The move pushed 484 people into redundancy and has sparked anger from some BrewDog’s ‘Equity Punk’ investors who have made significant losses.
Co-founder James Watt took to Linked In shortly after the announcement to offer an apology.
“I am heartbroken for all of the hard working and passionate team members who have lost their jobs. I am heartbroken for all of our brilliant equity punks who did not get the return on their investment they wanted. And heartbroken to have dedicated the best 20 years of my life to something that ultimately did not have the ending we all wished for,” his post read.
The statement on the social media platform also laid bare Watt’s regrets for ‘expanding too fast and diversifying too broadly’.
“During certain periods I did not control spend well enough across the business and furthermore I feel that I did not respond to certain crises that we faced (and we faced many) in a way that was authentic and true to who I am. Those decisions sit with me,” his post continued.
Why did BrewDog go bust?
Speaking to a source who is familiar with BrewDog on how it came to this, they said: “This has all the hallmarks of a really high-quality brewing operation, staffed by excellent people who are actually technically really good at what they do. On the other hand, you can see the chaos that has pervaded throughout this business over the years.”
They noted that “beyond all of the colourful things that we’ve all seen in the press around behaviour”, which would have likely had an impact on consumer appetite for the brand, a constant fluctuation in ideas would have not helped.
“There is a new idea in every corner of the building”, they told Food Manufacture, adding that these ideas burned bright for a while before being pushed aside for the next ‘big’ thing. In essence, there were too many ideas and not enough focus.
As a business like BrewDog grows, it needs to be able to centre and leverage on the things that made it good in the first place, whilst adding new, more structured disciplined things on top.
“When you go from small to medium or from medium to large, you have to change. You’ve got to work out what that core strand is that takes you all the way through, and I think they [BrewDog] lost sight of some of that.”
The TGI deal
In 2017, the business TSG Consumer Partners LLC acquired a minority share in the business with a view to funding the beverage firm’s continued global expansion.
But when TSG bought its 22.3% stake, part of that deal included an update to BrewDog’s share structure. The agreement was that TSG would gain preference shares, with an 18% compound return – essentially, the amount owed to them would grow by 18% each year. This pushed its some 200,000 ‘Equity Punks’ (a long-running crowd funder which offers its members perks such as free beer and discounts) right to the bottom of the pile when it came to return.
Then last year, BrewDog saw its revenue growth take a hit, prompting it to take out another loan of £20 million from TSG.
With debt climbing and as BrewDog looked to find a rescue deal, some investors started to get nervous about whether they would ever see a return.
Tilray to the ‘rescue’
On 2 March, Clare Kennedy, Ian Partridge and Ben Browne of AlixPartners were appointed joint administrators to BrewDog PLC, BrewDog International Ltd., BrewDog Retail Ltd. and Draft House Holding Ltd. (collectively, BrewDog).
As Food Manufacture understands, there were many buyers but no one wanted BrewDog as a whole – except for Watt and Tilray.
Ultimately, the business went to Tilray because they offered more money and it was more ‘deliverable’. And despite TSG’s preference shares, the sale of the business saw no return for the firm.
“By the time they [TSG] left, they had long since ceased to be the typical private equity holder and they were a bank. They were just putting cash into this business to keep it going,” Food Manufacture was informed.
“The whole 18% coupon bit in the press – about how this was one of the most lucrative PE [private equity] deals ever. It’s irrelevant, right? Because there was no upside. They were banking this business before they left it, which is why effectively it [BrewDog] had to go to administration because it ran out of cash.”
Mass redundancies
The deal with Tilray saw further closures and subsequent redundancies, with Unite the Union slamming BrewDog for giving the employees impacted so little notice.
According to Unite, workers received a 25-minute warning of a conference call where ‘vital questions about pay and redundancies were not answered’.
However, if a business becomes insolvent, certain employment protocols that you employ elsewhere, unfortunately, don’t apply.
A redundancy protection scheme has now been set up, with a third party appointed to help those affected. This includes support for employees to complete forms and information about what they are entitled to.
Food Manufacture has been told on good authority that there is a lot of interest from industry to recruit those who have been made redundant, with allegedly more jobs available than there are people redundant.
