough to keep him in business.

"We have our loyal following," he concludes, "even if some people think we're closed."