BrewDog: From young pup to big beast

David McDowall can’t quite believe that he’s just used the term “grown-up”, for the first time ever, to describe BrewDog, the craft beer brewer for which he heads the growing bar business in the UK and overseas.

“I guess we are slightly more grown-up than we were eight to 10 years ago, when we were young pups,” he muses - in an interview conducted before the group announced it had sold a 22% stake to US private equity firm, TSG Consumer Partners.

This inevitable maturing obviously sits a little uncomfortably with the softly-spoken yet animated Scot (he says ‘awesome’ quite a lot but with such genuine feeling it does not grate at all) to say out loud that the company, known for its unconventional approach to everything from marketing to fundraising, is maturing. He refers back to it later in the conversation, shaking his head.

Just because the firm is not so overtly out to shock as it was in its younger days, when it grabbed headlines for things like driving a tank down Clapham High Street and selling the world’s strongest beer in a bottle encased in a stuffed squirrel, does not mean it has become more conformist.

The difference now is the things it does are just a little more, well, grown-up. One of the firm’s most recent press releases, for example, was about the introduction of paid leave for staff to look after their own young pups, literally. Employees who get a new dog are allowed to take seven days’ canine ‘parental’ leave.

Fanatically focused approach

The company was set up some 10 years ago and not only has it evolved massively, its founders James Watt and Martin Dickie have aged accordingly from mid-20s to mid-30s. McDowall, who is a 38-year old father of two young children, has only been part of BrewDog, which now has 50-plus bars, for two and a half years. Prior to this, he spent six years at G1 Group, the operator of a group of cinemas, clubs, bars and restaurants in Scotland, during which time the business grew from 20 to 60 sites, turning over £60m. He loved working there, most recently as group operations director, but says BrewDog’s approach was hard to resist because it soon became clear to him just how serious the business was.

“I was incredibly enthused about the pace of growth, what they had achieved and, more importantly, by their approach to people, who are the cornerstone of the business strategy,” he recalls.

“My perception of the business evolved as I got to know it better – it is very easy to look at the first 10 things that come up for BrewDog when you Google it and form an opinion, but it is actually fanatically focused on beer and people.” The simplicity of BrewDog’s strategy – and its commitment to challenging the norm to achieve it – is, McDowall believes, the reason for its rapid growth and progress.

In 2016 overall EBITDA for the BrewDog group was £7.1m, based on sales of £70m, of which bar sales accounted for £22m, based on an average spend per head of £10 to £12. McDowall says the overall turnover figure will move beyond £100m in 2017, with £35m coming from bars.

“We are slightly unconventional – it is in our DNA and you are not going to change us, it is a big part our success. “When we look at a project, we ask ourselves if another business would do it and if we say yes, we won’t do it.” He cites the firm’s approach to managing sites now that it has become a much bigger entity in such a short space of time – growing to 50 bars within five years (30 in the UK) – as a good example.

Last year, GMs were given the freedom to choose 30% to 35% of the beers they sell (the remainder are BrewDog’s own), encouraging them to negotiate with local brewers directly. McDowall says the result is each bar has a unique range on offer, which its teams feel even better engaged with and the customers find more interesting.

“I guess if you went to any business with 50 sites, they would baulk at the idea of giving their managers autonomy and that is probably the reason we did it, and it is very successful,” he reports.

“We ask a lot of our teams, to focus on our values and really put their heart and soul into it and to see it as more than a bar job – we want them to feel like bar owners.”

Setting a good example

McDowall explains that BrewDog is committed to changing the balance in the employer/employee relationship in the hospitality business. On a micro level, this translates to his job title, internally, actually being ‘navigator’ rather than head of retail, with the GMs ‘captains’ of their own ships. In addition, the senior management spending time in the business is so much more than working on their laptops in one of the bars. Under its ‘Dogs on Deck’ initiative, all of BrewDog’s senior management spend time working behind the bars once a month – they try to do it at peak times and are treated the same as the rest of the bar staff, only taking breaks when told.

“The teams love it but we also love it because we can really get under the skin of the business, see who the stars are and get suggestions for improving things,” he says.

On a macro level, McDowall says the company likes to set a good example for the broader industry. Just before he joined, BrewDog became the first multi-site hospitality group to pay the National Living Wage and it has since introduced other groundbreaking staff-centric schemes.

He says investment of this kind is worth it on many levels.

“The reaction from the team was remarkable to see. Staff turnover was already low but went down and sales went up.”

He is delighted that the business, which now employs over 600 staff, made it into the Sunday Times 100 Best Companies To Work For list for the first time this year, at number 80, and even more so to report that of all the management jobs it advertised last year, 80% were filled through internal promotions.

In the second half of last year, BrewDog launched the Unicorn Fund, where every year the firm shares 10% of the profits taken at each site among the staff who work there.

“The second half of last year was fundamentally our strongest trading period since we started the retail business and in the first eight weeks of this year, we have seen 11% life-for-like growth across the estate,” McDowall adds.

Crowdfunding pioneers

BrewDog’s unusual approach to people extends to customers too. It has been a much-reported pioneer in crowdfunding, now boasting some 56,000 shareholders gained through its various Equity for Punks fundraising rounds. Each shareholder is given a 5% or 10% discount at BrewDog bars, according to their level of investment, and is invited to pre-launch parties and other exclusive events. McDowall says the shareholders are the group’s most loyal customers and its harshest critics, giving invaluable feedback on its endeavours.

The company’s first US fundraise is currently under way. It is releasing shares to raise up to $50m to build business in Columbus, Ohio, where it has opened a brewery and its largest BrewDog bar to date, and further bars across America.

McDowall says the geography of the group’s expansion has evolved since he came on board. He says getting to 65 to 70 bars in the UK plus a similar number internationally by 2020 is a comfortable target.

This year, the plan is to open a further six to eight UK bars – a long-planned site in Dalston, east London, is still subject to a complicated deal with the landlord but heads of terms have been agreed for a second site in Edinburgh and places in-cluding Oxford, Cambridge, Mancheser, Portsmouth, Plymouth and Exeter plus Peckham, Camberwell, Kings Cross and Brixton in London are all primary targets. BrewDog is upping the ante on its site finding – having previously offered a £1,000 finder’s fee, it now has bigger carrots for bigger premises, up to £10,000.

Global hitlist

Up until last year, all 16 international sites were operated with local partners on a franchise basis but in November 2016, BrewDog opened its first international company-owned site in Berlin. McDowall anticipates that in future new territories, it is likely the company will open the first flagship store in a key location, then work with partners to roll BrewDog out further. Paris and Amsterdam are likely medium-term targets. This year Dublin will get its first and second BrewDog bars and Tokyo and Columbus their second. Reykjavik, Budapest, Tallinn, Copenhagen, Vienna, Zurich, Australia, China – in fact pretty much anywhere is on the international hitlist.

McDowall admits even he loses track sometimes as things move so quickly in the company, but he is not unhappy about it.

“When I joined, we weren’t even talking about the US, but 42 acres of land and three months later, we were there.

“I always have this sneaking suspicion that around the corner is something different. I thrive in that environment,” he says.

A big part of McDowall’s job is looking at potential new sites, but he never loses sight of the need to continually improve the existing business.

The firm is in the midst of rolling out, where possible, American-style direct draw cellar systems, which significantly reduce the distance beer needs to travel to get to the tap, thus enhancing quality. It is also trialling draught beer vending machines, and takeaway beer from mini bottle shops and beer fridges.

Food sales also have room for growth, McDowall says. They presently account for 12%-13% of sales in the bars, but he thinks there is an opportunity to push this to 20% (at the Columbus bar it is actually 40%). A pizza menu is proving successful at smaller bars without a full kitchen, while the broader menu used for the larger sites, featuring burgers, has had more veggie and vegan options added. BrewDog has also recently launched a trial weekend brunch menu at four sites where same-day food sales have already increased by some 20%-25%.

Fighting tooth and nail

While beer is the primary focus, McDowall says food is a good way to get people into the sites and while it will never be the raison d’être for BrewDog, it is important to him that the company is as proud of its food as it is its drinks. The same goes for the carefully-selected artisanal soft drinks and the small range of spirits and wine sold at the venues.

The firm is structured and funded well enough to fulfil its short-term ambitions but listing the shares is still in the medium to long-term plan, which all sounds very grown-up indeed.

However, last year the firm added a clause to its articles of association so that it cannot be bought by any of the large brewers or drinks companies, many of which it has quite publicly criticised and mocked over the years. It sounds a little like cocking a snook at the big boys, but when McDowall explains, it is clear the motivation is much more heartfelt and serious than it may seem.

“That way at the natural point where we list, it will give us the opportunity to continue to manage the business in the way we will always fight tooth and nail to do and that we believe in day in, day out.”

■ Mel Flaherty is a freelance journalist specialising in the hospitality sector