Features, Trends

Brewdog A New Age Company With a New Age Way to Grow a Global Business

Scotland-based BrewDog brewery is a different kind of company that has a very different way of doing things. The genius is in the beer. If building a local world-class brewery in 10 short years, ready to play on an international stage, is the goal, then, to paraphrase, “I’ll have what they’re having.” But the genius is also in the co-founders’ irreverent attitudes and business approaches that have gained them a solid fan base and built a non-traditional business model.

As a promotional stunt to drive funding from fat-cat London bankers, BrewDog parachuted dozens of costumed taxidermy cats from a helicopter during London rush hour. With heavy media coverage, the stunt was immediate click-bait. There is method in BrewDog’s madness: Each cat carried an investment prospectus for the company’s next round of “Equity for Punks” crowdfunding. And it yielded results: $5 million worth, well on its way to the company’s £$25 million goal.

BrewDogs’ Equity for Punks crowdfunding model has been the driving force in building its breweries and locating its pubs where its loyal Punk investors live. These investors are also funding its overseas expansion and it has landed on our shores, bringing the BrewDog beer experience to the U.S.

Founded in 2007 by James Watt and Martin Dickie, both 24 years old at the time and bored by the industrial-brewed beers and ales then available in the U.K. market, they started crafting tiny batches of extraordinary beer. In the beginning, the founders followed the standard business-building playbook: going to the banks to finance their first brewery and distributing the brew through normal channels.

Within just a year, BrewDog quadrupled its brew production, as a growing fan base of U.K. beer enthusiasts shared James and Martin’s disdain for the usual industrial swill and supported their original mission, “to make other people as passionate about great craft beer as we are.”

But then the alcohol industry’s establishment, The Portman Group tried to shut out the disruptive interloper.

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BrewDog challenged the industry with the launch of its Tokyo brew and its claim as “the strongest beer ever brewed.” The beer industry association, with big-league members including Carlsberg, Diageo, Heineken, InBev and Molson Coors, filed an injunction claiming BrewDog violated the industry’s Code of Ethics. A media-wide firestorm erupted as BrewDog fought back, countering that Portman was impeding the development of smaller brewing companies. After an eight-month legal battle, BrewDog was cleared of all charges and allowed to continue its contrarian marketing campaign.

Perhaps it was due to this first David vs. Goliath battle, or James’ and Martin’s entrepreneurial zeal, but this initial dog fight set the company along a new course in opposition to the traditional brewery business. They developed what they call an “anti-business business model” based on building a community that shares not just love for BrewDog beer, but actual ownership in the company.

Named in honor of its flagship Punk IPA, it’s first Equity for Punks crowdfunding campaign was launched in 2009 and initially attracted over 1,300 investors, with two shares in the company offered for a modest $95 investment. In addition to shares, Equity Punks also get discounts in each of the company’s 29-and-counting U.K. BrewDog pubs and 16 international locations, plus an invitation to its “Annual General Mayhem” shareholders meeting.

And BrewDog continues to nip at the heels of the beer establishment with new media-worthy events including a game of beer golf where James and Martin teed up to drive industrial brewed beer bottles into oblivion. Who can’t help but cheer BrewDog along in its media-savvy quest to make more people passionate about great craft beer?

BrewDog’s invasion into the U.S. Market

After attracting 55,000 Equity for Punks partners through four U.K. campaigns, BrewDog set to invade the world’s largest craft beer market, the U.S. Adapting its crowdfunding model to the U.S. investment market, it has already garnered buy-in from 5,000 Punk partners at $95 for two shares. The new U.S. brewery, located in Canal Winchester, Ohio, just outside of Columbus, will join its Scotland-based Ellon brewery to supply the world with BrewDog beer.

As the Canal Winchester brewery ramps up production, the company has opened its first U.S. DogTap taproom to introduce the brand to the states-side market. Five additional BrewDog pubs are in the works for the U.S., as well as a beer-themed hotel adjacent to its Ohio brewery, crowdsourced through Indiegogo.

A unique feature of the DogHouse Hotel will be a sour-beer brewing facility co-located in the hotel itself, so guests can have bragging rights for sleepovers in an actual brewery. Ben Stewart, heading up sales and marketing for BrewDog USA, says, “There are a few hotels where you can stay near a brewery, but there is only one where you can wake up inside a brewery.” Adding to the hopped-up beer experience for guests will be Punk IPA on tap in the rooms, Beer Spa treatments with bespoke hop oils, and in-suite beer fridges in the shower.

BrewDog has big plans for the U.S. market, which co-founder James Watt notes is a “country that loves to supersize.” He continues, “We want to take our craft beer revolution global. From building a brewery, to opening craft beer cathedrals across the country, and even giving our American fans the chance to own a part of the business, we are going big. We still have a long way to go, but we can’t wait to firmly plant our BrewDog flag on the Land of Independence.”

Why BrewDog is Important Not Just to the Beer Market

You don’t like beer or you don’t compete in the craft beer market, so why is BrewDog an important company to know about? Because of its over-the-top, new-age business model, a model that other brands could emulate.

I first learned about BrewDog browsing through a copy of Mid-Atlantic Brewing News. The article reported that the executive director of Gloucester’s Main Street Preservation Trust, located in Tidewater area of Virginia, was lobbying its local community to recruit the required 500 Punks to pony up the minimum $95 investment to be one of the first U.S. BrewDog pub locations. Thanks to director Jenny Crittenden’s personal efforts, she claims Gloucester is way ahead of other cities vying for the honor, including New York, Chicago, San Diego and Houston.

BrewDog has previously selected sites for its nearly 50 worldwide locations relying upon real consumer-loyalist data to set up shop. “With over 55,000 ‘Punk’ partners, we have heat maps of where our Equity partners live,” Ben says.

So site selection becomes as easy as looking at a map to see where BrewDog fans congregate. Ben adds, “It’s a clever way to look at locations based upon our established base of ‘Punks.’ It’s a nice way to give back to our people and it also makes sense that you have a base of a lot of people who believe in what you are doing.”
BrewDog’s personal connection to its brand loyalists is enhanced by the storyboards in local pubs with pictures of its local equity partners. Such efforts go far beyond traditional brand loyalty rewards programs, club and membership models, and other traditional loyalty-building concepts. The BrewDog Punk partners have a real vested interest in the overall success of the brand. The brand belongs to them, not them belonging to some brand’s club. “We just announced that for those who invested in round one, their shares are worth 2,800 percent more than they were originally,” Ben says.

The ultimate end game for the company is to “float the business on the stock market, so those people who invested in shares will get real monetary value,” Ben explains. For some, the opportunity to cash out has arrived. A recent strategic equity investment by San-Francisco-based TSG Consumer Partners values the company at $1.24 billion, and rounds one through four Equity for Punks partners are offered a chance to sell 15 percent of their shares (capped at 40 shares per investor) at the $1.24 billion valuation. In keeping with the company’s crowdfunding model, Equity Punk partners were given a chance to vote in advance on the proposed TSG investment, with 95 percent of shareholders favoring the deal. TSG’s funding is slated to provide growth capital for new breweries in Asia and Australia.

“Our new partnership with TSG is a launch pad for us to turbocharge our mission to make the world as passionate about craft beer as we are, but it’s also a validation of our crowdfunding model,” James Watt explains. “Our Equity Punks now own part of an independent business that has attracted an awesome partner who will help grow their investment even further. Crowdfunding can no longer be viewed as alternative finance; this is the democratization of finance.”

BrewDog’s founders started like thousands of other entrepreneurial dreamers, hands-on hobbyists working out of a garage to craft their products and selling their stuff out of the back of a van. The founders had an idea for a product that they could create and that they believed would make a meaningful difference to others, and which people would pay for. And they were right.

BrewDog has pushed the boundaries and made missteps along the way, which they are not afraid to admit. But by not taking themselves too seriously, though never compromising their mission, they have made bold moves that have ignited the passion of people all over the world.

If they had played it safe, they probably would have built a nice little business, like so many other aspiring entrepreneurs. But they didn’t follow the traditional game plan and that’s what makes their story so important. In exchange for their loyalists’ support, BrewDog gave them a valuable stake in the business that assures long-term customer loyalty and business growth in the future.

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