BrewDog: cash crisis could ruin more firms than Covid

By Gary Lloyd contact

- Last updated on GMT

Warning: James Watt (left) has urged the Government to do something to avoid multiple business failures
Warning: James Watt (left) has urged the Government to do something to avoid multiple business failures

Related tags: Finance, Beer, Craft beer, Pubco + head office, Multi-site pub operators

The cash crisis “has the potential to destroy more businesses than the pandemic”, according to BrewDog co-founder James Watt.

The chief executive of the Scottish-based craft beer brewer and bar operator said the official figures of inflation are just under 10% but, in reality, that figure is much higher and called for the Government to start taking action now.

He added the UK is facing the slowest growth rate of any of the world’s developed economies and the combination of cost pressures means BrewDog will have to put its prices up.

He said: “The inflation numbers are lying to us. The official numbers tell us inflation is almost 10% in the UK, and this is highest it has been in 40 years. Unfortunately, this is nothing like the full picture.

“It costs us 25% more to make a case of Punk IPA today than it did in 2021 and our input cost prices continue to rise rapidly. We have seen huge increases in the prices of electricity, gas, transport logistics, wages, malted barley, hops and our packaging materials like aluminium and cardboard. Furthermore, if we were to increase our prices to retailers by 25%, our beer would end up costing 38% more on shelf in store.”

Greater costs

Watt explained BrewDog uses almost 40 times more hops than the average lager and does not use any cost-saving substitutes. The fact the business is carbon negative means further costs to the business.  

He said manufacturers and retailers can live with taking less margin over the very short term but this “comes out in the wash” in the medium term.

He continued: “Though revenues were up strongly last year, the continued investments we are making into the business and our people means we still reported a small operating loss – we don’t have huge margins we can eat into to help us through this economic storm.”

The issues faced means companies can either pass on huge price increases or make an inferior or smaller product and charge the price they were previously charging, Watt said both options are “grim for consumers and for our economy”.

No compromises

On what BrewDog will do, he said: “We would never compromise on the quality of our beer and we want to do all we can to manage our prices and offer great value to our customers but unfortunately our beers are going to become a little more expensive. The only other option would be to compromise on the quality of our beers or our commitment to sustainability, which we simply will not do.”

Watt concluded: “The Government is telling us inflation is 9.4%. In fact, it’s far higher than that and it is only a matter of time before the official numbers catch up to capture the brutal reality that so many businesses are facing.

“We will manage our way through this new challenge but make no mistake, this crisis has the potential to destroy more businesses than the pandemic, crippling the UK economy over the medium to long term.

“With the UK facing the slowest growth rate of any of the world’s developed economies, it is clear the government needs to do more to help UK businesses. Instead of this squabbling between the leadership candidates and their supporters, how about they all start addressing the real issues? They are wasting time when action is needed now.”

Related topics: Beer

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