Rise and fall of BrewDog leaves Equity Punk investors with hangover
Company endured heavy losses in recent years
It was the scrappy upstart railing against corporate oligopoly and bland beer products, making waves at the forefront of the craft beer boom and encouraging hundreds of thousands of small investors to come along for the ride.
But after crashing and burning into administration, the hangover from BrewDog’s acquisition by the US beverage and medical cannabis company, Tilray - a deal that has resulted in nearly 500 people being made redundant - has left supporters and critics alike reflecting on the demise of a firm once regarded as one of Scotland’s most disruptive new businesses.
Nearly two decades have passed since James Watt and Martin Dickie launched the craft beer firm out of an anonymous industrial estate in Fraserburgh. They invested their savings into the venture and secured a £22,000 loan from a business support scheme run by Aberdeenshire Council, allowing them to begin by brewing small batches.
Read more: BrewDog co-founder James Watt ‘heartbroken’ at staff job losses and sale of company
Those early days of BrewDog’s were about as grassroots as it got, and in many ways, fed the narratives - and myths - that encouraged so many others to support, and ultimately, invest in the company. Bottles were filled by hand, and the firm’s first beers were sold out of an old, beleaguered van at local markets in the north east.
Within the space of just two years, BrewDog’s dizzying rise, coupled with a clever marketing campaign, saw it launch its inaugural Equity for Punks crowdfunding initiative, which allowed fans of its beers to purchase shares in the firm. The first round raised £750,000 from more than 1,300 investors. Subsequent rounds saw that investor base grow significantly. Eventually, the number reached approximately 220,000, who cumulatively contributed around £75 million to the company.
As brand awareness and sales continued to rise, Brewdog’s expansion was rapid. From a solitary bar in Aberdeen, which opened in 2010, hundreds more followed around the world, and the firm even opened Doghouse-branded hotels as far afield as Manchester and the Ohio town of Columbus.
The so-called punk ethos was also evident across numerous marketing campaigns, from the use of a taxidermied stag's head to pour pints of a new beer, brewing a beer at the bottom of the ocean, or sanctioning the limited edition release of a new drink served in bottles made from stuffed animals.
Such stunts helped to generate headlines and interest, allowing BrewDog to expand further. Its operations moved to a new purpose-built facility in Ellon in 2012, with upwards of £20m invested to increase its capacity fivefold.
Come the mid-2010s, Mr Watt and Mr Dickie were riding high. Both men were awarded MBEs in the 2016 Queen's Birthday Honours list, and soon after they decided to expand into the spirits business via LoneWolf Distillery, which produced gin and vodka.
That extraordinary growth led to major investment by TSG Consumer Partners, a US private equity firm, which acquired approximately 22 per cent of BrewDog in 2017 for £213m, giving it a market valuation of close to £1 billion. Mr Watt and Mr Dickie reportedly received about £50m each via the deal.
In hindsight, that transaction marked the beginning of the end. Although the company would continue to grow, generating sales of close to £215m in 2019, the year in which it launched its 100th global craft beer bar, the advent of the pandemic saw it rack up substantial losses. A pre-tax loss of £12.5m was registered in 2020, followed by a loss of £9.4m the following year.
By 2021, the firm’s complex shareholdings made a mockery of its disruptive, punk marketing, with nearly a quarter of its holdings traceable to two exempted limited partnerships in the Cayman Islands.
This was the legacy of the deal struck with TSG, and it was significant in other ways - under the terms of the arrangement, the private equity entity had what is known as a “liquidation preference,” meaning that in the event of the firm’s liquidation, it would get its money back first. Crucially, TSG was also entitled to a guaranteed 18 per cent compound return a year on its investment in the event of a sale or initial public offering.
The same year, BrewDog’s company culture also came under fire after an open letter from scores of former employees condemned “toxic attitudes” towards younger staff, and characterised the firm as one built around a “cult of personality.” A BBC Scotland documentary in 2022 also alleged inappropriate behaviour from Mr Watt in the workplace, which he denied.
Amid the ongoing fallout, the losses intensified, going from £30.5m in 2022 to £59.2m in 2023, and £36.7m in 2024. That year, Mr Dickie left the firm, while Mr Watt stepped down from his role as chief executive.
The deepening financial pressures led to the closure of ten of BrewDog’s bars last year, and other initiatives, such as a forestry investment, set up to burnish the company’s sustainability messaging, was ditched. In the past decade, company filings show, the firm has lost more than £130m.
When the end finally came those early supporters of the firm were left reeling by the realisation that they stood to recoup nothing from their original investments, save for the promise of ongoing discounts and offers. “If I’d have known from the start how obfuscatory and shady the entire process would have been, they’d have never have got my money,” one such Equity Punk wrote on social media. “There’s £3k I’ll never see again.”
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