BrewDog’s business plan for the year quickly “went in the bin” after the Covid-19 pandemic forced the UK into its first lockdown in March, according to group chief executive officer David McDowall – who describes the near 12-month period since as “the toughest period the business has ever faced”.
“It's certainly been the toughest challenged I've faced in my business career,” he tells The Morning Advertiser (MA).
“The BrewDog of March 2020 was in a very uncertain position,” he continues. “Overnight we lost 70% of our revenue as our own estate of pubs and bars closed, as our on-trade volume disappeared, and our export markets followed a very similar pattern.”
Priorities became existential – with co-founder James Watt even reflecting that the independent Scottish brewer and bar operator’s odds of surviving the first lockdown were apparently “50/50” – and protecting the livelihood of as many team members as possible paramount.
Yet almost a year since Prime Minister Boris Johnson called last orders on the hospitality sector’s behalf – it’d be wrong to assume that BrewDog’s list of achievements is as sparsely populated as its still shuttered bars.
"Nine, 10 months on, a lot has happened,” McDowall says, reflecting a period that has seen BrewDog’s co-founders forgo salary, post a net loss of £8.1m in the six months to 30 June 2020, put a pipeline of 28 new sites into “hibernation” and secure a £25m Government loan in November as it sought to weather the pandemic.
Yet, the same stint has also seen BrewDog accelerate plans to become the world’s first carbon negative brewer, raise £7.5m in the first six weeks of its final Equity for Punks crowdfund and even fit former Government adviser Dominic Cummings and supermarket Aldi into the crosshairs of its still-firing canning line.
“We're delighted to be in the position that we're in and I think that's all because of the way that the team has responded to this crisis,” McDowall says.
“We've always been proud of the depth of passion and capability within the BrewDog team and I don't think you deliver big, grant audacious goals without having exceptional people in your team.
“The BrewDog of January 2021 has a team that is absolutely forged in the fire of adversity, even more galvanised than ever and ready to move past that adversity and continue to forge forward on our mission into 2021 and beyond,” he continues.
“We really have been through the mill together but the one key thing that this has taught us is that there is an exceptional group of people leading this business."
Sector losing more businesses daily
With a global estate of more than 100 bars across 15 countries, one of the company’s “biggest challenges” has been staying abreast of not just the UK’s churn of Covid regulation and rumour but goings on overseas.
“Trying to keep a handle on the ever-changing landscape in the UK has been difficult enough,” McDowall says. “I probably spend 20% to 30% of my time on the bars and pubs business, and I'm hugely fortunate that we have an exceptional leadership team in that part of our business.
"The most challenging thing for me has been the fact that the hospitality sector continues to face such torrid conditions,” he continues.
“There is a palpable sense the Government feels that there's light at the end of the tunnel in the form of the vaccine rollout and they've maybe done their bit. That's so far away from the reality that hospitality operators face.
“The team have been through hell, we've lost a lot of money, we've had to take on debt, but we'll reopen at the other side of this,” he adds. “Thousands of brilliant, independent, diverse, hospitality businesses won't and that is absolutely one of the saddest things to come out of this crisis.
“Every day that this rolls by we're losing more and more brilliant hospitality businesses."
Government response ‘not at the races’
McDowall believes the Government has to face the fact that the vibrancy and diversity of the UK’s hospitality sector is a “huge asset” under severe threat of debilitating Covid symptoms for years to come.
“We are moving to a point in time later on this year when our high streets will be far less interesting, vibrant and diverse places because of losing so many of those brilliant operators,” he says.
“We need to recognise that with no revenue, asking a small business to put its hand in its pocket for national insurance and pension contributions for their teams doesn't make any sense. We have to face into the fact that when the debt enforcement moratorium expires we are edging towards a cliff edge for lots and lots of businesses who've been racking up rent debt.
“We also have to recognise that a lot of businesses have taken on debt just to survive and the impact of that will be felt on those businesses for years and years to come.
“As well as thinking about a forward thinking, progressive view of how we support the sector reopening – and consumers being confident revisiting the sector – we have to recognise that there's still a lot to do just to make sure that some businesses survive."
What’s more, having witnessed Government response in more than a dozen countries, McDowall believes that the UK's response to the pandemic has short-changed an already cash-strapped sector.
"We operate in 15 different countries, but 60-odd percent of our sites are in the UK,” he tells The MA. “It's sad to say that the UK has been the example at times of how not to support the sector.
“If we look at support in terms of percentage of lost revenue refunded in Germany and France versus what is happening here with relatively minuscule grants that would barely cover the utilities costs in many pub businesses, we haven't been at the races.
“I think it comes down to a level of respect for hospitality as a sector,” he continues. “Early on in this crisis I remember French president Macron putting out a message which said hospitality was central to the fabric of society, that he stands alongside it and would find a pathway through this. That set the tone for how that administration was going to support the sector. We have not had that same level of support in the UK."
Playing catch-up
Amid what McDowall sees as a dearth of Government support, the operator has made well publicised efforts to provide the ailing health services and vaccine rollout a shot in the arm by donating half a million bottles of hand sanitiser to the NHS and more recently offering its shuttered UK sites as vaccine hubs.
"We got a great response as soon as we offered the space from the Scottish Government and from the minister for vaccine deployment,” he says. “We're in conversations with a few local councils about offering free use of space, so we continue to make that offer."
McDowall adds that measures such as these are underpinned by BrewDog’s claim that that business should be a force for good – which he states will continue to be integral to the beermaker’s pandemic recovery.
“In March when we faced real adversity it was clear that we really had to live up to that claim – and our team were challenging us to live up to that claim – so all the way through the past 10 months or so we've tried to find ways that – while trying to ensure that the business forges ahead and survives – we make sure we can support communities, key workers, carers and the people who are really at the front line of this crisis.”
Yet, McDowall also cites having a more “diverse business than a lot of pure hospitality operators” as another characteristic that will help the beermaker-cum-operator will bounce back from its Covid symptoms.
“The fact we've been able to maximise on the opportunities and some direct-to-consumer channels in grocery and some of our international markets has been fantastic news for us in an otherwise very difficult environment,” he says. “We remain as boldly ambitious about what the next three to five years hold for BrewDog as we always have been.
“But we're certainly taking advantage of the opportunity to step back, look at our geographic footprint, and look at what markets, what areas of the country, what international markets are really working for us and where that might be amplified by having a bricks and mortar retail location.
“That remains part of the strategy and there are some of those which are built and ready to open and have been for a number of months.
“Once we finally get to a point where hospitality can reopen then we will start to see some new BrewDog bars popping up – some of those are in construction at the moment.
“Effectively we've lost a year of our development, growth and acquisitions strategy and we move into 2021 firmly focused on getting to a point where we can start to play catch up.”
