New BrewDog B Share issue

For some reason my blog statistics are showing it is being found using search terms like "BrewDog share price" and "BrewDog AGM" - That might be because I was the very first person to sign up to their "Ordinary B" shares and blogged about it. It might also have something to do with a new share issue by BrewDog.

I've decided not to extend my investment in BrewDog, I need all the money I have to invest in my own stainless steel. It does however enable me to look back at what my share has been doing. At first sight it doesn't look good. The new shares cost £95 for 4. I paid £230 for one. Hang on, what's going on?

Looking at 4.3.2 in the offer document tells us:

the existing issued share capital (following the re-classification referred above), being £51,609.50 divided into 100,298 "A‟ Ordinary Shares of £0.50 each and 2921 "B‟ Shares of £0.50 each, will be sub-divided into 1,002,980 "A‟ Ordinary Shares of £0.05 each and 29,210 "B‟ Shares of £0.05 each;

(Lets ignore what appears to be a typo in the glossary under "existing B share")

So, my one share gets divided into 10 each worth £23.75 - I've made £7.50 then as it would now cost me £237.50 to buy more of the same. The down side could be that I currently own 0.00097% of BrewDog, but because of the new share issue it will drop to 0.00089%. However, this should help the company grow still further. I'll have a slightly smaller share of a much bigger beast.

Since I invested in BrewDog the sales have increased by around 8 times. The current share issue price values the company at nearly £27m. Is that an appropriate value for a company that turns over £6.5m, looks like being able to make in excess of 10% profit on turnover and has net assets of £3.4m?

I don't know, I'm not an expert on these things, and perhaps the value is currently a little optimistic. If the plans work out, and so far I feel that everything promised (apart from my Equity for Punks password) has been more-or-less realised.

If the plan carries on with the same level of success that has already been achieved then a further 12 fold increase in the size of the business is possible. I've had people criticise me for calling my purchase of shares an investment; Call it what you want, I still see it as an investment and if I didn't need to invest in my own brewery I would certainly have considered buying more of BrewDog.

And it's far more than just looking for a financial return. I strongly believe there is a stagnation in the British brewing industry. Sure, there are many more breweries than there used to be, but many of them are putting out beer that could do with a lot more interest. We went out last night and the only decent beer we found was Stringers Victoria IPA, we should have patronised one of the pubs that serves Hardknott, I know, but we like a bit of variety. The rest of the beer we found was nothing more than micro-brewed beer made and sold to a price rather than quality and with very poor brand image. BrewDog is one of a number of breweries that are leading the British brewing scene away from stuffy, stagnation generating tradition and into the 21st century. Indeed, without BrewDog as an example, I doubt I'd have had the gumption to do what I have done with Hardknott. I also suspect that there are other breweries who have been similarly significantly inspired, even if they prefer not to be as overt about it as me.

Call it copying if you like, call it band-wagon jumping if it makes you feel better, or just view it as a realisation of where the real market expansion in beer lies. Beer revolution or just appealing to a potential market? it matters not when comercial success is important to keeping your brewery alive.

So, if you have some spare cash, why not buy some shares? you might lose the lot, but then, you could just keep your money in the hands of the bankers if you prefer.

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Another view on the subject is written by Neil and there is also the one from The Beer Monkey

BrewDog AGM part three

We had not really eaten since breakfast. We shared a platter of cheese and meats in the BrewDog bar at lunch time but as that was between three of us. On this winter day we'd have even started to consider deep fried pizza by the time we got back to Aberdeen after our trip to the brewery. James suggested we visited his restaurant called Musa, only a short walk away. Back to the street next to the hotel we'd just come from.

Musa is in a building that used to be some sort of church or chapel, it's a great use for this sort of building. We have many underused religious buildings in Cumbria that really should be turned into some other form of use. I'm sure however that there are people resisting the change of use, certainly there are several such examples near us where planning permission has been refused and the buildings are becoming increasingly derelict. I have a feeling it is on a point of principle; rather a church fall down than it be used for something that might bring enjoyment. A bit like the pointless resistance of pubs closing - if the congregation isn't attending then why resist?

In this case the inside of the building is nice and friendly. Much of the original feel of the building is maintained, although I suspect the desire to stay is enhanced by the lack of homily and the need to kneel or stand. Best of all 5am Saint, even kegged, beats communion wine any day.

The food is nicely eclectic with a nod to Scottish tradition. Hardcore IPA duck stovies, Stir fried crayfish, chorizo and olives or Chilli poached smoked haddock all appealed to me. Each dish was matched with a beer, normally a BrewDog beer although the wild mushroom risotto with rocket was wisely matched with Orval.

Desert would have gone well with either Paradox or Tokyo*. Blue cheese ice cream, Dark chocolate and chilli pannacotta or christmas pudding tart. There were three of us, it would have been silly not to try all three. Sadly, the earlier business meeting, which we missed, cleaned them out of the obvious desert beers.

I don't think I've ever had as good a selection of beers with such good food except at decent beer dinners. Normally good restaurants have a reasonable selection of wine and the usual omni-present beers. I think that places like this could really work and I would love to see more of them.

Onwards back to the bar. By now it was after 9pm and the bar really was very busy indeed. James ensures me that the majority of the AGM crowd had long since left. Certainly it was a much younger looking crowd compared to the earlier shareholder people. James says the place "rocks" every Friday and Saturday. "If we put in handpulls it would be full of stuffy real ale drinkers" James explains to me. Certainly there were a lot of younger people, mid 20's - mid 30's I'd say. The place buzzed, perhaps in some ways a little too much for my liking, but once I'd got a seat, which didn't take long, I really enjoyed the atmosphere.

James and Martin joined us and we shared bottles of AleSmith Speedway and Lost Abbey Angel's Share. James asked me to choose which I preferred. Comparing an espresso imperial stout with a barrel aged barley wine? When they are both very good examples it is hard to choose.

If I sit at a beer festival and I drink with brewers and all they drink is their own beer I worry. Part of the definition of a craft brewer for me is an inherent desire to brew beers as good as their peers. As good, not better, few good brewers think that their beers can be as good as their role models, very few indeed. But many aspire to do so. Martin, James and Stuart are examples of this. Bringing out beers they wished they had brewed and sharing them with me, enthusing about them and sharing that enthusiasm is proof to me that they are interested in making the very best beer they can.

The bar started to thin out. The licence was only until midnight so the bar manager kicked us all out, James, Martin and all. It was the end of a very enjoyable day getting to know better what I had bought into.

I promised some information, here's some bare facts:

• Sales doubled in 12 months (£1.7m - £3.4m)
• Keg in more than 25 outlets using own brand fonts
• 5.25% ownership of Anchor Brewers and Distillers
• Anchor to handle US sales and distribution
• US production by late 2011
• Expected to open three more bars in 2011
• Expect to increase turnover in 2011 to £6m
• Broke into profit in 2010 all of which will be reinvested

There are loads more exciting things going to be happening. New beers, more collaborations, increased on-sales distribution. Expect more BrewDog beers near you soon. Of course, in Cumbria, Hardknott can help if there is a pub you know that you'd like to see some in.

Meanwhile I'm still comfortable with the money I invested in the brewery. If you want to tell me it's not an investment then go ahead, but I still think it is. Call it a craft revolution, artisanal beer or, as a someone suggested to me today, an Indie brewing movement, that's what I've bought into, and my buy-in extends much, much further than BrewDog, but more on that later. Much more later still.

BrewDog AGM part two

BrewDog; they have said that cask beer is not a very useful way of introducing people to craft beer and that the future of craft beer is keg. Quite bold, and the comments have upset a few in the beer world. Myself? I'm getting to the point of being ambivalent about backing particular types of dispense. It's beer for goodness sake, is it good or bad? Filtering, bottle conditioning, cask and keg, all have various advantages and disadvantages. I do understand BrewDog, a lot as it happens, and my trip to Aberdeen at the weekend only filled me with renewed purpose both in terms of my own brewery and the greater good of the beer world. More on this later, specifically I want to look at BrewDog as a brewery and a rapidly expanding business, how they see themselves and why I don't think they are wrong, at least in terms of how they grow and what they want to do.

Perhaps part of the problem for BrewDog is that Fraserburgh is a difficult place to get to. Sure, the locations of some other Scottish breweries are equally, or perhaps more difficult to get to. To become as successful as these guys have, from such a location, requires some creative marketing. Some seem to be jealous of this, which is such a shame. The reason I realise why they need to be so controversial is that very few beer writers can pop in and have a look at what they do. Beer writing tends to be London centric, with some outposts in places like Sheffield. We set off from Cumbria on Friday about 5pm, and apart from a couple of beers, a sleep and breakfast we did very little other than travel to get to Fraserburgh by 4pm the following day. Sure, the roads were a little wintry, but I wasn't hanging around, considering.

BrewDog brewery is not flash; Unless you define flash as having cylindrical conical vessels. There are quite a few of these nice shiny fermentation-conditioning tanks, but other than that the whole operation is quite like a brewery in a shed. However, many breweries remind me of collections of various bits of stainless steel in a shed. It's just the size of the shed and the capacity of stainless that changes.

I digress. When we got to the brewery the team were mashing in Rip Tide. 1¼ tonnes of grist go into this brew. Seeing as it was late in the afternoon it was obvious that brewday was not going to end at any sensible hour. It turns out that the last time the brewery doors were locked was 1st January and the next time will be 24th December. 12 hour shifts are worked by the team to keep production going and virtually all corners of the building as well as outside are used to house tanks. It's not difficult to imagine that this is a £4M per annum turnover operation.

Stuart, who was showing us around, pointed out that the brew-house itself contains little in the way of automation; this makes the whole process quite labour intensive. The advantage is that they have the flexibility to make beers from 0.5% up to 18.2%¹ which would be virtually impossible to do if the plant was a modern automated plant. Even when they build the new brewery, which will be closer to Aberdeen, they intend to keep the old plant to enable them to continue to brew more experimental and specialist beers.

Stuart talked quite passionately about the whole brewing process, about how they experiment with different yeast strains, a significant amount of dry hopping and avoid the use of additions that they feel are inappropriate. He talked about filtration. BrewDog do filter all their beers. They used to filter down to a 0.45 micron sterile. This ensures a long shelf life due to the removal of all possible contaminants. It also ensures that the beer is absolutely crystal bright. The problem with such aggressive filtration is that flavours and colours are stripped countering some of the advantages of the massive levels of dry hopping².

These days they filter at up to 8 microns, "As rough as we can" Stuart says. I always wonder why it is not possible to just leave beer in the conditioning tank until all the particulates drop out. It seems that this is not fast enough without using some form of finings³, which BrewDog see as an unnecessary chemical addition. Filtration, in their view, is a purer method of dropping beer bright.

Cask beer is generally not suitable for vegetarians⁴. BrewDog want to make beer more accessible to people. In their view, excluding a significant proportion of the population is unacceptable. With chill filtered keg or bottle beers they can be enjoyed by many more people.

Long discussions ensued about yeast and dry hops in the bottom of the tanks, and how they are removed, how long the beers were left in tank, how long Paradox was left in whisky casks and many more details that really wouldn't interest the reader. Or perhaps they would, but as my memory is crap and I never write stuff down, I'd be making up the detail if I tried to write it up. It came across very clearly that the team have a passion that runs right through. They care about what is produced and express disappointment when an experiment turns out not to have enough of BrewDog about it. Perhaps they have got DAIPA in Tesco, but they still care a lot about their beer. And still the brewers are happy about DAIPA; it's all very well working for a small artisanal brewery, but even better when you work for one that the regular Tesco punter might have heard of.

Around 2/3 of the inside space is taken up with bottling, packaging and dispatching. There was very little in the way of casks ready to go, although I know that there is still a significant amount of cask beer produced by the brewery. Most of the product that was ready to go was in the form of keg or bottle. Whatever the reader thinks of BrewDog's attitude towards beer that is not "real ale" it seems to be doing them all right.

I'd really like to return to the brewery sometime and muck in with these guys. I'm not sure I could contribute to their beer in the way the breweries they collaborate with do, but I know I'd get something out of it. Here's hoping. But we had to leave, we had a party to return to in Aberdeen and it was an hour away. When we got back we had to check into our hotel. The next post will hopefully be about the BrewDog Bar and their sister restaurant Musa. And most importantly, how I see their craft keg fitting, or not, with the rest of the beer market.

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¹Actually, the highest ABV they have fermented was about 23% but it was not really a saleable product. This, if I understand correctly, was later freeze distilled to make The End of History. Having tasted that beer it does just show that the technique of making Eisbocks might have a few applications. The End of History is a beer that was truly tasty in a liqueur sort of way.

²As far as I can work out, from the memory of what I was told, dry hopping is often at a rate of around 1kg per hl. That, I think, is what I would term "kick ass" hopping. This of course is after similar amounts have gone into the boil. Twice.

³For my bottled beers I use auxiliary finings in the conditioning tank and chill the bugger as much as I can. The yeast flocculates naturally leaving the beer bright enough that reseeding with yeast is required for bottle conditioning to occur. Auxiliary finings are good at removing chill haze providing the beer is cleared at a low temperature, i.e. 2 degrees lower than expected serve temperature. Is this an unnecessary chemical? I believe it to be mineral based and therefore inoffensive to vegetarians and vegans.

⁴Nearly all cask beer requires Isinglass for it to clear to a brightness acceptable to most drinkers in a reasonable time period. Isinglass is made from fish guts making cask beer unsuitable for true vegetarians. It surprises me how many people don't know this. I know that some cask beer drinkers are happy to overlook this for the joy of beer. If I were a vegetarian I would also overlook this for beer, as well as bacon, sausage, steak, roast chicken, gammon, kebabs............

BrewDog AGM part one.

My relationship with Brewdog has no real rational explanation - but then that's beer for you. Beer makes you do things that you really shouldn't. It would be easy to blame the alcohol content; after all, anything over 7.5% ABV is so stupid as to melt your brain and send you off into a crazy train of irrational actions that really should be controlled by some sort of draconian taxation that will prevent us ill-informed mortals from harming ourselves with such dangerous substances.

The weekend, and even the year just gone, is proof of how I desperately need the guidance of the authorities and their sensible caution. A little over a year ago I bought a share in BrewDog. It wasn't a great deal of money and there have always been sceptics that question the sense in such a move. But still, I recognise kindred craziness when I see it and in a flourish of my 16 digit credit card number it was done, I owned a bit of BrewDog. I blame the beer. Wine wouldn't have done it, whisky? well perhaps, vodka? no way, gin, brandy, rum or port, as tasty as these things can be, none of these would have puddled my brain sufficiently to part me with such amounts of money for a pointless investment.

We had always figured that the BrewDog AGM would at the very least be good fun, and the promise of good beer is very tempting bait. But the snow has come somewhat early this year. Actually, the amount of snow that has arrived is already of staggering proportions for any winter. We wondered if travelling to Aberdeen was a sensible proposition, but then we remembered, sensible wasn't something we did, so we set off anyway. Aberdeen is well connected with roads, and at the very least most of the journey would be motorway or dual carriageway. What could go wrong?

Friday was brewday; it was not until we had an FV full, temperature control set up and the brew house clean and tidy did we want to set off for the Caladonian land to the north of our island. We packed our passports, phrase book and a collection of winter equipment, and, as advised by Jeff Pickthall, Mars Bars for bartering¹.

Our first stop was to be Glasgow. A tentative arrangement to meet Barm in some establishment seemed a good idea. The M6 over Shap and the M74 through the borders could well have provided some challenges. Indeed the journey through Cumbria got to be something of an interesting adventure. The snow was falling thick and fast as we travelled north so that the first 70 miles were slow and difficult. Amazingly, as we crossed the border, it abruptly stopped and our journey through Dumfries and Galloway, onwards towards the Central Belt, was smooth and easy.

A quick visit to West Bar was in order upon arrival in Glasgow. Setting the SatNav to what we thought was the correct location took us spookily straight to the front door, although the snow made it impossible to know if we were parking on double yellow lines. Inside the building is a nice airy mix of Victorian splendour and contemporary renovation; apparently it was the winding house for a rather splendid carpet factory - there must have been lots of money in carpets in the 19th century. Most importantly all the beers at West are keg. Another example of this very rare craft keg then? To be honest, some of it was a little over-carbonated, but generally good stuff.

I could write lots more on this place, so perhaps I'll have to return sometime. But I have to move on to the real subject - The BrewDog AGM in Aberdeen and the hope we might get to Fraserburgh to see the brewery. Off to bed we went to prepare ourselves for what we were told was the worst part of the journey.

We set off from Glasgow in the morning expecting the road to be icy and difficult. In actual fact, although the overtaking lane was often very narrow where the snow had drifted, or even worse, unexpectedly covered with snow just in the middle of overtaking manoeuvres, the journey went really well. We made good time to the outskirts of Aberdeen and then proceeded to be grid locked for about two hours due to the sheer volume of traffic. Eventually we made it to a car park just around the corner from the BrewDog bar, but it was one car in and one car out making for patience thinning experience; after all, there was beer to be drunk.

Eventually making it into the bar we found Martin Dickie doing a "beer and music" matching session that was interrupted by James Watt doing a "money shot" tasting of Punk IPA. All quite amusing, although I think it was one of those situations you had to be there to understand.

We'd missed the first trip to the brewery and also the first business talk. I know I can get all the relevant numbers stuff elsewhere and I really wanted to get to see the brewery so we headed off up to Fraserburgh on the Brewdog bus to see where the beer is made.

I think that is enough for one post. Later I'll give a more in-depth run-down on what I found out and what I now think of my relationship with the brewery that thinks cask beer is past history.

Although my trip to the brewery meant I missed the business talk I've still managed to get the inside low down on some numbers and startling facts that I'm sure many of you don't know. James emailed it out to me earlier so I'll start writing about it just as soon as I've posted this.

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¹No, you are right, for battering.