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The REAL story behind BrewDog’s ‘sellout’ is that crowdfunding will only get you so far

The real story behind the news that BrewDog is copping more than £200 million from the private equity firm that also part-owns Pabst Blue Ribbon, is not, despite the howls of “hypocrisy!”, that nobody can resist a big juicy cheque, no matter how punk they claim to be. It is, rather more sadly, that crowdfunding will only get you so far, and if you have really big ambitions, you’re going to have to get in bed eventually with The Man.

Crowds of crowdfunders: a scene from the BrewDog AGM in Aberdeen earlier this month

The deal with TSG Consumer Partners, the $5bn 30-year-old San Francisco-based private equity firm, sees TSG acquire “approximately” 22 per cent of BrewDog for what the Sunday Times says is £213 million, split between a £100 million investment in the firm and £113 million paid to existing shareholders.

Of the two founders, James Watt is seeing his stake in the firm drop from 35 per cent to 25 per cent and Martin Dickie’s slice goes down from 30 per cent to 22. It’s not clear (to me, anyway) if that dilution is because the pair are selling 18 per cent of the firm between them to TSG, or some of the fall in their percentage ownership comes from new shares being issued: the Sunday Times says one of the motions passed at last month’s BrewDog AGMEGM in Aberdeen saw the creation of a new class of preferred shares, which would guarantee TSG a minimum compound annual return of 18 per cent if the company is bought or floated. There’s a fair bit of dilution, I reckon, or the figures for how much existing shareholders are getting out of the deal don’t add up. But even so, I’d say James is receiving north of £50 million and Martin more than £40 million. Not bad for ten years of being rude about the rest of the UK brewing industry and winding up the Portman Group. Looks like Dr Johnson’s comment more than 230 years ago about selling a brewery being the way to become rich beyond the dreams of avarice is still true. According to Watt, the sums in the deal mean BrewDog now has an enterprise value of £1bn (I make it £968 million, but hey, £32 million is mere loose change), thus making it the first new British brewery “unicorn”.

The most important figure, however, is the £100 million BrewDog now has to play with. That’s four times the amount the company has raised so far through its Equity for Punks crowdfunding schemes, which have given it more than 50,000 shareholders, but taken six years. The company is currently attempting to get $50 million through Equity for Punks USA, though this does not appear to be going anything like as well as its British crowdfunding efforts: the latest figures seem to suggest only $3.5 million or so has been gathered in. That size of sum doesn’t go very far: the hotel and sour beer plant BrewDog is building next to its new brewery in Columbus, Ohio, which finally opened in March, several months late, is costing $6 million. Earlier this month the company announced that it was looking to open breweries in Asia and Australia: based on how much it spent on the Ellon brewery in Aberdeen, that’s £40 million to £50 million that will be needed, in addition to the money required for the planned expansions in Ellon and Columbus. Crowdfunding simply won’t cover expansion of that magnitude.

Tying up with someone like TSG was pretty inevitable, then, if Watt and Dickie wanted to maintain the momentum they have built up with BrewDog. And why should they not? Is it somehow not “punk” to want to be as successful as you can be? Are they meant to say: “No, that’s it for us, really, we’re just going to sit on our arrises from now on”? If you believe in your product, surely you should want to reach as many people with it as possible, however that possibility has to come about? As Watt said in the note that went out to shareholders announcing the TSG deal, it represents “a launch pad for us to turbocharge our mission to make the world as passionate about craft beer as we are.”

Some have declared the TSG deal a betrayal of all the people who bought shares in BrewDog apparently believing that Watt and Dickie would never “sell out”; but this “betrayal” involves a pretty enormous return on those Equity for Punk backers’ investments. As Watt said: “Shares purchased in Equity for Punks I, which closed in February 2010, are now worth 2,800 per cent of their original value. Even craft beer fans who invested in Equity for Punks IV last year have seen the value of their shareholding increase by 177 per cent in just one year.” You don’t get that sort of return putting your money in Nationwide.

Mind, it was perhaps a little naughty of BrewDog to describe TSG as “one of the world’s leading growth funds with successful investments in global brands like Pop Chips and Vitamin Water” without adding that it also has a substantial minority holding in Pabst, purveyor of just the sort of industrial brews Watt and Dickie swore they would never sell out to. I am sure Alastair Hook and the guys at Meantime, whose beers BrewDog withdrew from its bars after the Greenwich brewer was bought by SAB Miller, are smiling sardonically.

Plain and powerful: 1930s German brewery advertising

In the 1920s and 1930s, cafés and bars in German-speaking Europe were decorated by enamel advertising signs promoting the local brewer that have rarely been bettered for their visual qualities: plain, simple, striking and powerful. Here are some of my favourites:

The Sacrau brewery opened in Zakrzów, a suburb of Breslau – modern Wrocław – in what was then Germany and is now Poland in 1885. It finally closed in 1995
The Sacrau brewery opened in Zakrzów, a suburb of Breslau – modern Wrocław – in what was then Germany and is now Poland in 1885. It finally closed in 1995
The brewery was founded in the 17th century in the Moravian village of Jarošov, next door to the town of Uherské Hradiště. Later called Pivovar Jarošov, it closed in 1997
The brewery was founded in the 17th century in the Moravian village of Jarošov, next door to the town of Uherské Hradiště. Later called Pivovar Jarošov, it closed in 1997
The Bürgerliches Brauhaus Breslau, or Breslau Burgers' Brewery, in modern Wrocław, Poland, was founded in 1894 and acquired by the Breslau innkeepers’ association to supply its members with beer. In 1945 its name was “Polonised” as Browar Mieszczański, and it closed in 1996. The six-pointed star is the brewers' alchemical symbol, combining fire, air, earth and water.
The Bürgerliches Brauhaus Breslau, or Breslau Burgers’ Brewery, in modern Wrocław, Poland, was founded in 1894 and acquired by the Breslau innkeepers’ association to supply its members with beer. In 1945 its name was “Polonised” as Browar Mieszczański, and it closed in 1996. The six-pointed star is the brewers’ alchemical symbol, combining fire, air, earth and water.
The Engelhardt brewery was founded in Berlin in 1860, and closed in 1998
The Engelhardt brewery was founded in Berlin in 1860, and closed in 1998
The Brauhaus Gunzenhausen, ran by the Müller family in Gunzenhausen, Bavaria, had a claimed foundation date of 1564 but closed in 1998
The Brauhaus Gunzenhausen, ran by the Müller family in Gunzenhausen, Bavaria, had a claimed foundation date of 1564 but closed in 1998
The Gorkauer Bürgerbräu was opened in the Lower Silesian village of Sobótka-Górka, Gorkau in German, in 1817 by Ernst von Lüttwitz. Production ceased during the Second World War but it reopened in 1945 and was finally closed in 1998.
The Gorkauer Bürgerbräu was opened in the Lower Silesian village of Sobótka-Górka, Gorkau in German, in 1817 by Ernst von Lüttwitz. Production ceased during the Second World War but it reopened in 1945 and was finally closed in 1998.
The Haase brewery was founded in Breslau in 1858 by Eduard Haase, whose surname is the German word for “hare”, hence the brewery logo. It was the biggest brewery in Eastern Germany, but was badly damaged during the attempted defence of Breslau against the Russians in 1945 and never reopened
The Haase brewery was founded in Breslau in 1858 by Eduard Haase, whose surname is the German word for “hare”, hence the brewery logo. It was the biggest brewery in Eastern Germany, but was badly damaged during the attempted defence of Breslau against the Russians in 1945 and never reopened
Founded in Breslau in 1844 by a man named Carla Kipkego, called Carl Kipke in German. Ceased production during the Second World War
Founded in Breslau in 1844 by a man named Carla Kipkego, called Carl Kipke in German. Ceased production during the Second World War
The Brauerei Ernst Bauer was founded in Leipzig in the 19th century and used as its logo the tower of Leipzig’s town hall. It was nationalised in 1972, but privatised 20 years later. Brewing stopped in 2008
The Brauerei Ernst Bauer was founded in Leipzig in the 19th century and used as its logo the tower of Leipzig’s town hall. It was nationalised in 1972, but privatised 20 years later. Brewing stopped in 2008
Bilin, in Czech Bílina, is a town in the modern Czech republic that was part of the historic German-speaking Sudetenland, incorporated into Germany between 1938 and 1945.
Bilin, in Czech Bílina, is a town in the modern Czech republic that was part of the historic German-speaking Sudetenland, incorporated into Germany between 1938 and 1945.
Brauerei Baar is a still-open brewery, founded in 1862 in the canton of Zug in Switzerland
Brauerei Baar is a still-open brewery, founded in 1862 in the canton of Zug in Switzerland

Will Big Lager one day go the same way as Big Porter?

I gave a talk at the Victorian Society’s “Beer and Brewing Study Day” yesterday in the Art Workers’ Guild building in Bloomsbury on “The Decline and Fall of Heavy Wet”, “heavy wet” being a 19th century slang expression for porter. I described how in 1843 the Scottish journalist William Weir called porter “the most universally favoured liquor the world has ever known,” and declared that “porter drinking needs but a beginning: wherever the habit has once been acquired, it is sure to be kept up.” But even then, the dark, hoppy, bitter beer that had been a favourite of everybody from dockers to dukes for more than a hundred years was in decline, losing sales to mild ale, a sweeter pale drink. Within 40 years mild ale had completely eclipsed porter as the favourite style of most beer drinkers, and mild was to remain number one until the 1960s – when it too, was turfed off the throne. The beer that replaced it, however, bitter, had barely three decades at number one before falling to the growing popularity of lager, which became the biggest seller in the 1990s. And I finished with this question for the audience: is there any reason why Big Lager should not, one day, follow Big Porter – and Big Mild – into oblivion?

Tom and Bob order quarts of heavy wet at a club for coal heavers (note the fantail hats, which hang down at th rear and protect the wearer's jacket from the coaldust from the sacks they carry on their backs: the president of the assembly, on the far left, has turned his hat around) - from the anonymously-written Real Life in London, 1821
Tom and Bob order quarts of heavy wet at a club for coal heavers (note the fantail hats, which hang down at the rear and protect the wearer’s jacket from the coaldust from the sacks they carry on their backs: the president of the assembly, on the far left, has turned his hat around) – from the anonymously written Real Life in London, 1821

Big Porter really was big. Those who brewed it became astonishingly wealthy. Samuel Johnson was talking about the opportunities available to the purchaser of a London porter brewery when he spoke about becoming “rich beyond the dreams of avarice”. Samuel Whitbread, who ran one of the capital’s biggest porter breweries, in Chiswell Street, was “said to have been worth a million at least” when he died in 1796, according to the Gentleman’s Magazine, a fortune equivalent to perhaps £1.5 billion today. The porter brewers’ wealth brought them considerable influence: all seven of the biggest London breweries had multiple members of parliament among their partners.

Samuel Whitbread, porter brewer, worth £1m in 18th century money
Samuel Whitbread, porter brewer, worth £1m in 18th century money

In 1823, porter output in London hit 1.8 million barrels, after a continual rise that had lasted 50 years. But this was its peak: by 1830 porter production would be down 20 per cent on its 1823 level. What was replacing it was mild ale, made for quick consumption, slightly stronger than porter, pale in colour, unaged and therefore sweeter, less acid than porter. A House of Commons select committee on the sale of beer in 1833 was told that the London drinker “will have nothing but what is mild, and that has caused a considerable revolution in the trade, so much so that Barclay and Perkins, and other great houses, finding that there is a decrease in the consumption of porter, and an increase in the consumption of ale, have gone into the ale trade; nearly all the new trade is composed of mild ale.”

In the early 19th century, ale brewers and beer (that is to say, porter and stout) brewers were still different concerns in London, with the ale brewers much smaller than their rivals. But as the demand for ale grew, so the ale brewers grew too, boosting companies such as Charrington in the Mile End Road and Courage at Horsleydown on the south bank of the Thames, almost opposite the Tower. Charrington’s trade increased almost 2 1/2 times between 1831 and 1851, for example. In 1814 it was producing just 16,510 barrels a year, all ale, when Barclay Perkins, then London’s leading brewer, was making 257,300 barrels of porter: by 1889 Charrington’s output had risen to more than 500,000 barrels a year, level with Barclay Perkins.

A couple of ads for Charrington's XX ale in 1829 this is pale ale in the earlier sense of a lightly hopped but strong pale malt liquor, not the heavily hopped India Pale Ale: these ads are actually from an Australian newspaper
A couple of ads for Charrington’s XX ale in 1829 this is pale ale in the earlier sense of a lightly hopped but strong pale malt liquor, not the heavily hopped India Pale Ale: these ads are actually from an Australian newspaper

The porter brewers responded by moving into the ale market, particularly after the Beerhouse Act of 1830 dramatically increased the number of available licensed outlets. Whitbread, then the third or fourth biggest brewer in London, whose production was entirely porter up to 1834, started brewing mild ale in 1835. Ale quickly rose from nowhere to more than 10 per cent of Whitbread’s production by 1839, and more than 20 per cent by 1859, when Whitbread’s porter sales had dropped by almost 30 per cent compared to 25 years earlier. At Truman’s, then fighting with Barclay Perkins to be London’s biggest brewer, the swing from porter was stronger still, with ale making up 30 per cent of production by 1859.

Continue reading Will Big Lager one day go the same way as Big Porter?

More frequently repeated beery history that turns out to be totally bogus

Bass No 5 signIt’s depressing and frightening, sometimes, if you start tugging at loose threads in the historical narrative, because the whole fabric can start unravelling. This all began with the Canadian beer blogger and beer historian Alan McLeod emailing me about claims that the “Hull ale” that was being drunk in the 17th century in London was really ale from Burton upon Trent, shipped down that river to the sea, and taking the Yorkshire port’s name on the way. Did I have any views, he asked?

I confess I’ve repeated the idea that “Hull ale probably really means Burton ale” myself, but Alan had several good points to make against it: Hull, like other ports, was known for its own ales, Burton lacked common brewers until the start of the 18th century, and in any case, until the opening of the Trent Navigation in 1712 it was not easy for Burton brewers to get their ales shipped out anywhere. So I hit the internets.

It all began to fall down with Peter Mathias’s reference in the otherwise magisterial The Brewing Industry in England (p150), written in 1959, to Samuel Pepys drinking Hull ale in London in 1660. Mathias wrote that “of course”, this Hull ale was “probably” from Burton upon Trent, with the town allegedly being “well known in the capital for its ale in the seventeenth century”, and the first consignment “reputedly” sold at the Peacock in Gray’s Inn Lane London in 1623. However, once you start digging, these claims appear to be completely wrong. The reference Mathias gives, to back all this up, The history and antiquities of Staffordshire by Stebbing Shaw, published in 1798, Volume 1 p13, is only available in Google Books via snippet view but it appears not to give a specific year for Burton Ale being sold at the Peacock at all. What it says, talking about Burton, is:

“And so great is the celebrity of this place for its ale brewed here, that, besides a very considerable home consumption, both in the country and in London (where it was first sold at the Peacock in Gray’s Inn Lane, a house still celebrated for the vending of this liquor) vast quantities have been exported to Sweden, Denmark, Russia and many other kingdoms.”

– but with no date for when Burton Ale was first sold at the Peacock.

Almost a century before Mathias, William Molyneaux, in Burton on Tent: Its History, Its Waters and its Breweries (1869 ) claimed in a footnote (p223) that

“About the year 1630 Burton ale was sold at the Peacock inn in Gray’s Inn Lane and had even then acquired a high reputation amongst the famous ales of England.”

But Molyneaux offered no reference to back this up. This claim was subsequently repeated in several books. However, there is no evidence at all that the Peacock was even open in the 17th century. Continue reading More frequently repeated beery history that turns out to be totally bogus

AB InBev acquires Camden Town: least surprising news in the history of beer

I was actually speaking to a senior London brewer about something else entirely on Monday when he asked me if I had heard that AB InBev had bought the Camden Town Brewery, and my instant response was: “That’s the least surprising news I’ve ever heard.”

Jasper Cuppaidge, evil mustachio-twirling villain – if you believe Twitter …
Jasper Cuppaidge, evil mustachio-twirling villain – that is, if you believe Twitter …

Camden Town has always seemed to me the Brewery Most Likely to Sell Out to a Big Buyer – certainly since its beers started appearing on bartops all over London. It’s got a great brand name, picking up the associations of a part of the capital that is somehow, at least in its image, gritty, urban, young, trendy and authentic all at the same time (possibly relevant trivia: Camden is where Scrooge’s clerk Bob Cratchit and his family lived, which suggests the place has had a reputation for cheery grittiness since Dickens’s time).

But it ought to be expected that the brewery is a great brand: founder Jasper Cuppaidge is married to the daughter of Sir John Hegarty, a partner in Bartle Bogle Hegarty, one of Britain’s most renowned advertising people, the man who gave us Vorsprung Durch Technik and Nick Kamen stripping to his boxers in a launderette to advertise Levi’s, and who is – or was – Camden Town’s chairman. If Hegarty and his ad world pals didn’t stump up the initial funding that allowed Cuppaidge to install all that shiny brewing kit from Germany’s Braukon in a Kentish Town railway arch in 2010, then I WOULD be surprised. And if there wasn’t always the possibility of a trade sale in the business plan, I’d be pretty surprised there too. (More trivia: Hegarty apparently designed Camden Town’s logo, with the horseshoe shape a nod to the Horseshoe in Hampstead where Cuppaidge started brewing)

Continue reading AB InBev acquires Camden Town: least surprising news in the history of beer