Brewdog get a lot of mentions in this column, in fact out of the 234 articles I have done for Pubpaper, 43 have mentioned the Scottish brewery, about 1 in every 6 and this week I’ll be increasing the hit rate for mentions even more!
They made the news last week due to the announcement of Equity for Punks 4, their latest fundraising share offering where they hope to raise £25,000,000 to develop their brewing capacity and provide funds to open new bars both in the UK and internationally. The business by any measure is doing very well, revenue up nearly 400% over the last 3 reported years (and predicted to jump another 56% in the 2015 results), profit is up 1000% in the same period, figures any company would be proud of.
However the Equity for Punks investment is slightly different from a traditional issue of shares, it is not like the stock market where shares can move in price and be traded (well not yet anyway, plans are afoot to introduce a private trading platform for Brewdog shares, and they have not ruled out a public listing in the future). When you buy shares in Brewdog, you naturally own a part of the company and get voting rights, but you get your benefits back in brand loyalty, through discounts at their shops and bars, the free beer on your birthday in a Brewdog bar, an invite to the party like AGM.
This is a very shrewd move from James, Martin and the team and a pattern that has echoed through the previous three Equity for Punk share offerings. People invest in the company, then they invest in the company even more by using their discount to buy Brewdog beer and visiting Brewdog bars, it is the gift that keeps on giving for the company. Just look at the extra benefits you get as an “Equity Punk”, first option on new beers, access to their beer box club and Abstrakt specialist beer club, all of these are extra cost items, all making more money for Brewdog.
You do not invest in Brewdog to make money (unless you are drinking so much Brewdog beer that your discount outstrips the cost of buying the shares), you are buying into the ethos of the company. I wrote a few weeks ago about Brewdogs dilemma about its craft / mainstream future and by continuing with the non trading nature of the shares which encourages fans of both Brewdog and good beer to invest, they are sticking true to their roots back in 2007.
A lot of the money the company turns over goes back into the company, dividends are not paid out to shareholders. The three main operators at the company, James Watt, Martin Dickie and Charles Greggor will own 74% of the company after this £25m issue. Salaries for the directors are not excessive for a £30 million turnover company, with 3 directors on circa £125,000 with others on significantly less. Employees are paid a living wage, not the minimum wage. They are creating a significant number of jobs in the area, with 130 estimated to be created with the opening of the new plant this issue is funding.
The demand is obviously there for their beer, there is no other reason to build a new brewhouse triple the size of your existing plant at the cost of £3 million, just to keep up with demand. There is also no reason to earmark nearly £9 million to open new bars here and abroad unless there is the demand for it. It is not just over here where the demand is apparent, another £3 million is planned for a US based brewing operation to try and break this tough market with plenty of competitors, although links with US brewers from collaborations won’t hurt them at all. Eight planned new bars and new markets will add new challenges, although owning a part of your distribution chain, via the planned set up of an “UK Import and Distribution Arm” will certainly help matters.
The core purpose is the same as any other brewer at Brewdog, get more beer to more venues in more countries as efficiently as possible, it is the subtle differences in how the company is run which puts the undeniably large company which Brewdog has become apart from the more mainstream brewers of its size.