Gig Harbor, Washington-based Heritage Distilling Company, Inc., a wholly owned subsidiary of Heritage Distilling Holding Company, Inc. d/b/a IP Strategy, has announced a significant restructuring of its operations, including the closure of all company-owned tasting rooms and a transition of spirits production to third-party partners effective December 31, 2025.
The decision follows an extensive strategic review by Company leadership, the board of directors, and advisors in response to shifting market dynamics, financial realities affecting the alcoholic beverage industry and a challenging tax and regulatory environment in Washington and Oregon.
“This was an extremely difficult decision and one we did not make lightly,” says Justin Stiefel, co-founder and CEO of IP Strategy. “For more than 13 years, our tasting rooms have been the heart of our spirits business and the cornerstone of the community for the connections we built. But changing consumer behaviors, increasing costs and recently-enacted and proposed taxes at the state level made future investments in this part of our business operations unsustainable. With the largest tax increase in state history now going into effect, and more already being discussed for next year, we determined that the path to profitability and growth for our spirits business in the current environment is not feasible. Given that many of our retail leases are coming up for renewal in 2026, we believe this is the right time to implement these changes as it is no longer prudent for the business to sign additional long-term leases on retail spaces.”
“For more than a decade, Heritage Distilling tasting rooms were places for friends and family to gather to enjoy each other’s company and great spirits. As we head into the final stretch of the year, we wanted to give our customers and club members two months of lead time to plan their final visits to our tasting rooms, to share in great memories and to thank the staff who helped them along their customer journey,” says Jennifer Stiefel, Co-Founder and President of Heritage Distilling.
Specific factors leading to this decision include:
– Increasing state taxes and regulatory burdens that make reinvestment and job creation in Washington and Oregon less feasible;
– Consumer shifts toward reduced alcohol consumption and alternative products, including marijuana;
– Repeated legislative blocking of efforts to equalize taxation for low-proof RTDs with wine and beer; and
– Input from investors and stakeholders seeking a streamline of operations to accelerate profitability in the Company’s craft spirits segment.
After the new year, Heritage Distilling plans to focus its resources on brand development, product innovation, continued Direct-to-Consumer sales, wholesale expansion, partnerships with more tribes for branded tasting rooms in and near their casino properties under the Tribal Beverage Network (TBN) program, and contract production partnerships. The restructuring is expected to reduce the Company’s annual spirits revenues by approximately $3 million and related operating expenses by more than $5 million once fully implemented, including the elimination of more than $1.1 million in unabsorbed production overhead costs per year, with an anticipated net reduction in working capital needs of more than $2 million annually. These newly identified savings are in addition to the $19.3 million in liability reductions and related elimination of more than $2 million in annual interest and other expenses previously identified and disclosed by the Company after its recent PIPE transaction.
In conjunction with the restructuring of its operations, the Company also expects to record one-time expense associated with the sale or write-off of assets and leases associated with the eliminated operations, as those plans are solidified and the net expenses are more readily estimable.
Commitment to Employees and Customers
The Company is committed to supporting its employees and customers throughout this transition by providing advance notice of the closures. The Company will host a multi-week “Last Call” celebration through the end of the year to thank loyal customers, Cask Club members, and the community for 13 years of support.
To support its workforce during the transition, the Company is offering comprehensive severance packages for employees who remain through their designated separation dates. Eligible employees will receive between 4 and 8 weeks of severance pay based on tenure and role, payouts for accrued sick time, and continued health coverage through the end of the month in which their separation occurs. Most retail employees’ separation date will be January 2, 2026, with final production wind-down roles ending on February 14, 2026. In all, from the time of the Company’s announcement to the separation date, individual wages and the severance packages are expected to cover more than 3 to 5 months of income for those employees who choose to accept the offer.
“Unlike many companies that close abruptly, we wanted transparency,” says Justin Stiefel. “Too often, companies, large and small, close their doors overnight and post a sign on the window thanking customers and employees with no further explanation. We felt strongly that our employees, club members and customers deserve better. We are committed to treating our employees with respect and gratitude, offering a severance program far more generous than what is typical in our industry, and giving customers the chance to raise a final glass with us.”