Gunns and roses

Gunns and roses

Beer brand Innis & Gunn has toasted sales success at home and abroad. Now chief executive Dougal Sharp tells Peter Ranscombe why his company is moving into the on-trade – and building its first brewery.

As Dougal Sharp walks through his new Innis & Gunn beer kitchen on Edinburgh’s Lothian Road, he knows that he’s seeing the calm before the storm. It’s festival season and the city is packed. Despite having only been open for a few weeks, his bar has already been heaving during the busy summer season, with many customers coming along specifically to try his unpasteurised lager.

“It’s the freshest pint in Scotland and people are going mad for it,” says Sharp, Innis & Gunn’s founder and chief executive. “We have been totally bowled over by how much people are loving it. The beer kitchen is a brilliant representation of our brand on the high street and it’s bringing our brand to life in such an exciting and vibrant way for drinkers.”

It’s not the first time that Sharp has dipped his toe into the on-trade. Back in 2012, Innis & Gunn teamed up with pub operator 56 North to open a ‘pop-up’ bar on Edinburgh’s Potterrow during the Fringe, testing demand to see if customers wanted a high street presence for the brand.

The results were very positive, especially when the company’s beers were used to make some of the sauces and glazes for the food in the pop-up pub.

Now the lessons learned from the 2012 pop-up have been put into practice with the new bar, which joins the ranks of BrewDog, the Hanging Bat and Ushers of Edinburgh in bringing craft beer to the masses in the city. Sharp’s ambitions don’t end with one bar though. “I can’t wait for the next one,” he says. “We’re already actively seeking other sites in Edinburgh and in other places in Scotland.”

It’s been a busy summer for Sharp and his team. Not only have they opened their first bar but they’ve also raised £3 million through a crowd lending scheme in order to fund the construction of the company’s first brewery. Fans of the firm’s beers and other investors have purchased ‘beer bonds’, a fixed-term mini bond that either pays 7.25% interest each year or the equivalent of 9% cent interest per annum in ‘beer bucks’, which can be used to buy beers from the company.

“The response has been fantastic,” Sharp nods. “We ended up with 1,115 investors and we raised £3m in eight weeks, which is an outstanding result. We got a fifty-fifty split north and south of the Border and we’ve got a very pleasing spread of investors from £500 up to £100,000 from all over the UK. I came to the simple conclusion that if we were going to be paying interest to anybody then I would much rather be paying it to the people who love
our brand and the beers we make rather than a bank.”

Innis & Gunn had extended the deadline for applications by a month to push it up from £2.5m with 840 investors to the original aim of £3m. Now that the offer is closed, the company is working out the finer details of the plans for its brewery, drawing up the specifications for the equipment it will need and selecting the site, including running the rule over services such as gas, sewage and water.

Sharp is preparing to unveil further details about the location of the brewery in the autumn, but he confirms it will be in the Edinburgh area and that it will be more than just a ‘pilot’ brewery where the company can experiment. Instead, he plans to build an 80,000 hectolitre (hl) per year plant, which would put it among the larger craft breweries in Scotland.

“Much like a swan, it all appears very calm above the water but we’re paddling away below the surface,” Sharp explains. “There’s a lot of work going on to spec the brewery and negotiating with landowners. The new brewery is about building on the creative foundations of the business. Our fans always respond well when we do special batches or new brews and the new brewery is very much about doing more of that stuff. It’s like my turbo-charged test kitchen – this is where the business will go to produce the small runs of difficult-to-produce beers that we can’t do in a big brewery.

“It’s a sizeable investment and will have a sizeable capacity on the basis that our global business will continue to grow and the need for us to be innovative and be flexible will also continue to grow. We’ve got to plan for the future here. There’s no point in having a solution that’s right for today, it’s about building a solution that’s right for the next ten years.”

Sharp was working as the head brewery and production director at the iconic red-brick Caledonian Brewery in Edinburgh when he was contacted by Speyside distiller William Grant & Sons, which wanted a beer that would add flavour to its barrels, allowing it to create its ale cask reserve whisky. Sharp spotted an opportunity not just to flavour the casks for the whisky but then to also sell the beer itself, which had taken on some of the vanilla and caramel flavours from the wooden barrels.

Sharp – along with his brother, Neil – created Innis & Gunn as a joint venture with Grants in 2003, with the name for the business coming from Neil and Dougal’s middle names. In January 2008, Sharp led a management buyout and drew on the experience of his father, Russell, who is credited with saving the Caley Brewery in 1987 when he led a buyout from Vaux of Sunderland.

In effect, Innis & Gunn’s brewery will be the third that Sharp has built. After cutting his teeth in the industry under the watchful eye of Alan Hay at Timothy Taylor – Sharp was drafted in to the Caley in 1994 to rebuild the brewery following a fire. A second fire meant he set about rebuilding the place again, eventually taking production from 30,000hl a year up to 160,000hl. And somewhere along the way he found time as head brewer to come up with the recipe for the Caley’s most famous product, Deuchars India pale ale (IPA), before leaving in 2002 to setup Innis & Gunn.

“We won pretty much every prize there is to win in brewing, including the champion beer of Britain,” Sharp remembers. “I was lucky enough to be involved during the 1990s when cask beer was exploding in Scotland. People were moving away from their usual pint of ‘heavy’. Now craft beer isn’t just competing with other ales it’s competing with mainstream beers too.”

Sharp doesn’t just have his mind set on the future of his own company though. On a dark night at the Scottish Parliament back in January, he launched The Brewers’ Association of Scotland (TBAS), a new trade body that he is chairing and which he and his fellow brewers hope will represent their industry to government.

Innis & Gunn has teamed up with seven other breweries – Cairngorm, Fyne Ales, Harviestoun, Inveralmond, Stewart Brewing, West and Williams Bros – to launch TBAS. Figures from the Campaign for Real Ale (CAMRA) show that there are around 80 breweries in Scotland, but TBAS has been looking at how much beer they produce, how many people they employ and whether there’s the chance to share best practice. Given the success of the whisky industry in exporting Scotch, Sharp is confident that one day Scottish beers could also play a similar role on the global stage.

“It will take a long time to get there, but the creativity that Scotland’s brewers are showing – not just in the way they make their beers but also in their routes to market – is amazing,” Sharp enthuses. “For a little country like Scotland to be doing the things it’s doing in the beer sector is amazing. Innis & Gunn is known around the world – we’re building a global brand. And I know there are other companies in our sector that are doing the same thing.

Don’t forget, this isn’t the United States we’re talking about here with a population of 320 million, this is Scotland with five million people and arguably you’ve got two highly-regarded global craft beer companies based in Scotland.”

Sharp doesn’t name Ellon-based BrewDog as the other global craft beer company, but the similarities and differences between the two businesses makes for an interesting comparison.

Founded by Martin Dickie and James Watt in 2007, BrewDog has grown to include a 100hl brewery, 27 bars and sales of nearly £30m, with exports to 50 countries. The firm has won plaudits and courted controversy for its marketing tactics in equal measure, with recent stunts including driving a tank through the City of London and dropping taxidermy cats from a helicopter. BrewDog has also sold shares to fans, raising £5m in 20 days during its latest crowdfunding round as it aims to secure £25m to build a 300hl brewery.

By comparison, Innis & Gunn’s most recent accounts showed sales up 15% to £11.8m, with a further increase expected in its next set of figures. The company’s beers have always been popular overseas, with around 80% of its production exported. The company has grown from just a handful of staff to 55 people, plus the workers in the new beer kitchen.

While few would begrudge Sharp his success, several Scottish micro-brewers do grumble about the fact that Innis & Gunn hasn’t had its own brewery up until now. The company uses Tennent’s massive Wellpark brewery in Glasgow to make the majority of its beers, with some also having been brewed at Belhaven in Dunbar and at Marston’s south of the Border over the years. Are those muttered comments likely to go away once the doors to the new brewery swing open?

“Ultimately, it’s up to the drinker to decide what beer they like and what beer they don’t,” replies a diplomatic Sharp. “From the outset we’ve consistently produced flavour-packed, interesting beers that drinkers want to drink. The new brewery will enable us to do even more of that. For the whole of the sector, the vibrant brewing scene in Scotland is awesome. We’ve got so many companies producing so much good beer.

“If you look at the level of craft beer consumption in the UK then the two hotspots are London and Scotland. That is evidence of the vibrancy of our sector. Within that, you have some companies, like us, which are not just playing a big part on the Scottish craft brewing scene but also the international craft brewing scene. I think that’s amazing for Scotland.”