What the BBC’s 2022 programme added to Private Eye’s analysis of Brewdog’s business model
The BBC Scotland investigation into Brewdog broadcast on 24th January 2022 drew most attention, rightly, to the final segment focusing on the toxic culture at the brewer and bar chain. It takes a lot of courage to speak out against even an ex-employer. Recognising a union still can’t come soon enough for Brewdog.
Brewdog complained to OfCom and after an 18 month investigation an adjudication has found that the entire contents of the BBC programme amounted to fair comment
The programme also covered Brewdog’s marketing strategies and its business model. It’s this last that ultimately is the key to the future of the brewer.
Private Eye covered some details in April 2020 and the BBC added more:
Private Eye (1517) carried a lengthy analysis of the structure and finances of Brewdog. Private Eye generally eschews such new-fangled things as the interwebs but a summary is below
The piece is interesting because Brewdog is far from transparent about how it works despite its Equity for Punks ‘ownership’ scheme.
The nub of the Eye’s analysis is contained in these sentences
‘it is not suggested that any of these transactions are illegal or improper. The question is whether they are appropriate for a company with 100,000 other shareholders’
Of interest it notes that while a profit of £3.8m was made in 2016 this had reduced to £1.4m in 2017 and by 2018 had become a pre-tax loss of £576,000. More recently Brewdog hasn’t made a profit in the last two years and has retreated from paying employees the real living wage.
Private Eye also noted:
When the private equity deal with TSG was announced in April 2017, it was stated to have involved a total of £213m, including £100m for new shares to fund Brewdog. The normal private equity playbook would look for an exit by sale or listing within five years. It’s now two years beyond that but of course the pandemic has intervened.
There was talk of an IPO (a public share flotation) in 2021 and this remains on the agenda. A key issue is what the valuation of Brewdog might be. Getting this right is key as to whether the IPO works. Brewdog has argued the company could be worth £1.8bn, but it could be much lower. The BBC revealed that when TSG brought a stake a new class of share was created which guarantees TSG an 18% return. If the valuation is correctly high this might be OK. If not the return provided to Equity for Punks shareholders will be less.
The BBC also noted that Dickie and Watt had personally made a substantial sum out of the TSG deal but chose not to invest this in Brewdog but rather launched another Crowdfunder.
The Eye analysis focused on a Company named JBW77 that appears to be linked to Brewdog founder James Watt and various holdings, transactions and deals that it has been involved in.
The BBC revealed that Watt has funds in the Cayman Islands, a tax haven. He is hardly alone in that but it’s not very anti-Establishment. It also revealed that Watt has £500,000 worth of shares in Heineken one of the big brewers he reviles. He tweeted that he subsequently sold the shares and explained it dated to when Brewdog were considering partnering with Heineken for distribution. These of course are his personal dealings not Brewdogs but James Watt is the figurehead.
Where the toxic culture and Brewdog’s business intersect is in the area that worries a lot of businesses-reputational damage. That might impact a successful IPO particularly if Watt remains in charge.
It’s a pity it’s no longer just about the beer as it was back in 2007 but the realities of 2024 have to be grappled with. Will they be? A first indication will be the comment, if any, Brewdog makes on the OfCom adjudication
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