Transcript
Speaker: We often say the best part about the middle market is the food and drink. Hear from a middle market craft brewer who is rapidly scaling operations and distribution in the United States and what lessons other middle market companies can learn to set them apart in their own industries. Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid -sized companies and help you take advantage of new opportunities.
Speaker: Okay, welcome to the Market That Moves America podcast. I'm Doug Farron, Managing Director of the National Center for the Middle Market, and we are thrilled to be on location at Brewdog Columbus, Ohio. Joining me today is Tanisha Robinson, CEO of Brewdog USA. Welcome. Thanks, glad to be here. So why don't we just start by, if you could just give us a quick history about
Speaker: Brewdog. Tell us about it. Sure. So Brewdog was founded in 2007 by two dudes and a dog in a garage in the northeast of Scotland. And James and Martin were just super passionate about craft beer at a time when craft beer wasn't really a thing in Europe at all. So the craft beer wave had really started to move in the US at that point, but it wasn't happening there. So they were making these beers that in that market at the time were super weird and really flavorful and people didn't like them.
Speaker: But they ended up winning a competition for Tesco, which is a large grocery chain in the UK. And that was sort of the big instigator for watching the business at a pretty big scale. OK. Very interesting. Tell us a little bit about your background. I know it's unique and kind of how you got into this. Yeah. So for about the past decade or so, I've been hustling in the streets as a tech entrepreneur. So I've built.
Speaker: some companies, sold some companies, burned a few to the ground as it happens when you're hustling in the streets. I currently have two companies that are still running that I don't have to run anymore. But one of the things I learned in doing all of those was that I love the fray of taking something from zero and pushing really hard on growth and turning it into a real business.
Speaker: I've been given the opportunity to do that here at BrewDogs, so in spite of our
Speaker: pretty significant and epic infrastructure here. We are actually very much an early stage startup. So it's very familiar territory for me. What were some other things that you took from those previous businesses? You mentioned kind of the excitement, I guess, and probably the chaos, right? Yes, early stage growth. But are there any things that you look back on and think maybe, wow, I definitely took away learnings that I can apply and do things better or differently?
Speaker: Yeah, totally. I mean, you know, so in the business I started, I used my own money. So that taught me to be super scrappy and lean and creative on how to kind of build a business on very limited resources. And you know that it takes a lot of resilience and grit and determination because, you know, even if you've got a great company, even if you've got a great brand and great product, it's still really, really hard.
Speaker: to be successful, so I think for me it was just really, and that I just sort of addicted to the idea of moving the needle sometimes every day, and that it's possible to drive a company so that it looks really, really different, hopefully in positive ways every quarter.
Speaker: Shifting gears a little bit, what do you think are some of the factors that have led to this explosion in craft beer in the US? You told us a little bit about what happened in Scotland with Brewdog, but particularly in the US, what do you think of the driving forces behind this revolution? I think that for a long, long time, domestic, big beer,
Speaker: was sort of the only option and it's really bland and it's not particularly interesting. There's no innovation really in that space. And so that was sort of the beginning of this craft beer movement where the beer can be so many things and that there's a lot of options and a lot of depth to what's out there. So, I mean, I would say that that's why so obviously it took off. But nowadays there are over 6 ,000 breweries
Speaker: the United States and I think part of that is because you know you can get you know a couple guys in a garage that are home brewing can then get a slightly bigger kit and make enough to have on taps at some of their local favorite bars and so you know the vast majority of those breweries are really really really small and you know then there's kind of these regional and larger players but you know there's a lot of a lot of
Speaker: tiny little breweries that are focused on creating cool beers for their neighborhood. And that's really exciting. So there's not significant barriers to entry for people to do that. Right. Well, following up on that point, though, because there's so much competition and low barriers to entry, do you ever see this market becoming saturated, so to speak, in terms of just so many options out there?
Speaker: I think we're pretty far away from that because craft beer is still only 20 % of market share in the beer market and then obviously in the larger beverage market that's a significantly smaller number. I do think there's a lot of people yet that have not met craft beer or been exposed to craft beers or a range of craft beers where they can find something that they like.
Speaker: Even though you mentioned that you're kind of in a startup phase, I mean, really, when you think about all your competitors, you're getting into now mid -size in terms of craft beers. Why do you think that's a good place to be? You've got enough infrastructure now, you're scaling, you're kind of growing. What do you see as the strengths of being in that position? Yeah, I mean, so we are certainly late to the craft beer party here in the US while we are the market leader in Europe in craft beer. So that's definitely one interesting
Speaker: point. So I think for us, like I said, there's still a lot of opportunity to bring craft beer to audiences that craft beer hasn't necessarily connected with, whether that's, you know, in a lot of urban and rural neighborhoods, they have yet to encounter craft beer. So I think there's still a vast opportunity for, you know, an ambitious regional or national brewery to
Speaker: to really sling a lot of beer to people that haven't tried it yet. What led to Columbus, Ohio as being selected as the site for this first entry into the U .S.? One of our founders was here in the U .S. looking at sites. He landed, tweeted, hey Columbus, where should I go get a beer? Before he had his bag, he had over 500 responses.
Speaker: and just decided, OK, this is where we're going to build our brewery. I don't know how we're going to pay for it. I don't know what the plan is. But Columbus, Ohio is where we're going to do this. So Ohio State and beer, there's a lot of different passions. And it's a great beer market. That's great. As we kind of walked in today, we had a chance to see some of the, I guess, other experiences that you offer here, the restaurant and the dog park.
Speaker: How much of a factor do you think that whole experience plays, not just for your company, but other companies as well? Yeah, I think I would say that the vast majority of craft brewers now are opening tap rooms on their own. That's great for margins. It's great to manage quality and control the end -to -end customer experience with the brand. But I also think it's part of our business model to build brew pubs so that we can
Speaker: One, be in communities and offer a great customer experience. But two, we're a living wage employer. We offer great benefits. So even our bar staff gets four weeks of paid vacation, health insurance, 401K. So anyone that's full time in our business. So the other part of our model is that we feel like by building brew pubs in communities, we can have a positive impact because of how we treat our people and that we build great places to gather.
Speaker: You know, I think that's sort of our approach to expanding our business. And you know, but I think for a lot of people, it's extremely practical that if you make beer and sell it yourself,
Speaker: you're protecting your margins and you can control for quality and have really small, batch -cool stuff. So I think that it's just a great way to do it. Right. So if I'm a mid -sized company, I don't have a product like beer where I can build this around, what are some ideas or suggestions you might give to other companies to do that? I think in any company, to just be totally fixated on the customer experience,
Speaker: whatever that is, is super, super important. I think a lot of times companies...
Speaker: take their eye off the customer, which should be the center of the universe in terms of driving product development, driving customer experiences, and driving strategy for the business. It should start with your customers and your people. Culture also plays a really big role. From what I've read, it's very unique things happening within your company.
Speaker: equity for punks we bleed craft beer what where does that originate from is it from the founders and how does that kind of permeate and why is it so important to your success yeah so with equity for punks that equity for punks was launched for the first time several years ago in the UK and to scale up so to build a brewery and starter breweries is capital intensive but to scale a brewery that's more than doubling
Speaker: year over year is extremely capital intensive. And so before the days of Kickstarter and Indiegogo, Brewdog revolutionized equity crowdfunding. And so to date, we now have over 80 ,000 investors. We've raised over $70 million. And the thing that's really exciting about that is that we have a community of 80 ,000 people.
Speaker: who are super excited and paying attention to what our business is doing, and they are super supportive of our growth. So we have over 8 ,000 investors in the U .S., and we're looking at launching another round equity for Punks 2 .0 in the coming months. So that's definitely one component because the minimum share price is $50.
Speaker: But people get really exciting perks. They get to be part of this community. We have our annual General Mayhem, which is our annual shareholder meeting, which is a beer and music festival.
Speaker: And people get to be part of something awesome, as well as being an owner in our brewery and our bars. Right. That's really cool. What are some areas that are looking to grow the business? You're looking at more restaurants, pubs, maybe partnerships with other craft brewers. What are some things you're looking at? Yeah, all of the above. So we definitely love doing collaboration brews with other craft breweries.
Speaker: We're definitely adding more brew pubs, restaurants to the region. And we think there's a lot of great opportunities and great communities where we can do that. We think making really exciting beers ourselves is always a great piece of that. And like I mentioned, growing our community of equity punks. So yeah, I mean, I think for us, there's just sort of infinite opportunities to do really cool things. And then we are opening our dog house hotel.
Speaker: and sour beer facility in August this year, which actually we're opening it right around the same time as our annual general mayhem. And this hotel is sort of the first of its kind. It's 32 room boutique hotel inside of a brewery.
Speaker: which is really, really exciting. The rooms are fantastic. We've got fridges just outside the showers so you can grab a cold beer and have a beer in your hot shower. And we're really trying to dive into these super immersive experiences for people that are fans and passionate about craft beer. How about an IPO? Do you ever see that down the road? Yeah, I think that that's probably
Speaker: On our path, one thing that I can definitively say is we will never, never, ever sell out to Big Beer. Certainly, as we continue to push on scale, we've announced a brewery in Brisbane, Australia. We're doing a joint venture in Korea. We're continuing to focus on global expansion because we do believe that we have an opportunity to be the largest
Speaker: international craft brewer for sure and we were already there in Europe. So I think there's sort of infinite opportunities and like I said, that's pretty capital intensive and an IPO would allow, you know, support our philosophy of being owned by our fans and our customers and our team and continue to allow us to grow.
Speaker: So it sounds like there's a lot of momentum, a lot of positive things happening, but no business is without its challenges. So what are some of the things that you face here in terms of challenges for the business and then you as yourself as the leader of the organization? Yeah, I mean, there's a few, right? So as I mentioned, we are pretty late to the party in terms of the craft beer game in the US. So really trying to tell our story and
Speaker: and have an impact in a market that is really full of arty, really awesome beer. It certainly will be a perpetual challenge for us, but we're doing pretty well, because we're making great beer. And that helps on that front. I mean, another big one in any business, especially that's high growth, is just getting the right butts in the right seats and finding people that can
Speaker: deal with the pace of what we are attempting. So to give you context, at the end of 2017, we had about 100 people in the business, we were distributing only in Ohio, and we had our taproom open. So as of now, we have two additional brew pubs open in Columbus, and we are at about 160 or so people. We're also distributing
Speaker: in eight states and adding another one or two in the next month or so. So we have a very, very aggressive pace in this business, which isn't for everyone.
Speaker: And then I think one of my biggest challenges is we've always got a lot going on. So just trying to wrangle the business and make sure that we've got the right foundation, ops, and processes in place to make sure that we can scale and keep the wheels on.
Speaker: So it's interesting, our center is about ready to release some research on kind of high growth companies and what are the pathways to that type of growth. And it sounds like you're doing several of the things in there. You're innovating, you're investing in the business. What kind of advice might you give to, you know, similar sized companies out there who are maybe kind of struggling with that chaos and
Speaker: Maybe it's more about not getting too far ahead of yourself and maybe outpacing or being too aggressive with your growth plans. But there may be companies out there who are kind of struggling with this question. What advice would you give as to how to go about it? I don't know. I think that if you've got the right people and you're really focused on the right people and you're obsessed with your numbers, so really keeping a tight, tight eye on
Speaker: EBITDA, Cash Flow, because that can derail the business more than kind of anything where you lack process. Because in my view, we can iterate and go and push. And then if things don't quite work, it's not necessarily that hard to make adjustments later. I think a lot of times
Speaker: People have a lot of ideas for growth strategy, but really it's about testing ideas and seeing what happens and then iterating from there. So in my view, it's just better to put stuff out there and kill things quickly, and if they have an opportunity to drive the business forward, then push really, really, really hard. But I think a lot of times businesses stagnate in speculation and kind of
Speaker: have meetings and discussions and planning and planning and they plan things to death and it's too late sometimes to seize those opportunities.
Speaker: Well, that is, I think, all we have for today. I want to thank you for spending some time with us. It's been a really interesting conversation. I'd love to learn about the business and about kind of craft beer in general. So I invite anybody who would be interested in subscribing to our podcast. You can find us on iTunes, Stitcher, and places where all good podcasts are found. You can also find us
Speaker: on our website at www .middlemarketcenter .org. And we thank Denisha and all of you for joining us today. Thanks a lot. Cheers.
