Equity for Punks Revisited

Back in 2009 I became somewhat infatuated with a small but up-and-coming brewery called BrewDog. James Watt managed to capture my imagination with his promise of change within the beer industry. Personal circumstances conspired the night of the launch of Equity for Punks and I found myself with a maverick attitude. I parting with £230 for a 50p share in BrewDog. I forget the exact proportion of the equity up for sale, but whatever, I had bought a little bit of a brewery and at the time that cheered me up when other stuff was properly getting to me. I had been slowly getting tired of running a pub, and the drab "Real Ale" scene that felt like it was restricting progression of beer.

I spent the next few days, weeks even, justifying my purchase. Many people were very quick to point out that BrewDog had grossly overvalued themselves. However, I believed then, as I still do now, that the boys have a very powerful formula that was bound to find some sort of success; I wasn't purchasing their current value, I was buying into a promise of bigger things to come. If the bigger things didn't happen, at least I bought into a concept that was worthy, part of a change in the beer world that was needed, and possibly still is.

I only took brief notice of the second round of their crowd funding concept. It seemed by the valuation at the time that I might have doubled my money, but I really couldn't be bothered to do the sums. I had by that time moved Hardknott to its current location and my association with BrewDog seemed to me to be bringing me more embarrassment than benefits, so I decided to pipe-down and just get on with the job of growing my own brewery, even though there were times I overtly used similar tactics.

BrewDog became increasingly controversial, and annoyed more and more people, whilst at the same time creating such a buzz that the whole thing appeared unstoppable by nearly anything, even the most annoying PR stunt. I thought at least if they continue to grow the sceptical critiques would be proved wrong.

Equity for Punks 3 was at a time I was trying very hard to force Hardknott, and my own PR machine, to distance from BrewDog completely. I really have no idea what went on. I'm still unsure if the distance between us is good or bad, but equally, it became clear that BrewDog cared much less about me too.

What did happen, at some point in time, was that my single share was converted to 10 shares, each with a nominal value of 5p. The 5p shares seemed to be selling at that point for £95. My shares then seemed to be worth £950. Not a bad step up for the £230 I initially invested.

On looking, finally, at Equity for Punks 4 it became clear that this really had been a freight train that is quite unstoppable. The new shares are being sold at £47.5 each. BrewDog have raised over £10m already and are hoping to get to £25m in total.

When completed the new shares will be 1p shares. My 10 shares will also be converted into 1p shares and I'll have 50 of them. At least that is my understanding. My original investment of £230 seems to now be worth £2,375. A ten fold increase in 6 years. Of course, what it will mean if they fail to raise £25m I don't really know, but it still looks quite good from my point of view.

I was uncertain about writing this post. As I've indicated, I'm now in a place where I want Hardknott to succeed because we are who we are, not because we are someone who has simply copied off BrewDog. Equally, now that I have my own brewery, and BrewDog has grown beyond any projections even I would have believed, they are on the verge of being a multinational monolithic conglomerate they rail against. I've felt that there is now a tension between us that is barely tangible, but clearly we are viewed as a threat, rather than an ally. It's a shame, but not surprising I guess.

I console myself with the fact that whatever we do, and whatever our honesty in the way we operate, I have at least gained some growth in my investment with BrewDog. If we were to do the same, and go to the crowd for funding, we'd certainly not be as brash, audacious, or actually even slightly devious. The fact we don't lie to the banks, or our customers, or are quite as all out ballsy as those guys, and as a result are more content in making our own way might not bring us quite that same world domination. If we went to the crowd we'd probably be looking for people to support us because we are not going to be so controversial, but at the same time, we could not expect to make quite such dramatic gains.

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I did a number of posts around the time of the whole launch. It was, I have to admit, quite exciting. I have never regretted forking out £230, even if sometimes I did wonder if I would see the cash again. Check out the posts below.

http://hardknott.blogspot.co.uk/2009/10/dog-virus.html
http://hardknott.blogspot.co.uk/2009/10/dogs-share.html
http://hardknott.blogspot.co.uk/2009/10/punk-equity.html
http://hardknott.blogspot.co.uk/2009/10/doggy-style.html
http://hardknott.blogspot.co.uk/2009/10/getting-doggeared.html

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.

Some more BrewDog stuff

They are clever, you got to give them that. Bloggers want something to write about and it's handy to have a stream of information given on a plate. Yeah, OK, here I go again, more on BrewDog, but you see when I get stories that have an interesting side to them then it's not difficult find a reason to write about it. I need an excuse to write anyway owing to the recent acquisition of a MacBook on which I need to put in some flying hours. Handy purchase really, it gives me the excuse not to buy any more Equity for Punks as I am now officially strapped for cash until the new season starts.

This week these audacious chaps have given us a bit more information on their Equity for Punks regarding the specific promise in their prospectus regarding Abstrakt, a limited edition beer that we are told will be "more art than beer". Rake Raspberry Imperial Stout is allegedly AB:01, the first in this series. I'm slightly confused because the recent blog post on the BrewDog web site disagrees with the earlier blog post on the Rake beer. Also, sadly, the promised site www.abstrackt.com fails to work. Still, that is what we expect from these guys, raw and unpredictable, that's why we love them.

For those who are interested the line up of beers planned, taken verbatim off the web site, are:

AB:01 will be a 12.1% vanilla bean infused Belgian quad
AB:02 may be a strawberry and black pepper oak aged imperial ale
AB:03 may be a 15% double hopped, double imperial red ale
AB:04 may be the Tokyo* we just put into Islay casks with raspberries

Due to be released in March it'll enable James and Martin to rob me of even more money. I'm at the very least going to "invest" to lay down in my personal cellar. I might even consider them as part of my eclectic beer menu, we'll see.

I guessed some months ago, when James was in the middle of his twitter campaign in the lead up to his equity launch, that some form of pub or bar chain was being planned. I cannot remember James' reply to me on that occasion but words along the lines of "Much more than just a chain of bars" indicated that I might not be wrong. Although the company is fairly quiet on this subject, there are reports that this is indeed in their plans.

Some seem to question this course of action. There are questions of how a BrewDog chain of pubs might operate, of how they will cope with the Fosters drinking masses or the bottle of Bud girl. I think that the commentators who are dubious don't share the kind of vision for pubs or beer that I do. There is a future in pubs and beer, but it isn't in catering for the masses and it isn't in the style of pub that relies on mass marketing for sales. BrewDog bars will no doubt rock a new style of pub that will help shape the future of the industry. These bars may well be specialist beer bars, it is certainly not a panacea for the future, but I'm sure at least some readers of this blog would welcome what is planned.

So, there are a few more reasons why BrewDog are continuing to increase in value. I know many do not share my view that there is something special in this brewery worth following, but I remain convinced that they are part of the future of craft beer in this country. Not the be-all-to-end-all that usurps all other beer considerations but one that is helping to shape the future by cutting new trails for the more adventurous, bringing their ideas into the licensed trade in the form of BrewDog pubs excites me tremendously,

I forecast that over Christmas more people would take up Equity for Punks. Bracken today tweeted the following:

"Seems like Santa Paws was giving away Breweries this Christmas! Lots of new Equity for Punks Peeps have joined our Pack!"

Followed up later by the indication that although the target of £500K might not have quite been met, it's close and we need to wait until the 8th to be sure. I'll of course be hoping that the target is met. I can't afford anymore shares, but I'm hopping a few more can. I'm more than anything else interested in how they will bring forward a new style of pub/bar/tap room. The next decade has loads of stuff to look forward to.

A Stone's throw away?

I got a couple of emails yesterday morning highlighting the potential failure of BrewDog's Equity for Punks. It seems that they are only about 2/3rds of the way towards their minimum share uptake. If they don't hit the target of raising £500,000 then they have to give all the money back, including the £230 that I gave them.

Now some would think I should be grateful if that happens. I'd have had a close shave from the humility of BrewDog running off with my money and Martin and James making themselves rich. It's a poor investment after all, as the company can't possibly be worth £23 million. The really bizarre thing is I can't bring myself to think that way. It is possible that I've been brainwashed by BrewDog's viral marketing. Perhaps I'm completely barking mad. If that's the case then I blame Bracken, that particular BrewDog has a charm all of it's₁ own.

So, why do I not want my money back? Well firstly because they are remaining right on track with financial performance. Turnover this year is expected to exceed £1.85 million and next year's turnover, with new contracts that have been won, will hopefully be in excess of £3.6 million.

They have stormed the world with Tactical Nuclear Penguin. They have installed a new brew-house. James gives more reasons in his Call to Arms as to why you should invest. In James' words in an email to me:

"A lot has happened since we launched EFP and it has all been overwhelmingly positive for the company"

BrewDog have been granted the planning permission for their new brewery. This apparently adds £3.5 million to the balance sheet. I think it is fairly difficult to value the company now; it's a fast moving target. One thing is for sure the value of the company is growing at an astonishing rate. OK, my investment might not be worth £230 yet, but it's getting closer and you never know, I might one day have the last laugh over the sceptics.

But - It's about more than money. BrewDog are giving an injection of vitalisation into the UK beer market. OK, not everybody welcomes their brash and alternative slant on brewing and marketing beer. They are challenging some of the entrenched views on beer but at the same time keeping an eye on the traditional market by putting out fantastic cask beers. I know, I was bowled over by Trashy Blond recently. For these reasons I'd like to see them grow.

One area of critique of the Equity for Punks initiative is questioning the reasons for growth. Why do they need a bigger brewery? In my view this is fairly simple. They are currently working night shifts to meet demand. The products regularly go out of stock on the web site and the demand for products will outstrip their ability to brew without this expansion. One criticism is the lack of cask beer availability. They can't get more cask beer out if they haven't got the brewery capacity.

Stone Brewing are thinking of opening a brewery in Europe. They claim there is demand for their beer. Perhaps there is but to me BrewDog have the ability to produce products as good, if not better than Stone. There is a market for these types of beers and for me I'd prefer BrewDog to take more share of the market rather than see Stone do that, not that I wish them any harm and it'd be even better if there ends up being room for both.

If you don't like BrewDog then don't invest in them. If you haven't got the money to risk then like any investment, don't risk it. If you don't do investments then fine, don't break a habit of a lifetime just cause I say so. Think of it just as a BrewDog fan club for sad impressionable beer geeks if that makes you feel happier.

You can invest on-line, it's dead easy. You will be able to do it on Christmas day if you like, spend that cheque that came from relatives on something for the future rather than putting it in the bank account and it being swallowed by the humdrum of utility bills. Perhaps you are looking for a Christmas present for somebody you really care about, who likes beer and BrewDog. There is no Christmas post to worry about. The notification all comes through by email and you can do the shopping at 23:59 on 24th December if you like₂.

But, if you do like BrewDog and you have got the money then why not invest? Sure, it's a risk and the wise money is still unsure about the value. It isn't about the money though, it's about there being more exciting beer to be had, about having a say in what happens at the brewery and about 20% lifetime discount off their beer. It's about a BrewDog fan club for sad beer geeks like me₃.

So, if you were wavering about the deal, thought you might but were unsure, then it's a punt. If it works out then those of us who have invested will have the last laugh. If it fails then I'll look a big fool, even more than usual. Nobody can be sure but an adventure into the unknown is much more exciting than standing on the sidelines criticising those of us that are prepared to take the risk.

You have until 8th January 2010 to make up your mind.

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₁I have been unable to positively ascertain the gender of Bracken, and I'm not going to risk upsetting the canine toothed charmer, in case I get it wrong and offence results in strategic height teeth being used against things that are precious to me.

₂You have to remember that an email address and details of the person you wish the share(s) to be registered with will need to be entered rather than your own. I'm assuming there is no legal reason why this can't be done.

₃And I know of several people for whom I have high regard will be tut, tutting at me over this post. Well sorry guys, something has captured me on this one so take the piss out of me if you like, saves you the job of thinking about it.

Getting Dog'geared

Dare I post about this subject again? Everybody is getting fed up of hearing about it. I guess it's a bit like watching a 24 hour news channel when there is breaking news of a big disaster or a major government scandal, all you ever get to hear about is the same story. Additionally, some are highly critical of otherwise sensible beer geeks wetting themselves over this. Ah, that made me think. Oh well, one last post and I'll shut up until there is some more real news on the subject.

BrewDog are arguably the most controversial brewery in the UK. They certainly are unconventional with their approach to both brewing and marketing. Now it would seem they are also being unconventional in their approach to funding expansion plans. Their ordinary “b” shares are valued at no more than around £50, if you are very kind, according to a city source. However, BrewDog are offering them for sale at nearly 5 times that asking £230 each. How can they justify such a high asking price on what would appear to be a balmy investment? James seems to think it's perfectly reasonable.

The first problem is finding people who will buy their shares. With such a high price being asked, when the current intrinsic value appears so low, makes it a bit like asking champagne prices for Green King IPA. To continue the drinks analogy; BrewDog are hoping we will believe they are a good vintage, our shares can be laid down and return good on the investment in a few years time. Even so, people in the city don’t think it’s a good investment so why should we?

The mastermind behind the whole operation, James Watt, is hoping his mastery of viral marketing will work wonders. He and his co-conspirator Martin Dickie are just young lads in their 20’s, not long out of University. Being part of the IT generation you’d expect internet wizardry to feature in everything they do. Certainly to date their beers are the most blogged and twittered about beers in the UK online beer lovers arena. Not always seeking full favour, but these boys are only too aware that nearly any publicity is good, especially if your target audience are punks. Loving every bit of publicity, they are repeatedly criticised by authorities for appearing to use inappropriate advertising, only to find that the criticism brings them more publicity. Giving beers provocative names and making beers outrageous strengths gets you noticed, smart boys. Making the beers taste good helps a whole load too.

These guys are hoping to work their magic on the beer lover’s world, hoping there will be enough people who will buy into the BrewDog dream and ignore the fact that the current value doesn't look good against the asking price. They are hoping that people will believe their promise that they have expanded so much in two years, that they can keep going and in another two will be close to maximum capacity of their new brewery. If they succeed it will make them nearly 10 times the size they are now. They claim their initial business expansion is unprecedented given their original investment and we will see a good return within a surprisingly short period of time.

We of course forget the rumours about a BrewDog/Stone collaboration. The brand is likely to expand with enormous effect in the USA. Watch this space, as the information I have would indicate that something along these lines will be happening.

I travelled by train to London to join the BrewDog party. I was twittering the subject with my beer friends on the way and finding that not many are likely to take up the offer. With threats of being blocked, I wonder if I have lost some friends, such was the apparent hostility from some. Although some are interested in investing, but just think the price is too steep, and others just haven’t got the money “or the balls to tell the wife” what they’d spent the money on. It seems punks have got more sense, or perhaps they just lack vision. This could be a problem for the whole project; one of the risks is the chance that the capital raised would be insufficient to enable the project to go ahead, or perhaps it will but at a greater cost due to having to use banks to finance.

But it’s early days yet. James has a way of making it work. I’ll be surprised if he doesn't pull some magic rabbits out of Martin’s mash tun, although sources close to the management team have hinted that Penguins are more likely to feature. After all, Nick Griffin will need beer in his new all white Antarctic retreat.

I’m intrigued at the responses I've seen around the other blogs. Reluctant scooper has drawn up his own incentive plan put forward as a suggestion. To be fair to BrewDog I think some of the suggestions might turn into reality anyway. It is to be expected that any shareholders meeting would sure be a fine party. A members goody box containing some bottles of a special members beer plus tshirt, glass and bottle opener is highly marketable and could be costed at the £20 Mr Scooper is suggesting. After that, as far as I can see, it's just a change of name and perceived status. The word I get from James is that "we are happy with how it is going so far" so perhaps no repositioning is needed.

Tandleman asks why they need to expand. The answer seems to be straight forward, they are running into capacity problems with their existing plant. That capacity problem occuring despite a doubling of the brew house capacity this year. It is reported that the online shop is nearly bare of product and indeed a quick look myself shows that the beers I'd be interested in are out of stock. You can’t brew any more beer when your fermenters are full.

Impy maltings, not surprisingly, complains about the goth totty being used in the marketing. I'm still trying to work out if I'm a sad old lecherous git for liking it or if it's really just another joke. The punk fashion started when I was about 13 and so for me it is retro amusement. The girls in question, once the party was under way, did seem to look like they felt uneasy and out of place. I nearly went to talk to them, but was afraid of looking like a lecherous old git. Thinking back, my trips to London normally show me just how devoid we are, in this Cumbrian valley, of pleasant eye candy and when I come to think of it, the PunkGirls were unlikely to raise my pulse compared to other sights I saw, sorry girls.

John makes some comments here and here. John is a financial journalist by day. He has experience of understanding good investments and he's still unsure that this one is. I've been through the experience of thinking the same. But if you add the tangible assets¹ BrewDog now have, plus the growing brand of BrewDog and everything they stand for, with the growth that they have already achieved it is difficult to compare this to the type of company that has an office in Canary Warf. A company that turns over £1 billion a year is unlikely to grow tenfold in two years. One that has a turnover of £1.5 million a year might, especially if it has a track record of ten fold sales increase in the last two years².

I was sceptical about the two yanky guys. What is Skyy vodka anyway? I've talked to Keith Greggor and he seems genuine and friendly and more importantly talks confidently about what he thinks of his company's £600k investment. He sees that his investment is in two clever guys who are too young to be that smart. He is somebody who has built successful brands elsewhere and feels humbled at the natural marketing abilities of these guys; he's investing in James and Martin.

Finally though, the fact that they have achieved so much interest so far proves that they can do it. If they can get otherwise sensible beer geeks wetting themselves then I've got confidence that they will bring this new brewery to fruition and carry on to grow the brand. So far it surprises me how few people know about BrewDog. I mention them in my place and the vast majority have never heard of them or Fraserburgh. They have nowhere near saturated their potential market and in this day and age of over-burdensome legislation, risk assessment and cotton wool wrapped society I'm happy to chance an arm on these outrageous guys.

"BrewDog is about breaking rules, taking risks, upsetting trends and unsettling institutions but first and foremost, great tasting beer"

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¹The site of the new brewery, that will be worth £4 million once planning permission is granted, is not currently shown at this value on the balance sheet.

²January 2008 BrewDog turned over about £20k that month. July 2009 they turned over about £250k. OK seasonality might have some effect, but just look at the graph of sales data in the prospectus.

Dog Tired

Firstly an apologies to my Twitter followers who noticed my silence. My BlackBerry appears to have been stolen by an opportunist thief so my journey back home was somewhat lonely. I actually could have tweeted when I got home midday but didn't think that everybody would miss me as much as it seems they did. It's so nice to know people care and missed my tweets.

My camera and laptop remained strapped to my body. I'm glad because I still have the pictures of the party

Of course for those who don't know, I have been in London to give the management of BrewDog my thoughts on their corporate strategy. As the very first "ordinary B" shareholder I feel it is my duty to ensure my investment is being well looked after. A grand party was had at The Bishop of Norwich. I'm not going to say much more just now as I have some more sleep to catch up on. For various reasons I slept no more than around a total of 5 hours between Monday morning and today midday.

I have one very important observation to make - echoed by other people at the BrewDog event. We expected James and Martin to be as audacious as their beer and perhaps they are. But this recklessness and ambitiousness does not result in the brash, overconfident and arrogant personalities some might imagine. These guys are incredibly friendly and have a real measure of humbleness that neatly balances their imaginative business drive. OK, maybe I have to say that seen as I am now a small part of what they are doing.

I'm sure I'll have more to say soon on BrewDog's ambitious plans, meanwhile Mark has posted his own thoughts. Interesting Mark has better literary imagination than me, but I always did OK at sums - I'll be giving some more thoughts on the money side of things in days to come.

Doggy Style

Equity for Punks is apparently much more than just having a share in a brewery. After all, I could buy shares in Marston's if I was stupid. I've have never in my whole life bought shares before. At 2am this morning twitter alerted me to the fact that equityforpunks.com was live and I could buy shares in BrewDog - thanks @robserowski. I decided to do so, after all it's not every day you get to be one of the first of 10,000.

I then started to look at what I'd bought. I downloaded and printed out the very lengthy document of 36 pages to assess. My brief financial assessment is here. On paper I was beginning to doubt my investment, although in the grand scheme of business a couple of hundred quid is nowt - I've been robbed of bigger sums by rogues, but that's a different story. You have to remember what made me jump in immediately and buy some, without thinking. It's the whole BrewDog story; the innovation and the boundary pushing and the viral marketing. If you look at what they are planning you see that anybody who buys shares is buying into more than just a load of stainless steel.

There are two geezers who developed a billion dollar vodka brand that I've never heard of, well maybe that might be good. More importantly they are developing a brand new site where a completely energy self-sufficient brewery is planned. Interestingly, Sierra Nevada are ahead of them there, only in California you can benefit from solar panels, I'm guessing in Aberdeenshire windmills might be more appropriate.

A new brand of beer is planned. Each brew will be individual and packaged in numbered bottles. Called Abstrakt it will be more art than beer, whatever that means. In half champagne bottles¹ and could be very interesting. Their Zephyr is now fetching significant sums on the Ebay. The new brand will be launched in January. Hopefully this might well be something that will catch the attention of the restaurant trade and bring greater kudos to the beer world.

Equity for Punks promises to allow fans of BrewDog to be involved with their brewery through the web site. It will be interesting to see how much notice they will take of 10,000 fans, but still it does carry on their interactive theme. I'd just encourage James to comment on other peoples blogs slightly more often - having to poke him very hard with a pointy stick to provoke response can be fun, but I like to be nice to people as well.

I'm still a bit sorry that the news wasn't something revolutionary in brewing, but I suspect I'm being unfair. BrewDog are revolutionary in brewing every day they brew, so that wouldn't be new either. I'll have to settle for a new business model, although to be fair you could smack me round the head with a new business model and I'd still not recognise it. That's why I'm only a poor brewpub owner and little BrewDog share holder and not the director of BrewDog. It's because I haven't got a degree in business law, so all the guff that James has produced to describe the business model is just gobbledygook to me.

So I've bought into the growth of BrewDog; A national brand that is certainly anything but bland. I sell some of their beers here in bottles. I think I might just look at selling more. I feel they are part of the answer to the complaint I have about beer and food that I have talked about before. I think there is more they could do along the lines of beers for food, perhaps as a shareholder I will get involved in helping there.

Their image is progressive and trendy, just what the beer world needs and a significant part of their success. Perhaps for some it is too trendy, I've heard people say that, but that's OK, it's not the stuffy old generations that are the future of the beer world.

So I remain sceptical about the financial benefits of such an investment. A city advisor who has commented on the value puts them more at £50 each if you ignore the beer discount. I'd tend to agree after my own brief look. For some the discount might be worth a bit, but most people have managed to get that anyway, I wonder if they will stop the promotional codes now? But it really is about more than just money. It is buying into a concept about beer that is the real deal. It remains to be seen if 10,000 people get it.

That, I think, is enough blogging for one day. I'm off to London soon to join the party tonight. I get the feeling slightly that I've been hoodwinked, but I'm going to enjoy it anyway. Loads of beer people that I know are going to be there. I suspect a whole lot more that I don't know about will be too.

Of course you can check out the details of the scheme yourself on http://www.equityforpunks.com/

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¹Green bottle? bad move I suggest.

Punk Equity

It seems I am a Punk. I own shares in BrewDog, which I bought through equityforpunks.com so I must be a punk. I buy beer from BrewDog - beers for punks. I need go no further.

Now, I need to know if my £230 is well invested. £2.3m is the total that Bracken and the others are hoping to raise. The total, should they sell all 10,000 shares, will be worth only 9% of BrewDog. That results in a complete value of the BrewDog brand of £25.55m. Do we think it's worth it?

Well, as a share holder I need you to now all to invest in their cunning plan. Without the £2.3m investment it won't get to the £25.5m value they are expecting. The trouble I'm having is that the current value of the assets and liabilities are not much more than £0.5m and they are only looking to expand 10 fold. So we have to assume that their current brand and fixed asset value is around £2.5m based on a £0.8m turnover and negligible profits.

Admittedly they are expecting final year turnover to be significantly higher as they are rapidly expanding. Additionally, low profits could easily be due to heavy investment, but still, I'd like to see more on the bottom line myself.

But hey, if you are a visionary, what do numbers matter? If you can buy into the idea that they are on a mission "to show people how rewarding and exciting craft beer can be" then what are you waiting for? If you can consider a beer to be Abstrakt¹ and enjoy the fact that it is, then go ahead, invest in these to young ragamuffins, what else is there worth investing in these days? Not property and for sure not banks.

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¹Read the document on the web site.

The Dogs Share

BrewDog have floated shares. I've bought one - £230. 10,000 shares are available which makes, wait, £2.3 Million. Shit, I'm going to love this tomorrow later today. They had better put my £230 to good use, that's all I can say. "As a share holder Mr James, can I just say........."

Equity For Punks

OK, update - these shares seem to represent 9% of the total value of the company. So BrewDog is estimated to be worth..... £25.5 million?

It's late, or early, I think I need to read the document I just printed and post later.

Dog Virus?

Tomorrow BrewDog will finally reveal "The single most exciting, influential and ground-breaking thing to happen in the British brewing industry for decades". The BeerTwitterSphere has been getting more and more excited about the news. I've booked a ticket to get to London tomorrow so that I can join in with the hysteria. But are we all getting worked up over another publicity stunt with the customer base doing most of the work and no real payback?

Of course we're getting used to BrewDog's viral marketing. Send out a tweet here, post a blog there, slip the odd bottle of something new into orders. Releasing beers with provocative names and pronouncing their products "beers for punks" is bound to raise an eyebrow in the current Daily Mail style shock-horror-were-all-drunken-bums journalism enjoyed today. Back it up with press releases and a few rumours and the machine is rolling a little faster. Just as the momentum is picking up give it another kick in the form of the strongest beer in the UK. Wow, that got us noticing things for sure.

So, how are these young upstarts doing it? After all, they are not long out of University and already they have made a big name for themselves. They've only been going since April 2007 for gods sake. I've been brewing longer than they have. How dare they take over the world so soon!

Anticipation for sure. Tomorrow we'll get to know if the world will really change. Perhaps it will for the beer geek. For me, if the world of beer changes a little for the better then it's worth it. But I worry that I've been taken for a ride. Have I spent nearly £80 on train fares that I needn't have done? After all, I only have to look at their web site at 7am to find out what the fuss is about.

If it's really the biggest thing to hit brewing in decades then how can I miss out tomorrow? Of course I have to go to London and of course I had to book the tickets in advance. If it turns out that I've wasted my time and money and it's all just a pile of dog poo then James and Martin have one less fan - they are too clever to risk that, aren't they?

Well, I'm not going to guess what it's about. I'll just trust them¹ and wait. Tomorrow we find out.

What I really want to know is how Bracken tweets, I'd really like to see that. I have no doubt that Bracken is the most intelligent BrewDog in the whole world, but the physical incompatibilities with human I.T. must be insurmountable. I suspect it's got something to do with James's beard.

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¹What am I talking about? James studied as a lawyer, you can't trust lawyers.