Border X Brewing, one of the largest and only Latino-owned breweries in the United States, is in danger of closing its SELA location in Bell without outside investment. David Favela, who co-owns Border X with his wife Carmen Velasco-Favela tells L.A. TACO, is hoping to bring on up to five Los Angeles-based partners to purchase a 40% ownership stake in the brewery to transition it to a subsidiary model.
Border X Brewing started in the Otay Mesa border region of San Diego in 2013 before moving to the Barrio Logan neighborhood, a largely Latino area located directly southeast of downtown. In 2019, they opened a second location in Bell and by 2020, they launched San Diego’s first Latina-owned and operated brewery, Mujeres Brew House.
Awards, accolades, and recognition quickly followed, including a James Beard Award nomination and inclusion in Imbibe’s 75. But when the pandemic forced a global shutdown—with especially tight restrictions on hospitality in Los Angeles—Border X became what David describes as a “brewery, interrupted.”
“In 2019, we did exceptionally well,” he says, celebrating their successful first year in L.A. on March 7, 2020, before COVID “crushed us… it tripped us up and we haven’t had the capital to recover from the disaster.”
But the Favelas aren’t ready to give up on their dream—or their community. “Our reviews have always been stellar and our beers have always been great. It has felt like success was just around the corner,” David says. “If it had clearly been a failure, then yes, I would have stopped the losses a long time ago.”
He estimates Border X in Bell needs around $1.2 million in revenue each year to break even, which he says they nearly reached in their first year of operations. With the help of an investor (or investors) putting in a total of $500,000 towards the new LLC, he believes there’s no reason they can’t achieve that goal.
“We would spin off the brewery as an independent LLC. It will have its own EIN [Employee Identification Number] and its own banking. In other words, it’s a totally separate business,” David says. “The capital structure would go from 100% Border X ownership to 60%, and 40% available for this investment group or person.”
Money from the investor/partners would go towards strategic improvements, such as finishing their mezzanine area for event rentals, building out a kitchen program, updating the decor to better fit Border X’s signature Chicano vibe, and adding additional staff who are deeply plugged into the surrounding area to establish more close-knit relationships with artists, non-profits, and other organizations in SELA. Since opening, the brewery space has also become a much-needed venue of sorts for local bands and artists. It also became hang for many first and second-generation young adult Latinos in the area. There is also one of the only Tesla supercharger parking lots in southeast Los Angeles across the street from the brewery.
“What we’re looking for is more than just money,” he explains. “We’re looking for people who are looking for a solid investment, which we think we can provide. But more importantly, people who share the values of what we’re trying to accomplish.” Plus, he points out, acquiring traditional funding from banks proves difficult for small business owners of color, especially as banking systems worldwide are currently in flux.
David points to Border X’s success in Barrio Logan, as well as Mujeres’, as examples of exactly how successful the SELA location has the potential to be. “Our contribution to the community is much more than selling craft beer,” he says. “Letting it go and walking away, or just taking money and stripping it down to the bare minimum would be a disservice to our legacy and to our communities.”
He is specifically seeking investors with strong ties to the local Los Angeles community. “Local is everything,” he explains. “[Bell] is fundamentally a working-class Latino community. Not only do we want to foster entrepreneurism, but we want to be a safe place where people can come together.”
As a San Diego resident, David says that lack of hyper-local community connection is one reason that’s held Bell back, and what he hopes to change—before it’s too late. “A lot of breweries just shut their doors and everyone's left wondering ‘What happened?’” says David. On top of this, he is fighting a zero-tolerance type of cultural stigma against alcohol pushed by older Latino conservative members of the community and the national trend of overall reduced beer consumption due to inflation-based higher beer prices, especially in craft beer. Not to mention a new sober-curious generation of youth who are drinking less and have an overwhelming glut of beer alternative options such as seltzer and cider. In the last three years after the pandemic, even well-established and nationally respected breweries have continued to shutter in the Los Angeles area. However, other breweries have also still continued to open and stay in business. This is largely due to a loyal community following and brewery owners who value pouring fresh pints for their customers in person instead of relying on extremely competitive shelf space through older distribution-based revenue brewery models.
But David remains ardent in his belief that by bringing on local investors who share their vision and values, Border X Bell can do more than survive. It can thrive.
He points to the increasing power of Latino consumers as a huge potential, but one that’s mostly tapped by non-Latinos in an exploitative, inauthentic way. “Latino consumers are being duped into feeling pride in brands that have nothing to do with our community, and in fact have no positive effect on our community,” he says. “These big companies exploit us and it effectively closes doors. It ensures that a monopoly continues to be in place, no matter our efforts.”
Plus, he adds, Latino representation in craft beer is already low enough, with Hispanic/Latino-owned breweries accounting for only 2.2% of breweries in the United States, according to the Brewers Association’s latest demographic report. To lose a brewery of Border X’s size and visibility would affect the entire craft beer industry.
Transforming into a subsidiary brewery would not have an immediate impact on the alternating proprietorship arrangement with Border X Bell and Beer Thug Brewing, who have shared the space and brewing equipment as separate businesses for four months. Beer Thug founder Edgar Preciado says it was always their intention to “be roommates” temporarily as their business grew.
“I wasn’t going to be here forever,” he laughs. “But I didn’t think it was going to be this soon! We’ll see.”
Their contract allows them to remain in place, regardless of Border X’s ownership structure, until at least October 2023. Preciado says their sales are up and they already have their eye on a new location, although nothing is yet set in stone. But Precidado, who was recently named one of Food & Wine's Drinks Innovators of the Year, is fully supportive of the Favelas and the future of Border X Bell, whatever that future holds. “I wish them the best,” he says.
David invites interested investors to contact him via email, promising transparency in all past financials and terms. “We can do so much more than what we’ve already done,” he promises. “I think it’s going to be groundbreaking.”
Interested investors can contact David directly at david.favela@borderxbrewing.com.
