• Eirini Efstathiou

Brewdog: Chaos Behind the Beer Froth

Dubbed as the UK’s largest craft brewer, BrewDog has recently faced allegations that it fosters a ‘misogynistic’ and ‘toxic’ culture. The craft brewer is largely backed by its own crowdfunding program 'Equity for Punks', and the allegations mean that a large number of early retail investors are asking for clarification as to the company's culture. This article discusses BrewDog’s history as a company, private equity and crowdfunding as methods of raising finance, BrewDog’s upcoming IPO and how rumours about the company’s culture have put its ‘small-town’ craft brewer brand on the line. Considering how consumer-led the company is, can the craft brewer win over hearts again?

via BrewDog

BrewDog’s strategy

Founded in Scotland in 2007 by two 24-year-olds, over the past decade, BrewDog gradually rose to become a successful craft beer and pub chain business. The company initially focused on ale and lager production for retail and online purchase and expanded to the bar trade in 2009 with its first outlet in Aberdeen. With more than 100 bars in business, including in the UK, Las Vegas, Tokyo, Shanghai and Brisbane, the company grew its bar portfolio globally and rose to what is now a near $2bn valuation.

BrewDog set off with a strategy of ‘making others as passionate about great beer as we are’, which morphed into a mission still standing today. Founder James Watt has repeatedly expressed disdain at the idea of selling his company to ‘industrial beer’ corporations, since it would impede on the 'craft' brand. Past acquisitions by big players include Molson Coors (Carling, Coors, Blue Moon), Anheuser-Busch InBev (Budweiser, Corona, Stella Artois) and Constellation Brands (Corona Extra, Modelo Especial). Acquisitions by multinational beer companies have been propelled in the last decade by a craft beer sector boom – reportedly an 8% sector growth over the past five years. This also meant several Private Equity (PE) firms turned their attention to the craft industry, including PE firms LNK Partners and Encore Capital taking out stakes in small craft brewers Dogfish Head and Full Sail Brewing.

PE firms typically purchase stakes in private companies, and they comprise institutional and accredited investors. By gaining influence in a company’s decision-making, PE firms stir decision-making towards the most profitable route in order to yield positive returns, with the investment typically lasting 4 to 7 years before selling their stakes out. As will be discussed further below, PE firm TSG took a stake in BrewDog back in 2017, a move that was seen as contradictory to the company’s founders’ goal of preserving a ‘small-town’ craft brewer brand.

One way with which BrewDog offset the risk to preserving its strategy was by setting up its own crowdfunding program ‘Equity for Punks’, which became a key source of early growth for the company. The program was launched in 2010, and attracted almost 150,000 global participants, raising around £80 million. Through the scheme, the company’s userbase grew a vested interest in the company’s products, creating a community of advocates rather than mere customers. BrewDog’s unlisted shares can still be bought, and the company makes the process available on its website.

Crowdfunding: a method for raising finance

Kickstarter; Gofundme; Crowdcube; are some of the most popular crowdfunding pages. Similar to private equity, crowdfunding is a method used by individuals, charities and businesses (including start-ups) to raise capital to finance a new business venture, project, campaign or person. This is done through the use of small amounts of capital from a large number of individuals.

Investment crowdfunding is where businesses seek capital by selling ownership stakes online, in the form of equity or debt. In this way, those who invest directly or indirectly become shareholders by buying shares or debentures and get rights to financial returns. While in private equity the stakes are taken out by the PE firm, which in turn allows them control over the company, in the instance of crowdfunding, the stakes are taken out by the public. Due to the high-risk element of crowdfunding – as a result of the retail element in it – the FCA regulates investment-based crowdfunding to protect retail investors who may be gambling with their money for lack of knowledge, experience or expertise.

One of the biggest risks of crowdfunding is the fact that most businesses seeking finance through crowdfunding are start-ups, and investment may often result in a 100% loss of capital as most start-up businesses fail. Another risk is that the more shares issued through multiple rounds of funding that a business goes through, the more dilution is suffered by investors who hold shares in a business or project, and the less the financial return that they receive e.g. through dividends.

The Crowdfunding industry has grown exponentially over the years. Data shows that the overall crowdfunding market was pegged at $17.2 billion in 2020, and projected to reach $34.6 billion by 2026 at a 17% growth rate. As discussed above, BrewDog crowdfunding pushed it into an early growth, and as of March 2021 the company raised around $100 million across various crowdfunding and private equity rounds.

Other successful businesses which have used crowdfunding in the past include fintech firm Monzo, phone accessory-maker Popsocket, and Oculus, the virtual reality headset.

Recent controversies

In a recent open letter signed by more than 100 ex-staff, BrewDog has been accused of poor treatment of workers, a misogynistic culture, and alleged ‘lies, hypocrisy and deceit’ over PR campaigns. The letter also referred to “toxic attitudes” considered as “an intrinsic part of the company”, while staff also admitted “they have suffered mental illness as a result of working at BrewDog”. The former staff point out a shared experience of a ‘residual feeling of fear’ to express dissatisfaction with the company’s culture, both during their employment and since leaving.

Since the surfacing of the letter, participants of the company’s ‘Equity for Punks’ crowdfunding program have sought clarification from the company’s executives. The scheme’s participants have also been concerned that the company’s executives may be prioritising private equity groups over retail investors, and such priority would also lead to retail investors to potentially losing money.

TSG, a private equity firm which bought a stake in BrewDog in 2017, is guaranteed an 18% compounding annual return on its 22% shareholding in the event of an IPO or sale, and this return would take priority over other shareholders. These preferential rights are set out in the Company’s prospectus; an ‘advertising’ document required to be published under the Financial Services and Markets Act 2000, and in certain circumstances approved by the FCA. The prospectus acts as an information instrument, providing details about an investment offering, in this case BrewDog’s shares offered on its website.

What is more, the prospectus sets out that the Company may undertake further equity financing which may be dilutive to existing shareholders, or even be subject to a reduced entitlement, in the event that the Company does not have enough capital to satisfy the preferential shares of the private equity groups.

In this instance, the divergence between private equity financing and crowdfunding is evident; while crowdfunding offers a means of raising fast finance through the public, it limits current and future negotiation of investment terms and shareholders agreements. This is evident through BrewDog’s prospectus; while the company was propelled into an early growth through a loyal set of customers, their rights have seemingly been diluted after multiple rounds of financing, with their rights being further stomped over by negotiated agreements with the private equity groups.


Over the last decade there has been a clear shift in tastes to local brews, nonetheless BrewDog will have to get to works to regain the trust of the same investors who believed in it back in 2007. The biggest takeaway from BrewDog’s case is the extent to which a company’s culture can have an influence over its valuation and attractiveness as an investment, even more so where a company is being vetted for an upcoming IPO. And although the craft brewer’s founders keep resisting approaches for investment by multinational brewer companies, it still found a halfway house of accepting investment from a PE firm. This investment, however, may pan out as a cost to its loyal fanbase, ‘Equity for Punks’.


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