THE GIST
Leaders for global beer company BrewDog say they are working to stop business losses by closing pubs in the U.S. and U.K. while simultaneously planning to open more elsewhere, focusing on new markets to shore up balance sheets ahead of a long-simmering plan for an initial public offering (IPO). While acknowledging strong business headwinds on its home turf, the company hopes to project itself as a unique global entity in craft beer, worthy of ongoing investment and confidence.
Co-founder and CEO James Watt says last week’s closure of three pubs in the U.K. and one in Pittsburgh, Pennsylvania is due to inflation’s effects on the hospitality industry, a decision that echoed the closure of six BrewDog bars in the U.K. in September 2022. Watt also says BrewDog will still open an additional eight bars around the world this year. The company opened two sprawling locations in Las Vegas (30,000-square feet) and London (26,500-square feet) earlier this year, the latter of which is the largest bar in London.
BrewDog did not specify where the eight new locations would be or a timeline for completion, but the company had previously committed to opening 100 bars in India and nine in China. In total, the company already operates more than 100 bars, which the company itself describes as “mother-fucking cathedrals of craft beer.” Some portion of these bars could be franchised: BrewDog has set up a “franchising opportunities” section of its website, and its upcoming Denver location will be operated under that model.
Franchises would provide BrewDog an infusion of cash while also reducing the company’s operating overhead.
WHY IT MATTERS
The latest round of closures—two in London; one in Leicester, England; and one in Pittsburgh—come as BrewDog seeks to right its slumping bar business. The timing is likely purposeful—Watt told the Financial Times he expects a timeline for the company's IPO to be unveiled by the end of this year.
However, for a company that has leaned heavily on its on-premise side of the business to fuel global expansion, the closures and the departures of high-level retail- and employee-focused staff are signs of struggles for BrewDog’s network of locations. David McDowell, BrewDog’s chief operating officer and former CEO of its bars division, left the company in December 2022. On March 29, BrewDog’s director of community and inclusion, Fiona Hunter, announced her departure as well.
Meanwhile, two additional employees of TSG Consumer Partners joined BrewDog’s board of directors in last month—an indication that the private equity firm, which took a 22% stake in BrewDog in 2017, seeks more control over the beer company’s strategy and decision-making.
It wasn’t long ago that BrewDog said its fans would have the power in deciding where and when new bars would open. During its U.S. launch in 2016, the company stated that if 500 people from the same city invested in the company, it would open a pub there. The retail strategy now seems increasingly focused on markets outside of Europe and the U.S., and includes a partnership with Budweiser China to make and distribute BrewDog’s beers in that country and other Asian markets.
(The two TSG employees did not respond to requests for comment; BrewDog declined to make anyone available for an interview or to answer questions posed by email, instead linking to a LinkedIn post Watt wrote last week.)
BrewDog’s bars have been a critical tool not only for generating sales but for connecting with drinkers, around 200,000 of whom have been brought onboard from around the world as investors in the company’s crowdfunding rounds, providing about $100 million to the company. With hospitality businesses struggling in the U.K. and BrewDog’s sales in the U.S. underperforming craft beer as a whole, the company needs to find new territories in which to spread the BrewDog gospel. China and India are especially attractive markets, as they are large countries with perceived room for craft beer growth.
“Craft beer is growing massively in China—the market is about ten times bigger than it was a decade ago—so this is a huge deal for our business and our ambitions going forward,” BrewDog wrote in a statement announcing its partnership with Budweiser China. That sentiment mirrors reporting on rising incomes and premiumization trends in both countries.
Under the terms of BrewDog’s deal with that Anheuser-Busch InBev subsidiary, BrewDog reportedly will also expand into South Korea, with the option to add additional Asian countries. Watt told The Guardian that sales of the company’s beers had doubled in Japan following BrewDog’s joint venture with Asahi, established in 2021.
BrewDog needs these new partnerships to pay off as a way to offset losses in its more established cities and countries. The challenge it now faces is to do more than just spend additional money in these new markets to ultimately sell the same amount of beer.
In the U.S., chain retail sales for the brand’s packaged beers have suffered losses in the past two years:
After growing chain retail volumes by double digits in 2019 and 2020, BrewDog’s volumes in those stores fell -15% in 2021 and -11% in 2022, according to Circana/IRI data. Overall craft beer volumes in U.S. chain retail fell -7.7% in 2022.
Only one of BrewDog’s top-five, best-selling beers grew chain retail volumes in 2022: Lightspeed Hazy IPA (+33%).
The brewery’s flagship IPA in America, Elvis Juice, saw sales volumes fall -12% in 2022.
Losses were partially offset by a collaboration beer made with Iron Maiden (+75%) along with a hobbit bump from the launch of an IPA made in partnership with the Lord of the Rings franchise.
These declines come despite having eight locations in Ohio, Nevada, and Georgia after the closure of its pub in Pennsylvania.
Things haven’t been much better in the U.K., especially for BrewDog’s pub locations. Watt acknowledged that pub profits have been slim to non-existent since last spring, leading the company to move away from a prior profit-sharing model with employees: “There is not much point sharing 50% of bar profits if there is little or no profit to share,” he wrote in his LinkedIn post.
A former employee of BrewDog Pittsburgh, who asked not to be named because they may continue to work in the beer industry, says that their share of profit-sharing dividends amounted to two checks for roughly $100 each over the course of a year. They also said that the public perception that BrewDog shared revenue with its staff may have contributed to lower tips.
“I think that people didn’t tip as well because they thought ‘Oh, they’re getting 50% of the profits,’ not realizing there’s not much profit. I never thought of that until I was talking to a customer who mentioned it,” the former employee says. Watt said the profit-sharing model in the U.K. would be replaced by a £1 hourly bonus each month for hourly paid employees at bars that meet customer service quality targets. It’s not clear what the U.S. model will be moving forward.
Sales struggles come in tandem with scrutiny of BrewDog’s labor practices. As of December, the company is no longer certified as a B Corp, a certification that affirms an organization’s social and environmental commitments. BrewDog characterized this as a voluntary “step away” from the certification, while The Guardian reports that the company behind B Corp certifications was investigating BrewDog following allegations that the brewery fostered a toxic and hostile work environment.
Those claims appeared to be substantiated by a BBC Disclosure documentary that aired in March 2022, and by the BrewDog Affected Workers Platform Report. The latter document was published in February by Hand & Heart, the hospitality consultancy that partnered with a group of former BrewDog workers calling themselves Punks With Purpose to launch a program for BrewDog employees to share stories of misconduct.
The final report categorized 103 cases that occurred between 2012 and 2022:
83.5% of total cases included incidents of harassment;
18.5% of total cases included sexual harassment;
45.6% of total cases involved gender-based discrimination;
71.8% of total cases described a toxic work environment;
11.7% described wage theft.
BrewDog has in the past said it is “committed to being a great employer” and that “there is work to be done but we are listening and taking action.” (Last year, a former employee who participated in the company’s independent culture review lodged a complaint with the U.K.’s Information Commissioner’s Office alleging her information was improperly shared by the third-party workplace consultancy.) In his LinkedIn post regarding the recent pub closures, Watt stated that BrewDog has been an accredited Real Living Wage employer since 2012, and that all workers at the shuttered locations were offered continued employment with the company.
The former Pittsburgh employee confirms that workers received severance packages and theirs included compensation based on their time of employment. There were also offers of employment at other pubs that came with some relocation assistance, but that option was unrealistic for most laid off workers who would need to move to other states to continue working for BrewDog. Pittsburgh staff, for example, could potentially be offered jobs in Ohio, Atlanta, or Las Vegas.
“Why would a server pick up their lives and move three hours away?” they say. “We were offered things, but in a realistic sense, no one’s going to take them up on it.”
This worker also says Watt’s announcement of additional pubs at the same time that Pittsburgh closed was “hard” for them to read in light of having just been laid off.
“I read James Watt’s LinkedIn post and I was like, ‘Really, you’re opening more bars?’ You literally closed mine yesterday,” they say. “Maybe get everything that you have open under control first.”
While the shuffling of pubs is painful, it’s likely a necessary move to keep the overall BrewDog books in order. WIth TSG presumably seeking a return on investment and an IPO still shining like a North star, the company can’t afford to let listing pubs take on water.
Words by Kate Bernot