In 2016, James Watt published a book titled Business for Punks: Break All the Rules. In it, he advised that “networking is for fools” and an entrepreneur should “be a selfish bastard and ignore advice.”
(Bloomberg) — In 2016, James Watt published a book titled Business for Punks: Break All the Rules. In it, he advised that “networking is for fools” and an entrepreneur should “be a selfish bastard and ignore advice.”
Since then, Watt’s company BrewDog has received a wave of complaints from former staff members, seen brewing costs soar 40% and been forced to close a handful of bars in the UK. Earlier this year, Watt paid out £500,000 ($636,550) to competition winners following a bungled “solid gold” beer can promotion.
The fallout from the complaints — that BrewDog harbored a toxic work environment — has provided Watt with ample material for his next book: My 50 Biggest Mistakes as BrewDog CEO.
“I apologize to anyone who during that time didn’t have a good experience working with us,” he says, during an interview at Bloomberg’s offices in London.
Before BrewDog, he was captain of a fishing boat. “That required a different leadership style than running a company, so at times I could be a bit too intense.”
While arguing that the affair “was misconstrued and blown out proportion,” Watt says his company learned from the experience and has improved as a consequence. The 40-year-old boss needs investors in London or New York to agree if he’s to successfully float the brewer next year. It may be a tough sell.
“Brewing beer is a very big boys’ game,” says Nigel Parson, a consumer analyst at brokerage FinnCap Group Plc. “You can do very well as a small player, but to get from a small player to a big player is like a chasm.”
Parson says not everyone is convinced by “quirky” BrewDog. “They come with quite a lot of baggage, and I think there’s a degree of caution around in the City about anything to do with them.”
Watt sees London as his preferred destination for an initial public offering. Buyout firm TSG has extended the term of its investment until August 2024 and if the IPO market hasn’t improved by then, Watt says he plans to refinance the TSG stake with another private equity house. Selling to a big brewer is “not part of the plans,” but Watt declines to rule it out completely.
“Everyone’s always got a price,” he says.
Craft Beer Revolution
Since it was founded 16 years ago, Watt’s business has consistently positioned itself as an underdog, known for outlandish publicity stunts and an outspoken CEO. Watt has consistently refused media training — “then you just sound like somebody who’s had media training” — and once threw taxidermy cats out of a helicopter over London. He even once had his naked image projected on to the Houses of Parliament as part of a marketing ploy.
While breaking with corporate convention, BrewDog has been at the forefront of a craft beer revolution, taking on the world’s biggest brewers and opening pubs in Las Vegas, across London where it claims to own the country’s largest bar, and in Shanghai. Its beers — with names such as Punk IPA, Hazy Jane and Elvis Juice — are shipped across the world, and stocked in Britain’s leading supermarkets. Today, BrewDog has 128 bars, employs nearly 3,000 people directly and made sales of £320 million last year.
However, as BrewDog has grown, so Watt and his co-founder Martin Dickie have learned that not all publicity is positive. In May 2021, former employees published allegations of sexism and a rotten culture in which staff were placed under intense strain. “The true culture of BrewDog is, and seemingly has been, fear,” wrote the former employees in an open letter. A BBC documentary, Disclosure: The Truth About BrewDog, followed. Watt was subject to personal scrutiny over his behavior. The company’s mission to challenge the world’s biggest brewers, and pursue a stock market listing in London or New York, looked increasingly unlikely.
Nonetheless, BrewDog continued to expand — striking deals with some of the main players in the global beer market. In Japan, BrewDog partnered with Asahi Breweries Ltd to distribute beer across bars, in the UK it has a deal with Molson Coors, and in China BrewDog will produce beer as part of a deal with Budweiser. How does this square with Watt’s previous comments, including that the UK beer market was “dominated by multinational, faceless mega-corporations”? He offers some clarity: “What I’ve said is big corporates owning the craft beer players is bad.”
Crowdfunding
Watt has also defended BrewDog’s crowdfunding model, which has relied on 220,000 customers buying shares — and becoming known as “equity punks” — and the company’s valuation of about £1.8 billion.
BrewDog had initially declared that it would never sell up to a multinational brewery, or in its words “a monolithic purveyor of industrial beer.” Private equity companies, however, were not considered so bad.
Watt points to early backers who made handsome returns selling stock when the San Francisco buyout firm TSG invested in 2017. Yet while Watt and Dickie shared the bulk of the £113 million of existing shares bought by TSG, “equity punks” were limited to selling 15% of their holdings. BrewDog continued to raise money while growing to considerable size. TSG is guaranteed an 18% compounding annual return on its 22% holding in the event of an IPO or a sale or liquidation. Newer investors risk making nothing.
Watt says he is the largest shareholder in the company — meaning he is “very focused” on making sure that all investors get a good return.
Watt and Dickie began making beer in Fraserburgh, northeast Scotland, in 2007. Initially, Watt continued his work as captain of a North Sea fishing boat between brewing, and both moved back in with their respective parents to save money.
‘Zero Benefit’ Brexit
Unlike some of his more corporate rivals, Watt is not afraid to stick his oar into political debates, including on social media.
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— Bloomberg UK (@BloombergUK) June 28, 2023
In August 2019, he threatened to load up his grandfather’s lobster boat with beer and sail across the sea to Hamburg. “This may very well be the only way to get our beer into Europe come November!” he wrote on Twitter.
Today, he is no less furious about Brexit, which he says has been “tragic” for UK business. “It has massively handicapped UK businesses that do business in Europe with zero benefit at all.” BrewDog sells beer in mainland Europe, and owns and operates bars in France, Italy, the Netherlands and other countries. “Getting our beer to those bars is now significantly more expensive and significantly more difficult.”
“If it hadn’t have been for Brexit, we would have been able to grow our European sales more,” he says. Most of the beer for the continent is manufactured in the UK.
Watt says Britain has been hit by more severe food inflation than anywhere else he does business. It now costs almost 40% more to make a case of beer than 18 months ago, he says. “We’ve had to absorb the vast majority of that.” As a result, BrewDog reported an operating loss of £30 million for 2022 — even as sales rose 13%.
Upstart
Growth remains the goal for his own company too. BrewDog has signed deals with some of the world’s biggest brewers, announced an agreement with SSP Plc, the owner of Upper Crust, to open BrewDog bars at airports — starting with Gatwick — and now has Allan Leighton, the chair of the Co-operative Group, as non-executive chair. But despite adopting some of the trappings of larger corporates, Watt insists BrewDog is “still as tenacious” as it has ever been.
“We continue to be an upstart. We continue to be a challenger. We continue to take a stand for the things that we believe in. Do we have better governance behind the scenes? Absolutely. But I don’t think that changes the DNA of what we are.”
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