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Excitement rising over BrewDog IPO this year, but when will it happen?

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BrewDog, heralded as one of the most exciting craft brewers in the UK, is never very long out of the news. The focus this year will be on its long-awaited listing on the London Stock Exchange.

It is a young company – founded in 2007 – that has developed a distinctive ‘punk’ branding, centred around its iconic Punk IPA beer, the best-selling craft beer in the UK. Selling direct to customers and to the trade, it has a range of other quirkily-named beers, such as Elvis Juice, Lost Lager and the non-alcoholic Nanny State, while also distilling whisky and gin.

The company has worked hard on its branding. The core of the brand is the idea of a community of beer lovers, with a Planet BrewDog loyalty club and an ‘Annual General Mayhem’ beer festival.

Loyal customer base helped to fund the brewer

A slick website and app encourage customers to ‘order to your table, your home or for collection’. Their approach to fundraising has also been community-focused: unable to get a loan from the bank in 2009 (a difficult time to ask a bank for a loan for anyone), they turned to their customers. The crowdfunding was a success: today they have more than 200,000 ‘Equity Punk’ shareholders around the world, and their latest record-breaking round raised £31m.

But it seems all that energy and drive has a dark side, and the ‘punks’ who have been crucial to BrewDog’s success to date are not all happy. Last year a BBC documentary aired allegations of inappropriate behaviour by founder James Watt and what some former staff described as a ‘toxic workplace’. New chairman Allan Leighton yesterday (25 January) issued a statement rejecting the claims made in the BBC report, and saying they had conducted a “major independent review into our culture”.

Is BrewDog all about James Watt?

Although Watt is the focus of the allegations, he is also the driving force behind the company’s success. As Leighton says, under Watt’s leadership, “BrewDog has grown from a two part-time employee start-up to a global brewer with over 100 bars, 5 hotels, 2,400 employees, with plans for considerable growth in 2022, with the creation of over 1,000 new jobs this year”.

But with so much success under its belt already, why does BrewDog want to list on the London Stock Exchange? BrewDog has big ambitions and the old crowdfunding model will not be enough to unlock the company’s high growth potential. Like all brewers, it also has significant fixed costs, with annual interest payments of about £4m on leases and debts, which limit the scope for profits.

Market expectations are that an IPO would value the company at more than £2bn, with shares costing £25.15 (March 2021). BrewDog’s sales growth has averaged 57% over the past 10 years, while for 2020, a particularly difficult year for all brewers, BrewDog posted revenues of £238m, about 10% more than in 2019, against a net loss of £13.2m.

It will be difficult for BrewDog to retain its young ‘punk’ image and craft beer identity, while trying to scale up and mature as a company. But now that BrewDog has weathered the Covid lockdowns, and and with the market listing completed, the markets will see how it measures up to the challenge.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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