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Old dogs, new tricks: How BrewDog grew up

By Mel Flahety , 16-May-2017
Last updated on 16-May-2017 at 11:01 GMT2017-05-16T11:01:41Z

Brewdog grew up 10 years

Once the young punks of the beer scene, BrewDog recently celebrated turning 10 with a £213m investment that will lead to a more grown up approach to world beer domination

David McDowall can’t quite believe that he’s just used the term ‘grown up’ to describe BrewDog, the craft beer brewer for which he heads the bar business in the UK and overseas. “I guess we are slightly more grown up than we were eight to 10 years ago, when we were young pups,” he muses.

It obviously sits a little uncomfortably with the softly spoken yet animated Scot to say out loud that the company, known for its unconventional approach to everything from marketing to fundraising, is maturing.

Yet 10 years after it began life in its co-founder’s mother’s garage, BrewDog has come of age. Last month San Francisco-based TSG Consumer Partners agreed to buy 22% of the brewer, in a deal worth £213m – valuing the company at a cool £1bn.

Some £100m will be invested in the business by TSG, which also owns US brewer Pabst. Founders James Watt and Martin Dickie are believed to have made £100m between them as a result of the deal. All very grown up stuff.

Success story

The investment is just another chapter in the success story that is BrewDog. Founded 10 years ago by Watt and Dickie when they were both in their mid-20s, the company was at the vanguard of the craft beer movement in the UK and one of the first to make a point of sticking two fingers up at the big brewers.

Known for its anarchic and headline-grabbing approach to marketing, which included the launch of Tactical Nuclear Penguin – the world’s strongest beer at the time – driving a tank down Clapham High Street and selling bottles encased in dead animals, the self styled ‘punk’ brewer rose in popularity just as drinkers were beginning to question the quality of much of the UK’s mainstream lager.

According to the company, its popular Punk IPA beer “has become a byword for craft beer rebellion”.

(Photo: The Tactical Nuclear Penguin / BrewDog)

It’s an approach that hasn’t won favour with everybody, but it has impressed many within the sector, as has the company’s meteoric growth. As well as running a hugely popular brewing business, the company now operates 30 bars in the UK and another 20 in places such as Sao Paulo, Warsaw and Tokyo.

“I was incredibly enthused about the pace of growth,” says McDowall, who joined the company just over two years ago. “My perception of the business evolved as I got to know it better – it is very easy to look at the first 10 things that come up for BrewDog when you Google it and form an opinion, but it is actually fanatically focused on beer and people.”

The simplicity of BrewDog’s strategy – and its commitment to challenging the norm to achieve it – is, McDowall believes, the reason for its rapid growth and progress. In 2016 overall EBITDA for the BrewDog group was £7.1m, based on sales of £70m. Bar sales accounted for £22m of this, based on an average spend per head of £10 to £12.

The overall turnover figure will move beyond £100m in 2017, with £35m coming from bars. “The second half of last year was fundamentally our strongest trading period since we started the retail business,” says McDowall. “And in the first eight weeks of this year we have seen 11% like-for-like growth across the estate.”

Last year, GMs were given the freedom to choose 30% to 35% of the beers they sell (the remainder are BrewDog’s own), encouraging them to negotiate with local brewers directly. McDowall says the result is each bar has a unique range on offer, which its teams feel better engaged with and customers find more interesting.

“We are slightly unconventional – it is in our DNA and you are not going to change us, it is a big part of our success,” he says. “I guess if you went to any business with 50 sites, they would baulk at the idea of giving their managers autonomy. That is probably the reason we did it. It is very successful. We want them to feel like bar owners.”

Shock jocks

(Photo: Pumping it up / BrewDog)

Today, the Scottish brewer is not so overtly out to shock as it was in its younger days but its headline grabbing days are far from over. In recent months the press has challenged whether the punk label is still relevant for BrewDog, not just because of the size of the company – it now employs 800 staff – and the investment from TSG but because of how it seems to have become ‘poacher turned gamekeeper’ in some people’s eyes.

In March the brewer backed down in a row with a family-run pub after initially trying to force it to change its name, blaming its lawyers for the legal action.

The dispute was with the brother and sister team behind The Wolf pub in Birmingham, which was forced to drop its original plan to name the pub The Lone Wolf after receiving a legal warning from BrewDog, which produces a spirit of the same name.

BrewDog is also believed to have raised an objection to plans by music promoter Tony Green to open a bar in Leeds called Draft Punk, saying that it would create confusion in the marketplace, including a likelihood of association with its Punk mark.

Watt laid the blame for the Birmingham incident on the company’s lawyers, saying in a statement: “Although they wear suits and are mostly sensible folks, lawyers can sometimes go a bit crazy and forget the kind of business we are and how we behave. They are sorry for their actions and we have put them on washing up duty for a week.”

It might be an unconventional approach to PR, but the company is still at pains not to be seen to be toeing the corporate line completely. It recently introduced paid leave for employees who get a new dog, for example, allowing them to take seven days’ canine ‘parental’ leave.

Employee relations

(Photo: Post punk - BrewDog's Camden craft beer bar) 

Giving dog owners additional holiday may seem to tick the quirky box rather than have any real merit, but BrewDog is committed to changing the balance in the employer/employee relationship in the hospitality business, McDowall insists. On a micro level, this translates to his job title, internally, at least, as ‘navigator’ rather than head of retail, with the GMs ‘captains’ of their own ships.

In addition, the senior management don’t just spend their days working on their laptops in one of the bars. Under its ‘Dogs on Deck’ initiative, all of BrewDog’s senior management are required to work behind the bars once a month – and at peak times – and are treated the same as the rest of the bar staff.

“The teams love it but we also love it because we can really get under the skin of the business, see who the stars are and get suggestions for improving things,” he says.

On a macro level, McDowall says the company likes to set a good example for the broader industry. Just before he joined, BrewDog became the first multi-site hospitality group to pay the national living wage and it has since introduced other staff-centric schemes.

In the second half of last year, for example, it launched the Unicorn Fund, where every year it shares 10% of the profits taken at each site among the staff who work there.

In recognition of these efforts, BrewDog made it into the Sunday Times 100 Best Companies To Work For list for the first time this year, entering at number 80. McDowall also points out that of all the management jobs it advertised last year, 80% were filled by internal promotions.

Crowdfunding pioneers

(Photo: Rolling out the barrel - BrewDog has 30 UK bars / BrewDog)

BrewDog’s unconventional approach to people extends to customers too. A pioneer of crowdfunding, the company boasts some 56,000 shareholders gained through its various Equity for Punks fundraising rounds. Each shareholder is given a 5% or 10% discount at BrewDog bars, according to their level of investment, and is invited to pre-launch parties and other exclusive events.

McDowall says the shareholders are the group’s most loyal customers and its harshest critics, giving invaluable feedback on its endeavours.

This approach is now being taken Stateside, with the company’s first US fundraise under way. BrewDog is releasing shares to raise up to $50m to build its business in Columbus, Ohio, where it has opened a brewery and its largest BrewDog bar to date, as well as to open further bars across America.

In the UK, the plan is to open a further six to eight bars. A long-planned site in Dalston, east London, is still subject to a complicated deal with the landlord, but heads of terms have been agreed for a second site in Edinburgh and places including Oxford, Cambridge, Manchester, Portsmouth, Plymouth and Exeter plus Peckham, Camberwell, Kings Cross and Brixton in London, are all primary targets.

BrewDog is upping the ante on its site finding. Having previously offered a £1,000 finder’s fee, it now has bigger carrots for bigger premises, with up to £10,000 up for grabs.

The aim, says McDowall, is to hit 65 to 70 bars in the UK by 2020 with a similar number internationally, something he describes as a “comfortable target”.

Dalston, east London, is still subject to a complicated deal with the landlord, but heads of terms have been agreed for a second site in Edinburgh and places including Oxford, Cambridge, Manchester, Portsmouth, Plymouth and Exeter plus Peckham, Camberwell, Kings Cross and Brixton in London, are all primary targets.

BrewDog is upping the ante on its site finding. Having previously offered a £1,000 finder’s fee, it now has bigger carrots for bigger premises, with up to £10,000 up for grabs. The aim, says McDowall, is to hit 65 to 70 bars in the UK by 2020 with a similar number internationally, something he describes as a “comfortable target”.

Global hitlist

Up to last year, all of BrewDog’s 16 international sites were operated with local partners on a franchise basis. In November 2016, it opened its first international company-owned site in Berlin. McDowall anticipates that in future new territories, it is likely the company will open the first flagship store in a key location, then work with partners to roll the brand out further.

Paris and Amsterdam are likely medium-term targets. This year Dublin will get its first and second BrewDog bars and Tokyo and Columbus their second. Reykjavik, Budapest, Tallinn, Copenhagen, Vienna, Zurich, Australia, China – in fact pretty much anywhere – is on the international hit list.

The company is in the midst of rolling out, where possible, US-style direct draw cellar systems. This significantly reduces the distance beer needs to travel to get to the tap, thus enhancing quality. It is also trialling draught-beer vending machines, and takeaway beer from mini bottle shops and beer fridges.

Food sales also have room for growth. Food presently accounts for 13% of sales in the bars, but McDowall believes there is an opportunity to push this to 20% (at the Columbus bar it is actually 40%). A pizza menu is proving successful at smaller bars without a full kitchen, while the broader menu used for the larger sites, featuring burgers, has had more vegetarian and vegan options added.

BrewDog has also recently launched a trial weekend brunch menu at four sites where same-day food sales have already increased by some 20% to 25%.

The company may no longer be a young pup, but McDowall is out to prove that there’s life in the old dog yet.

A version of this article first appeared in the April issue of sister title MCA , and then appeared in the May issue of Restaurant magazine, and was adapted for the web by Hannah Thompson. Subscribe to Restaurant from just £63 per month here!