Crowdfunding, global expansion, its own TV show and the odd stuffed squirrel – craft beer company BrewDog is shaking up the drinks industry. Founders James Watt and Martin Dickie reveal how the business has grown and why they’ll never sell out to the establishment
“For too long people have been sold a fizzy, insipid lie,” declares James Watt, eyes staring on full beam. “For too long consumers have been lied to by faceless, monolithic, generic mega-corporations.”
We’re barely two minutes into our interview, and the co-founder of BrewDog is already off on his favourite rant. BrewDog is the self-styled bad boy of British brewing. “Our mission when we set up the company was to make people as passionate about great craft beers as we are, and that remains our mission today and will be forever.”
The mantra of ‘them and us’, of the street-fighting guerrilla versus the boardroom gorilla, has driven the business from day one. “If you think back to what there was in 2007, it was myself and James and a dog in a small industrial unit in Fraserburgh [Aberdeenshire] with a brewery that was cobbled together with whatever we could afford,” explains the other half of BrewDog, Martin Dickie. The pair have been friends since school and shared student digs at Edinburgh, where Watt read law and economics while Dickie studied brewing at Heriot-Watt.
BrewDog has come a long way since, and fast. It is said to be the UK’s fastest-growing food and drinks company, with annual average growth of 167 per cent and a predicted turnover of £19m this year. The firm’s top-selling brew is Punk IPA, which Dickie describes as “a rebellious beer that could take on the status quo in UK beers”. He denies it was in any way pre-conceived or market-led. “It was basically us trying to get a little bit of our personality and enthusiasm for what we were doing into the brand. So it was a bit gritty… far from polished.” To which his partner adds: “We’re selfish and make beers we want to drink. If people like them – amazing, and if they don’t, then we don’t care.”
Of course, if you are struggling to scratch a living in north-east Scotland flogging beer from the back of a pick-up truck, you’re bound to feel like an underdog, if not a rebel. But in the intervening years, BrewDog has changed beyond recognition. In January last year, thanks to the UK’s most successful crowdfunding initiative to date, it moved into a stunning new £7m brewery in Ellon, up the coast from Aberdeen. Excited first minister of Scotland Alex Salmond called it “the Star Trek of brewing”.
Meanwhile, the craft-beer revolution continues apace with more than 1,000 UK microbreweries – double the number of a decade ago – winning sales from the ‘Big Four’ brewers [Heineken, SABMiller, Anheuser-Busch InBev and Carlsberg] whose brands fight for share of a mainstream beer market in slow, seemingly terminal, decline. According to a report by CGA Strategy, craft beer sales grew 79 per cent in the UK in the year to August 2013, and a quarter of the country’s pubs and bars now stock them.
“Sounds like you’re winning,” I suggest. “Winning?” Watt splutters. “In the UK, the type of beers we’re making account for less than one per cent of the market. There’s a hell of a lot more to do to increase the understanding and appreciation of beer, and ultimately raise its status. Things are moving in the right direction, but we’re a long way from winning anything.”
Recovering from the knocks
Remembering the pair’s initial setbacks, Watt says: “We loved the knocks because if it was easy, then everyone could do it. It’s tough. You’ve got to be focused. You’ve got to believe in yourself and what you’re trying to do, and have faith in the vision. So many people told us ‘the beer’s too hoppy’, ‘the beer’s too expensive’, but we didn’t care. If we were going to fail, we were going to fail on our terms, making beers that we loved.”
Dickie nods: “Yeah, all we did was work. Seven days a week, and in the brewery – probably 18 to 20 hours a day. It was nothing but a lot of hard work and belief.” However, having set up the company with £50,000 of personal savings, a £30,000 loan from the Bank of Scotland and £5,000 from the Prince’s Scottish Youth Business Trust, BrewDog was going nowhere until its first big break in year two.
“We’d sent Punk IPA and a couple of other brews to a Tesco beer competition,” says Watt, who was called a fortnight later to be informed the beers had come first, second and third – the supermarket wanted to list them nationwide. “I sat there with my best poker face on and didn’t mention anything about it being two guys and a dog filling bottles by hand.” They were fast at it, but not fast enough. “We were doing maybe 180 bottles an hour,” says Dickie.
It was time to get serious and invest in an expensive bottling line, but the bank – doubtless distracted by the financial meltdown at the time – refused. Undaunted, the pair, still in their suits, went to a nearby branch of HSBC and, claims Watt, “basically blagged our way to £100,000 of asset finance”. If they were economical with the truth, it seems the bank has since forgiven them, and BrewDog is still with HSBC.
But to compete against the beer giants it needed help, ideally for free. Aside from the media, those co-opted into the BrewDog PR machine included Scottish politicians and the Portman Group – the alcohol industry’s regulatory body. But arguably the team’s longest-serving unwitting member is Jack Law, head of Alcohol Focus Scotland, who could always be relied on to comment.
The company quickly learnt to court controversy and reap column inches, but things were relatively innocent at first, says Dickie. “One of the first beers we got a lot of publicity for was Tokyo – a big, imperial stout with jasmine and French oak that was fermented for about six weeks. We were immensely proud of it.” It also packed a punch, rising from an initial 12 per cent to 18 per cent abv – twice as strong as super- strength lagers. “James’s face was on page 4 of The Sun, and suddenly it was, ‘Binge drinking – blame this man’,” says Dickie.
BrewDog then released Nanny State at 1.1 per cent abv. Law called it “a positive move which proves that low strength doesn’t compromise quality”, though he was suitably unhappy with the name. There was also a brief race with Germany to produce the world’s strongest beer. It resulted in BrewDog’s 55 per cent abv The End of History, which one critic dismissed as “not so much beer, as badly made whisky”. To ensure maximum outrage, the 12 bottles produced were stuffed into taxidermy roadkill. From projecting themselves naked onto the House of Commons to driving past the Bank of England in a tank, the PR pranks continue. But who’s responsible? “Mostly they come from inside James’s head, to be honest,” says Dickie, grinning at Watt. “Yeah, but you don’t take much convincing to do it,” he fires back. “So you’re at least as culpable as I am.” The latest wheeze, launched on the eve of February’s Winter Olympics, was ‘Hello My Name is Vladimir’, an IPA with an Andy Warhol-style label featuring the Russian president. “The Vladimir story was one of the most widely covered and universally acclaimed things we’ve done,” says Watt.
Thirst for craft beer
Everything is tweeted and Facebooked to foreign fans in around 40 markets who now account for over 60 per cent of all sales. Soon after the Tesco deal, they discovered what Watt calls “the huge thirst for amazing craft beer in Scandinavia”. To stoke up interest before launching, beer writers and bloggers were sent samples, and a local beer was created for that market.
“When we went to distributors we were able to say ‘we’ve done the marketing for you, all you’ve got to do is sell it’,” says Watt, who adds that great care is taken with finding the right importer. “We have such a strong ethic and reason for existing that we have to be 100 per cent certain that anyone we partner with holds the same passion for craft beer as we do.”
In 2010, BrewDog opened its first bar in Aberdeen. While many have predicted the death of the pub, Watt is more upbeat. “Clinging on to outdated designs and fusty, old ranges of drinks will not inspire new customers through the door, so pubs just have to remain nimble and understand what people in their pubs want to drink.” Today there are a dozen BrewDog bars in the UK, plus a presence in Stockholm, São Paulo and Tokyo, where a grand opening party last month saw a keg of specially brewed beer delivered in a Union Jack Mini.
The bars inspired BrewDog’s best PR coup to date. In May 2012, it was up for an award at a ceremony in Glasgow, sponsored by Diageo. The judges picked BrewDog, whose name was duly etched on the award. But at the 11th hour, someone from Diageo reportedly told organisers that – unless the winner was changed – they could forget about future sponsorship. It was a spectacular own goal by the drinks giant whose apology three days later did nothing to dampen media interest or the ensuing global Twitter storm. Crucially for BrewDog, it helped reinforce the idea of them and us.
Moment of inspiration
The pair were by no means the first microbrewers in Scotland, but Watt insists they were different. “No one was doing what we were doing, which was high-octane, super-hoppy, full-flavoured, don’t-give-a-damn beers.” While that is obviously opinion, it is undeniable that BrewDog aspired to be more than a small, provincial brewer – one reason why they are now Scotland’s biggest independent brewer, employing 240 people.
Dickie recalls “cracking open little brown bottles of hop-packed Californian beer” as a student in Edinburgh. “It was like nothing I’d ever smelt or tasted before. It was a moment of inspiration of how beer can be an incredible product, and part of your life.” There’s no doubting his passion or his partner’s ambition which, together with clearly defined roles, makes a formidable double act. “James oversees the company and leads the direction of all the sales, marketing and bars, whereas I’ll work with a team of 60 guys here to make sure we’re getting the beers out. It works really well.
“We’ve known each other for so long, we know what we’re best at. If we disagree about something, we can discuss it,” says Watt. As for their lack of experience when starting BrewDog, he believes it was an asset. “It was good that we hadn’t run a business before.” Dickie agrees: “We were both young and didn’t know any better. We had a lot of energy and enthusiasm.”
Social media sensation
BrewDog is nothing if not a triumph of social media – indeed, it wouldn’t exist without it. When sales really took off, the business struggled to keep up and the pair considered involving venture capitalists. “We spoke to a few and we thought we were selling our soul to the devil,” says Watt.
The pair decided instead to turn to their fan base for money through crowdfunding – a concept almost unheard of at the time. “We spoke to five different law companies. The first three told us it was impossible, the fourth that it was going to cost us half a million,” Watt recalls.
Eventually, he found a lawyer who, in return for a percentage of what was raised, agreed to take them on and create a prospectus. “We dealt with a receiving agent who had to build a system based on her requirements and, as a PLC, it all had to be audited. It cost us £150,000,” says Watt. “We gambled the entire future of our company on making this a success.”
On 20 October 2009 Equity for Punks was launched, with 10,000 shares at £230 each for a nine per cent stake in the company. It valued the business at a staggering £23m, yet somehow it worked. The first offer raised £655,000, while the second launched in 2011 brought in £2.2m. The third, where around 42,000 shares were offered at £95 each, completed just before Christmas and netted a record £4.25m – the EU limit on what could be raised through crowdfunding in any one year. “For us, it’s a far better business model,” says Watt. “It raises finance, it builds a community around what we do, and it shortens the distance between ourselves and our best customers.”
With more than 14,500 shareholders, BrewDog has recruited an army of unpaid brand ambassadors. In return, “they get a 20 per cent lifetime discount in our online shop, five per cent in all our bars, exclusive offers on all our new beers and they get an invite to our AGM, which is an epic party, with beer and music,” says Watt.
He claims those who bought in 2009 will have seen a four-fold increase in their investment, which they will soon be able to cash. “We’re going to have a trading platform in place by June, and we aim to have a full AIM listing in three to five years’ time. So this is not just about fluffy, cheap benefits. This is about equity in a business.”
BrewDog’s success has not gone unnoticed in the industry. An edgy punk brand could do wonders for AB InBev, Coors or even Diageo, but Watt shakes his head. “If you’ve got an exit strategy you make very different decisions to those you’d make when you’re doing something because you’re insanely passionate about it.”
For now, the pair are having fun making a second series of Brew Dogs for Esquire’s American cable channel. Since the first aired last September, US sales have doubled. “It comes from us wanting to spread our love and knowledge of craft beer,” says Dickie, the more bashful half of BrewDog. “It was daunting for the first few days, but after a couple of beers we didn’t know the cameras were running,” he laughs. “We made beer on a raft made of kegs floating down a river. We made beer using the power of the sun on top of Mount Evans in Denver. And we made beer soured by our own bodies in Boston.”
Call us old-fashioned – but we think we’ll stick to a Punk IPA.
Brewdog official site