Heritage Distilling Announces Strategic Transition of Alcohol Business to Reduce Expenses and Become Asset Light
- Heritage Distilling announces strategic transition: closure of craft spirits tasting rooms and shift to contract production
- 5 retail tasting rooms in Washington and Oregon to close on December 31, 2025
- Company will focus on maintaining its higher margin Direct-to-Consumer channel, growing wholesale volumes and adding Tribal Beverage Network locations in partnership with Native American tribes in and near their casinos
- Strategic move expected to reduce ongoing operating expenses by more than $5 million on a full year basis and accelerate profitability in the Company’s craft spirits segment
GIG HARBOR, Wash.–(BUSINESS WIRE)–
Heritage Distilling Company, Inc. (“Heritage Distilling”), the wholly owned subsidiary of Heritage Distilling Holding Company, Inc. d/b/a IP Strategy (HDC or the Company) (Nasdaq: IPST), one of the nation’s most awarded independent craft distilleries, today 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,” said 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.”
Since opening its first tasting room in 2012, Heritage Distilling has been the most awarded craft distillery in North America according to the American Distilling Institute, and Heritage Distilling is widely known as a key player in advancing policy for the craft spirits industry, from pushing for legislative parity with beer and wine to pioneering direct-to-consumer sales.
“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,” said 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,” said Mr. 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.”
Establishing a New Validator Revenue Segment
The Company recently created a digital asset treasury focused on the Story $IP token. It currently holds 53.2 million $IP tokens and recently established a validator program making it the largest validator for activities on the Story $IP protocol. The Company’s new validator business has unlocked more than 80,000 tokens per week on average for the Company, with gross margins exceeding 95%.
About Heritage Distilling Company, Inc., Heritage Distilling Holding Company, Inc. and IP Strategy
Heritage Distilling Company, Inc. is the wholly owned subsidiary of Heritage Distilling Holding Company, Inc., d/b/a IP Strategy (Nasdaq: IPST) has been one of the nation’s most awarded independent craft distilleries for more than a decade. The company became the first Nasdaq-listed company to hold $IP tokens as a primary treasury reserve asset. Through this strategy, IP Strategy offers public market investors broad exposure to the $80 trillion programmable intellectual property economy in a regulated equity format. The Company’s treasury reserve of $IP tokens provides direct participation in the Story blockchain ecosystem, which enables on-chain registration, licensing, and monetization of intellectual property.
Heritage Distilling Holding Company, Inc. is the registered corporate name of IP Strategy.
Forward-Looking Statements
This press release contains forward-looking statements, including statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as “aims,” “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “plans,” “possible,” “potential,” “seeks,” “will,” and variations of these words or similar expressions that are intended to identify forward-looking statements. Any such statements in this press release that are not statements of historical fact may be deemed to be forward-looking statements. These forward-looking statements include, but are not limited to, the Company’s ability to realize anticipated savings from reduced operations and overhead, attempts to grow the Company’s DtC business, wholesale volumes and TBN locations, realizing net profits or accelerating profitability from the craft spirits segment of the business after completion of the restructuring, the ability for one or more of the Company’s retail locations to stay open through December 31, 2025 if employees choose not to work through the end of that employment period, anticipated cost savings and the expected amount of unabsorbed overhead to be eliminated, the expected severance packages to be offered to employees and the expected separation dates, the number of $IP tokens unlocked by the Company’s validator business and gross margins associated therewith.
Any forward-looking statements in this press release are based on IP Strategy’s current expectations, estimates and projections only as of the date of this release and are subject to a number of risks and uncertainties that could cause actual results to differ materially and adversely from those set forth in or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, risks related to the Company’s ability to realize anticipated savings from reduced operations and overhead in its craft spirits segment, risks in attempting to grow the Company’s DtC business, wholesale volumes and TBN locations, risks associated with the ability for one or more of the Company’s retail locations to stay open through December 31, 2025 if employees choose not to work through the end of that employment period, risks related to the Company’s digital asset treasury strategy and validator operations, the value of $IP tokens and $IP token price volatility, the legal, commercial, regulatory and technical uncertainty regarding digital assets generally, the treatment of crypto assets for U.S. and foreign tax purposes, expectations with respect to future performance, growth and anticipated acquisitions, any correlation between the Company’s stock price and the price of $IP tokens, the ability of the Company to execute on its treasury reserve and validator business plans, the Company’s yield and capital management strategies and $IP’s potential. These and other risks concerning IP Strategy’s programs and operations are described in additional detail in its registration statement on Form S-1 filed with the SEC on August 26, 2025, as amended by Amendment No. 1 filed on October 16, 2025, its latest annual report on Form 10-K, subsequent quarterly reports on Form 10-Q and annual reports on Form 10-K, and any other subsequent filings with the SEC, as well as the supplemental risk factors included in Addendum A to the form of Subscription Agreement filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 11, 2025. IP Strategy explicitly disclaims any obligation to update any forward-looking statements except to the extent required by law.
View source version on businesswire.com: https://www.businesswire.com/news/home/20251023995467/en/
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KEYWORDS: United States North America Washington
INDUSTRY KEYWORDS: Technology Finance Wine & Spirits Professional Services Digital Cash Management/Digital Assets Blockchain Restaurant/Bar Cryptocurrency Retail
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