USA, WI: Karben4 Brewing files for bankruptcy

Founded in 2012 by brothers Ryan and Zak Koga and their childhood friend Alex Evans, Karben4 is famous for its Fantasy Factory IPA, whose label features a gun-toting cat riding a fire-breathing unicorn.

The company, at 3698 Kinsman Blvd. near the Dane County Regional Airport, has struggled to recover from the financial tumult of the COVID-19 pandemic and from a lawsuit by Evans, attorney Jerry Kerkman said.

The business filed for Chapter 11 bankruptcy on Feb. 26 and has already received approval for its initial requests, allowing the company to pay its 22 employees, honor gift cards and continue using its bank account.

Zak Koga told the bankruptcy court that by 2019, Karben4’s gross revenue was nearly $4 million. “Before the pandemic, the business essentially broke even on an operating basis,” Koga said in a court filing.

But the pandemic temporarily shuttered the taproom and wiped out keg sales, one of Karben4’s most profitable offerings. The company adapted by holding drive-thru sales, and it received an Economic Injury Disaster Loan from the U.S. Small Business Administration.

Two years later, the company had “unprecedented” net operating losses, Koga told the court. It lost around $907,000 in 2022 and around $332,000 in 2023 due to what the company describes as a “general downturn in the craft beer industry since the pandemic.”

“Ever since COVID hit in 2020 we have been pivoting every few months to adjust our focus on how to rebuild our business for the future,” Koga said in a press release. “As pandemic aid dried up and inflation ramped up, we have been running out of room to pivot.”

The owners haven’t been paid since November, Koga said.

The company began contract packaging, which has helped the business’ balance sheet, Koga said. The bankruptcy process will allow Karben4 to restructure and reorganize to “build a strong and sustainable company going forward,” Koga said, noting that creditors, lenders and customers have been “incredibly supportive.”

“We plan to forge ahead and come out of this phase stronger than ever,” Koga said.

“There's no plan to liquidate this company. The prospects are good,” Kerkman said, noting that the owners are in talks with someone interested in investing in the company.

They’re also working to resolve the dispute with Evans, who owns half the company but has not been active in running the business since 2020. Evans sued over the Koga brothers’ decision to buy other brands and produce their products, saying the move was not in the company’s financial interest. Karben4 bought brands from Viroqua soda maker Wisco Pop and from Madison brewery Ale Asylum, which closed in 2022, making brews like Hopalicious available again.

The company will submit its reorganization plans around June. If the court and the company’s creditors accept that plan, Kerkman said, the business will exit bankruptcy around August.