Brewdog sale: what next for the craft beer giant?
Brewdog’s bars sat empty on Monday, lights off and beer taps dry, as weeks of frenzied anticipation over the sale of the craft beer titan built to a head.
It quickly became clear on Monday afternoon that many of those bars would never see another punter walk through their doors. For the venues lucky enough to still be operating by Tuesday morning, staff found themselves working in a very different business.
The beer firm, which was once valued as high as £2bn, sold for just £33m to American cannabis and alcohol group Tilray Brands in a rescue deal, a sombre twist of fate for Aberdeenshire-based Brewdog, a company widely credited for having kickstarted the British craft beer craze after scaling rapidly, driven by an irreverent, countercultural ethos.
The sale is the latest proof that Brewdog was unable to deliver on its lofty ambitions. Co-founders and former school mates James Watt and Martin Dickie had already stepped away from the firm, which had been dogged by allegations among its staff of a culture of fear and a “cult of personality” – allegations which Watt rejects.
While the sale to Tilray will preserve the Brewdog brand – at least for now – the deal comes at a significant cost, especially for the company’s staff.
Which bars will dodge the chop?
The terms of the deal mean Tilray will acquire Brewdog’s global brand, its UK brewing operations and a select number of its UK bars in exchange for £33m in cash.
Those hoping to continue frequenting Brewdog’s bars will be lucky, as long as they live in London. Five of the English bars bought by Tilray are in the capital: Canary Wharf, Paddington, Seven Dials, Waterloo and, in the Square Mile, on Great Tower Street.
Two further bars in England – the Birmingham and Manchester Peter Street locations – were bought by Tilray and will remain open, while three in Scotland and one in Dublin will keep the lights on.
This means 38 Brewdog bars in the UK will shut immediately, leading to nearly 500 job losses.
The widespread closures are the latest sign of deep challenges facing the hospitality industry in the UK. The owner of Revolution Bars appointed administrators earlier this year, leading to hundreds of job losses.
The pubs crisis hit an inflection point in Cornwall last week after it was announced that Sharp’s Brewery, who make Doom Bar ale, is to be shut by its US owner. In the same week, four historic Cornish pubs said they are going under.
AlixPartners, who were advising Brewdog on the sale and have now been appointed administrators of the unsold bars, said there were no offers on the table which could have saved the bar network in its entirety.
Clare Kennedy, managing director at AlixPartners, said: “As one would expect over the past two weeks, we have received significant interest in the BrewDog business from prospective buyers across both the trade and investment communities.
“In Tilray, we have secured a purchaser with a passion for craft brewing who will be an excellent custodian and sponsor of the business in the months and years ahead.”
Kennedy called on other leisure and hospitality firms to pitch in to save the livelihoods of the workers who lost their jobs in the deal.
Brewdog has a number of bars in the US and Australia, but these are subject to separate negotiations between the brewer and Tilray.
Bitter taste for ‘punk’ shareholders
Brewdog’s ‘punk equity’ investors, who were a key part of the company’s disruptor model, will be feeling the pain of the takeover deal. Shares were sold to everyday consumers, in exchange for discounted pints and other perks.
While the brewers raised £75m across seven ‘equity punk’ rounds, these investors will never see a return on their investment.
Pundits had speculated that private equity firm TSG, who held a compound return agreement with Brewdog, could snap up most of the proceeds from a sale, but AlixPartners confirmed no equity shareholders will make a return from this deal.
What next for James Watt?
Watt had reportedly been circling a comeback bid using £10m of his own money, but Monday’s Tilray deal saw Watt lose out on the opportunity to stage a dramatic return to the business he co-founded.
The Scottish businessman’s bid included funding from Hay Wain, a family office with close links to Modella Capital – the equity firm which recently acquired WH Smith’s retail line – according to Sky News’ Mark Kleinman.
Watt’s bid would have given the ‘equity punk’ investors a 19.5 per cent stake in a new holding company and protected at least 65 per cent of the jobs at Brewdog’s British bars, according to reports.
Modella is a controversial operator in UK retail, as they recently placed The Original Factory Shop and Claire’s Accessories into administrations to a cost of hundreds of jobs.
Watt has not commented on the sale of Brewdog or his alleged bid.
Tilray Brands said Brewdog will add $200m in annual net revenue to its balance sheet, as it targets $500m in annual revenue from its global beverage portfolio.
Irwin Simon, Tilray’s chief executive, said: “As we begin a new chapter for this great brand, our priority is to refocus BrewDog on the craft beer excellence that made it beloved in the first place and strategically invest to return the operations to profitable growth.
“BrewDog’s future is bright, and we are committed to ensuring the brand continues to lead and inspire the global craft beer movement.”