What can SMEs learn from the rise and fall of Brewdog?

It has been a story of epic highs and headline-grabbing lows, but the administrators of BrewDog, the Aberdeen-based brewery known for their Punk IPA, have now announced that the business has been sold.

The news follows consultants being brought in last month after years of no profits, and the axe has fallen fast. US beverage and medical cannabis company Tilray is the new owner of the company’s UK brewing operations, brand and 11 pubs. However, the £33m deal will still see 484 jobs culled and 38 bars closed.

The rise and fall of this once viral brand is a cautionary tale to all businesses, but especially those in the beleaguered hospitality industry. While the pandemic and tough economic conditions definitely played a role in the business’s downfall, SMEs should take notice of the myriad of missteps that ultimately diluted the brand’s ‘punk’ persona, which it had previously leveraged to great effect.

When things go flat

The announcement by BrewDog’s administrators, AlixPartners, will come as little surprise to many. Only in July, the brewer revealed it was shutting down 10 sites, including its flagship location in Aberdeen. 

Just months later, in August, The Telegraph reported that over the past two years, 1,860 pubs had turned the taps off on the company’s range of draught beers. This amounted to a crippling 52.3% reduction in distribution.

Lauren Caroll, BrewDog’s chief operating officer, said that the decline reflected wider industry issues. She stated: “Independent brewers across the board have felt the squeeze from the economic pressures hitting the pub trade. With costs rising and consumers watching their spend, pub groups have been narrowing their ranges, and brewery-owned pubs are putting more emphasis on their own brands.”

While Brewdog’s financial woes were key to its downfall, it’s impossible to ignore years of bad headlines and missteps that tarnished the reputation the company had developed, over many years, for doing things differently. 

Often, there’s only one thing that irks people more than companies engaging in poor ethical and business practices – and that’s companies that talk the talk but refuse to walk the walk. 

Scandals, mistakes and not being very ‘punk’

When James Watt founded the venture in 2007 with his friend, Martin Dickie, it quickly became what BBC News calls “the rebellious challenger to a UK brewing industry it regarded as stuffy and corporate”. 

While the company initially seemed to live up to its mission statement – externally, at least – in recent years, that image has collapsed. In late 2020, for instance, the brewer launched a competition promising that there were solid gold cans hidden in packs of beer, as well as £15,000 in BrewDog shares. 

Watt quickly came under fire after it was discovered that the cans were simply gold-plated and, as Marketing Week reported, “largely made of brass”. The claim caught the attention of the Advertising Standards Agency, which rapped the brewer’s knuckles and prompted him to fork out around £500,000 of his own money to pay back winners.

Around the same time, a 2021 letter penned by a group of employees, Punks With Purpose, alleged that a “toxic culture” and “cult of personality” had developed at the company. 

It also referenced the misalignment between the company’s stated desire to “save the planet” and the use of private aircraft, as well as several other actions the group viewed as antithetical to the company’s purported values.

Then, the BBC reported in January 2022 that numerous staff members at the company had accused co-founder James Watt of “inappropriate behaviour and abuse of power”. This eventually led to his departure as CEO.

Later in the year, it was revealed that Watt had bought shares in drinks giant Heineken in 2017, which he claimed was a “goodwill gesture” to facilitate a distribution agreement. It was viewed by many, however, as another example of the company’s top brass working against its stated ethos.

More recently, there was severe backlash when Watt was accused of refusing to pay his staff the Real Living Wage (RLW). Watt refuted claims that employees would face a pay cut but stated that the company could not afford to put the RLW into place. 

While this furore was good for news writers, it did win some sympathy for Watt among those in the hospitality industry, within which many businesses are unable to meet employee wage expectations. Despite the understandable financial pressures, it did not play out well in the wider public arena. 

The brewery’s unsuccessful attempts to stay relevant, coupled with these scandals and missteps, saw the brand slip further and further from its ‘punk’ beginnings, and towards that corporate, stuffy vibe it initially claimed to despise – and clearly, the public took notice.

A brutal announcement

The fallout from the sale of the business has seen the unions strike out at the management team, further compounding the company’s reputation. Sharon Graham, Unite’s general secretary, said that BrewDog has treated its workers as “disposable pawns.”

According to the BBC, Brewdog employees were given just 25 minutes’ notice of the 15-minute call to announce that their roles were being cut. There was no opportunity for comment on the call, and cameras were off. While the job losses were inevitable after so many years of financial turmoil, the handling seems unnecessarily brutal. 

Leon went through a similarly harsh cull after the business was bought by Asda’s management team, floundered and has now been bought back by co-founder, John Vincent. 

While he was upfront about the job losses ahead – the closure of 20 locations – he and his management team also reached out to rival Pret A Manger, to try and place as many of their people as possible in new roles. 

The move showed how valued the staff were – but it also ensured that the brand managed an inevitably negative situation with the sort of grace and care its customers would expect it to. Tasked with breaking the same tough news, it feels like Brewdog has failed once again.

What SMEs can learn from this

Of course, every company can go through financial difficulties. They can fall victim to macro-economic conditions that make trading increasingly difficult, or simply make poor business decisions that ultimately lead to closure. In this way, Brewdog certainly suffered.

But crucially, the way Brewdog compromised on its stated values, in a variety of ways, was completely avoidable.

The stories about the company’s toxic workplace culture and desperate marketing ploys would probably have made the headlines anyway, but there’s an element of obvious hypocrisy running through them that arguably made reputational recovery much more difficult. 

The learnings for SMEs are simple: customer loyalty is increasingly tied to the values exalted by brands – and ultimately, is both brittle and conditional. Your values simply have to run through your company culture, your marketing campaigns, and your business goals. Or else, it becomes pretty hard to shout about them. 

To put it another way, if your core marketing message is ‘I’m not like the other brands’, and then you behave exactly like them, your pitch to your target market is going to appear spectacularly hollow.