James Watt

James Watt, "Captain" at BrewDog

A dog's tale

BrewDog has grown from a microbrewer into one of the most dynamic drinks businesses in the UK. James Watt tells Peter Ranscombe how the brewer has managed to retain its punk ethos while employing more than 1,000 people.

There can’t be many beer drinkers who haven’t heard of BrewDog: it’s the company that threw taxidermy cats out of a helicopter above the Bank of England; it’s the company that drove a tank through the Square Mile; it’s the company that satirised Russia’s “anti-gay” laws by making a protest beer called “Hello, my name is Vladimir”.

But away from the eye-catching publicity stunts, there’s another side to BrewDog: it’s the company that’s posted record-breaking growth to turn over £72m in 2016; it’s the company that’s a living wage employer and shares 10% of its profits with its staff; and it’s the company that teamed up with social entrepreneurs to create Brewgooder, a lager that funds clean water projects in developing countries.

Nowhere are those two sides to the business more apparent than at its brewery in Ellon, to the north-east of Aberdeen. The company was founded on an industrial estate in nearby Fraserburgh in 2007 and moved to its current base in 2012, growing rapidly to expand not once but twice, with the third incarnation of its brewery opening last summer.

On one hand, the site is just what you’d expect from BrewDog – an attractive bar for visitors, the grooviest canteen in the world complete with pictures of every member of staff on the wall, and lots of exposed brick and polished metal fixtures and fittings that scream the word “cool”. Yet step inside the brewery itself and it’s the pinnacle of modern manufacturing; immaculately clean, with a quality control laboratory bristling with scientific apparatus and even a machine that taught itself how to make the packaging process more efficient.

BrewDog lightingCult film series Star Wars is clearly an important reference point for BrewDog. Stride along one of the metal walkways that connects phase two and phase three of the brewery and Darth Vader’s Imperial March starts to play, while reception has a giant Lego model of the site, complete with a Cantina-style bar room, and a version of the Episode VII: The Force Awakens poster is framed on one of the boss’ walls.

While the appearance of the operation may draw comparisons with the evil Galactic Empire’s Death Star or the cutting-edge technology of the clone makers on Kamino, the company and its staff would probably prefer to think of themselves as the Rebel Alliance. That’s because one word has epitomised BrewDog right from the very start: “punk”.

The firm’s flagship India pale ale, which accounts for some 60% of production at the new £20m brewery, is called Punk IPA, its crowdfunding scheme was Christened “Equity for Punks” and at its very core is its punk rocker-style mission to break the rules so it can make the public as enthusiastic about beer as its staff. But how do you retain that notion of being “punk” when you’ve raised in excess of £30m from more than 50,000 shareholder-fans, featured in the Sunday Times’ Fast Track 100 listing five times in a row and employ 1,000 people, with the total expected to rise to nearly 1,500 before the end of the year?

“We focus on two things – beer and people,” says James Watt, who founded the brewery with his best friend, Martin Dickie, in 2007 and who has the rather unusual job title of “captain”, with Dickie acting as “beer pirate”. “Beer is our first, second, third and millionth priority.

“We have a sensory lab that allows us to test every beer to make sure it’s as good as we can make it. We listen to the feedback we get from our customers.

“The stand-out highlight for me of running the business came in 2014 when we had 4,000 shareholders in Aberdeen for our annual general meeting (AGM). We announced that we had become a living wage employer and we got a standing ovation from the audience – no other company’s investors would applaud when they’ve increased their costs, but our investors share our point-of-view that we need to look after our staff to retain the best people.”

As well as being an early-adopter of the living wage, BrewDog also puts 10% of its profits into a “unicorn” fund, which shares the surplus out equally among each and every member of its staff, regardless of their job title. The profit-sharing fund paid out around £1,500 per employee last year and is projected to award £4,000 to each employee this year.

James Watt 02Cash isn’t the only incentive for workers, who each receive a free case of beer every month and a four-week sabbatical after five years’ service. They also get the chance to study for Cicerone qualifications, the beer industry’s equivalent of the Master of Wine scheme, with only 11 people globally holding the highest “Master Cicerone” level, including Watt and his head of product marketing, Rob MacKay. Those who pass the exams get an automatic pay rise.

Members of staff share in the responsibility of running the business too – the company practises “open book management” by giving a copy of its full profit and loss account to every member of staff each month so they can see how their role fits into the profitability of the wider operation and can suggest improvements to increase efficiency.

That punk ethos is about to be tested to the limit. The company is opening a brewery at Columbus in Ohio, so it can supply fresh beer to the United States faster than it can from its existing operations in Ellon and cut both its transport costs and its carbon dioxide emissions.

Building a brewery on the other side of the Atlantic has involved raising US$3.5m (£2.8m) through an “Equity for Punks USA” crowdfunding scheme, along with £10m through a mini-bond on the Crowdcube platform in just 24 days, setting a fresh record and adding to BrewDog’s total of raising £40m directly from investors.

Watt’s punk attitude was alive and well when choosing the site for the firm’s American adventure. “Whenever I land in a city, I send out a tweet asking for recommendations of where to go to have a beer,” he explains. “When I landed in Columbus and sent that tweet my phone exploded with replies. That’s how I knew that our brand was known in Columbus.

“When I got back and met with Martin and Neil Simpson, our finance director, I told them ‘Look guys, I know I was only there for 24 hours and I know we haven’t done our in-depth market research, but Columbus is where we should open our brewery’ and they said ‘Yeah, ok’.”

While taking risks and trusting your gut is all part of being an entrepreneur, you need firm foundations in order to make those choices. While BrewDog is known for its punk ethos and for wanting to break the rules, Watt is very clear that you need to know the rules – and especially the financial rules – before you even begin to think about breaking them.

His book, Business for Punks: Break All the Rules, was published in 2015 and gives an insight into how Watt and Dickie wanted to create a new category of beer in the UK, away from “real ale” or mass-produced lager. But it’s also filled with solid business advice about knowing your customers, listening to them and, above all, how cash is king.

Watt’s wife, Johanna Basford, is an illustrator who’s best known for producing Secret Garden in 2013, one of the first colouring books for adults, which led to a bit of friendly rivalry when their work hit the shelves. “My book was published at the same time as Johanna’s second book and so we had a bet that whoever sold the least books on Amazon that week would have to take the bins out for a month – Johanna sold so many more books than me that I think I’ll be taking the bins out for the rest of the millennium,” he laughs.

BrewDog 03Watt wrote the book while on paternity leave with his first child. Reaching into one of the cupboards below the windows in his corner office in phase three of the brewery, he produces the hand-written first draft in a ring-binder. With paternity leave for baby number two looming, perhaps there’s a sequel in the making.

That firm grasp of the financial figures behind the business has allowed BrewDog to grow its revenues from £29.6m in 2014 to £44.7m in 2015, with earnings before interest, tax, depreciation and amortisation (EBITDA) holding steady at £4.9m despite major expansion, according to accounts filed at Companies House. Watt reveals that turnover soared to £72m last year, with EBITDA remaining at around 10% of sales.

It’s a long way from where BrewDog started. Dickie and Watt had been making homebrew when they got the chance to go to London; after tasting their tipples, beer writer Michael Jackson told them to quit their day jobs and open a brewery, which they duly did.

Dickie was working in brewers and distilleries after training at Heriot-Watt University in Edinburgh, while Watt had studied law but quit his first job after just a few weeks when he realised all he would be doing was “glorified admin”. Instead, he became a deep-sea fisherman, sailing from Fraserburgh and becoming a fully-qualified captain.

In the early days, they moved back in with their parents to save money, often sleeping on malt sacks at the brewery and turning their hand to everything from digging trenches to fixing machinery. Despite the phenomenal growth, the division of labour remains roughly the same, with Dickie responsible for the making of the beer, while Watt runs the business side; perhaps those job titles aren’t so weird after all.

Growth is forecast to continue in each part of the business. As well as producing beer in Ellon and Columbus, the company also sells its wares through its 31 craft beers bars in the UK and 19 overseas, including Copenhagen, Sao Paulo and Tokyo.

Building work continues in Ellon, where the company is constructing a sour beer brewery next to its existing facilities. Also on the horizon is a distillery, with test batches of its LoneWolf gin and vodka having gone on sale just before Christmas and its first spirit being laid down in casks to make whisky.

“We’ve bought that site and that site, and that land over there for expansion,” says Watt, pointing out of the windows behind him. “We’re not setting up a distillery for the sake of it, we’re in it for real.”

BrewDog sculptureThe marketing stunts haven’t been the only time that BrewDog has hit the headlines over the years. The brewery has been criticised on several occasions by the Portman Group, the body set up in 1989 by the alcohol industry to promote responsible drinking. BrewDog has produced a series of high-strength beers, from Tokyo at the original ABV of 18.2% and Tactical Nuclear Penguin at 32% through to Sink the Bismark at 41% and The End of History at 55%. It responded to the criticisms with Nanny State, a 0.5% brew that’s become a mainstay of the low-alcohol supermarket shelves.

Yet each of the strong beers has been made in small batches, not as session ales designed to be drunk every night. Watt highlights that each of the marketing stunts wasn’t done simply for the sake of it but had a purpose behind it, like “Hello, my name is Vladimir”, half of the profits from which were “donated directly to charities that represent oppressed minorities around the world”. Last year some commentators took to Twitter to ask why two punks were accepting awards from the establishment after Watt and Dickie were made Members of the Order of the British Empire (MBEs) in the Queen’s birthday honour list for “services to the brewing industry”– at the same time that Basford, Watt’s wife, became an Officer of the Order of the British Empire (OBE) for her “services to art and entrepreneurship”.

“I think the people who made those comparisons forget who the godmother of punk was in the UK,” Watt counters with a smile. “Most of them will have been a lot less punk than her.”

In a world where even Vivienne Westwood is a dame, there’s no arguing against the tremendous boost BrewDog has given not just to Scottish brewing but also to exports. With more and more of the new generation of craft brewers tipping their hats to Dickie and Watt, their services to the industry are clear.

“I think my Gran was the most excited about the MBE,” Watt laughs. “When the envelope arrived, my wife thought it was just going to be another speeding fine.”