Storm Clouds Brewing: BrewDog hit by £13m loss despite craft beer boom

August 21, 2021

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3 min read

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What's going on here?

Scottish brewer and bar operator BrewDog has reported £13m in pre-tax losses for 2020. The pandemic-induced hit to BrewDog’s profitability overshadowed booming craft beer sales on its online platforms.

What does this mean?

Brewdog’s recent financial accounts, filed with Companies House, reported revenues of £238m for 2020 – up 10% from 2019. The rise in revenues is thanks to the brewer’s fast-growing grocery and e-commerce channels. Despite BrewDog’s clever use of its online offering, its losses from the pandemic outweighed its revenue. BrewDog runs a chain of bars while also producing craft beer, which means it was especially hard-hit by Covid-19 lockdowns. After the pandemic shuttered hospitality venues, the beer powerhouse shipped 750,000 orders to thirsty customers over 12 months.

It is easy to forget that BrewDog has not been around for that long. The firm, founded in 2007, markets itself as an upstart challenger to established breweries such as Carlsberg and Heineken. However, these days BrewDog is a household name. The brewer operates more than 100 bars in cities including Las Vegas, Tokyo, Shanghai and Brisbane. BrewDog’s chief executive James Watt called the revenue increase “the most significant achievement in our short history”.

What's the big picture effect?

One effect of the pandemic has been to increase the flexibility of corporate supply chains and production lines. Many companies have learned to pivot and become creative in how they utilise resources. BrewDog, for instance, responded to the initial lockdowns by switching to producing hand sanitiser for the NHS at its Aberdeenshire distillery. In a nutshell, as pandemic restrictions ease, things may never go back to normal as we knew them. A further indication of the changing corporate landscape is the rise of BrewDog’s online shop. Mr Watt recently described the e-commerce platform as “one of the most important divisions” of the brewer’s entire global operation. While we can expect brick and mortar venues to remain a feature of the hospitality industry, the shift to online services continues to accelerate.

BrewDog’s latest financial results also illustrate the rapid growth of the challenger brewer. Despite (or perhaps because of) this rapid growth, BrewDog has been no stranger to controversy – most recently, claims of poor working conditions. In an open letter circulated on Twitter, 61 former employees alleged that the Scottish brewer’s growth had involved cutting corners on health and safety. The revelation is a grey cloud hanging over the recent financial results. The company’s struggles to respond to the criticism risk alienating the crowdfunding investors who have paved the way for BrewDog’s expansion. This group of 180,000 investors, which BrewDog calls “punks”, has injected £80m over the past decade. The punks’ concerns over BrewDog’s future are amplified by attractive financial terms the brewer has offered to private equity groups. These terms mean newer investors risk making nothing or losing money even if the company’s value rises. These issues make it harder for BrewDog to justify a high valuation as it moves towards a planned IPO (Initial Public Offering).

BrewDog’s financial results were revealed as part of a prospectus for its upcoming IPO. The challenge is that BrewDog is now a large business and craft beer is maturing. It’s no longer in the explosive growth category it once was. The Scottish brewer is going to have to work hard to regain the public’s trust. Without trust, it will prove difficult to return to profitability post-pandemic. As companies take advantage of sky-high capital markets (to see our article on that, click here), corporate reputations, employee welfare and profitability will be issues to keep an eye on.

Report written by Deniyi Coker

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