Wednesday, 20 July 2011

Buy their beer, not their hype

When I started this blog a month or so ago it was supposed to be for me to write about something I'm passionate about, ie beer, as well as other subjects as they took my fancy. Unfortunately it appears my natural tendency to procrastination and a certain brewer's ability to get attention means it's turned into something of a single-issue publication.

I've made myself the promise that after this post the next two or three will have nothing to do with BrewDog. After this one...

Yesterday, a post was made to the BrewDog Blog. The front page of the blog carries the emotive (and false) statement that "BrewDog [are] banned [from GBBF]". It's false because they aren't; GBBF organiser Marc Holmes has stated that BrewDog are welcome to reapply for 2012.

The blog proper goes on to say that an agreement had been made for BrewDog to supply "kegged" beer to GBBF. This isn't (wholly) true either, or rather it uses language that many perceive to mean one thing, when in fact it means another.
Let me explain. CAMRA does not specify the type of container necessary for the beer within to be "real ale" by their long-standing and clear definition. Provided the beer "undergoes secondary fermentation in the vessel from which it is served" and is served such that no extraneous CO2 comes into contact with the beer, it satisfies the definition. It's worded that way because it encompasses bottles, casks, and yes, even kegs. The "kegged" beer BrewDog were going to supply wasn't "kegged" in the sense that it was dead, pasteurised, or overly filtered, it was "kegged" because the vessel they wanted to supply it in was called a "keykeg".

In other words, the beer BrewDog agreed to supply would be identical in every way to "real ale" served in a cask, with the only exception being that the container is called a keg, not a cask.

The blog then goes on to say that it is "[i]ronic that if Scotland was independent, we would qualify as foreign and could serve anything we wanted there." This isn't true either. The external policy document that tells CAMRA beer festival organisers what they may or may not stock at the festivals allows beers that do not satisfy CAMRA's definition of real ale to be stocked if and only if the country of supply does not have a tradition of cask-conditioned products. Scotland's tradition would not change overnight if independence were to be gained.

The blog then expresses surprise that CAMRA care if the beer contains a minimum amount of live yeast. I say "expresses surprise", what I really mean is "tests credulity by claiming to be surprised". CAMRA have made no secret of what they consider to be "real ale", and that is beer that undergoes secondary fermentation in the cask/keg/bottle/dustbin/prosthetic limb from which it is served. Live yeast is necessary for this process, as every schoolboy knows.

Size Matters
The next point of contention (and closer to the apparent truth of the dispute) is the size of the containers used. GBBF is a massive event, with a huge number of attendees. This means that it needs a lot of beer, and small containers mean that they have to be changed more often.

Last year, as the blog rightly points out, Thornbridge supplied 9g firkins. This was a trial to see if it worked, as ordinarily 18g kilderkins are used. It didn't work, and this year everyone has been asked to supply 18g containers.

It seems that originally the agreement was that BrewDog would supply 50l containers. These are approximately 11 gallons, a standard size for kegs. Unfortunately, keykegs are only available in 20 or 30l sizes (4.4 and 6.6 gallons respectively). The idea that a festival that has rejected 9 gallon containers due to the impracticalities involved could instead use a container 33% smaller was apparently rejected by the festival organiser.

This dispute over container size resulted in an extension of the payment terms; brewers with bars were to have all monies paid to GBBF by 27th May, but due to the difficulties in agreeing an order BrewDog were granted extra time. During this extension, James (according to Marc) offered to supply some beer in 18g casks if the rest of the order was accepted in 30l keykegs. James says that this isn't the case.

By the time 13th July came around, some two weeks before delivery was expected, I'm told by Marc Holmes that he
"emailed James on Wednesday 13th at 1pm asking him to accept the beer order, giving him a deadline of Thursday 12pm to accept, and Friday 12pm to make the outstanding payment. He responded within hours, not to accept but to continue to argue. He finally emailed to accept on Friday morning at 11am, by which time he had already received the official cancellation letter (which had been posted after 12pm on Thursday)."
This is in stark contrast to the claim made by James in the blog comments that their contract was cancelled before the deadline. Whether James had in fact received the cancellation letter is unconfirmed; whether it was sent recorded I don't know.
It should be noted also that a post to the same effect as the quotation above was made to the BrewDog blog comments shortly before those comments were closed, and that comment is one of a few that have been deleted., despite James' ultimate comment that "all views have had their fair chance".

The second comment here is no longer to be found on the blog
It should be noted that the top comment appears to be a fabrication, made possible by the lack of verification in place in the form used for blog comments.

Two things seem clear:
  1. The order has been cancelled due to a disagreement between CAMRA (or more properly the GBBF organiser) and BrewDog
  2. The core of the dispute is about container size, and not ideological.
The rest is unclear, and never will be until one party or the other published the e-mail exchanges leading up to the deadline. James has posted on the blog comments that BrewDog "have nothing to hide", and so I can see no reason to obstruct such publication. It's the only way we'll ever get anywhere close to the truth, hidden as it is by grandstanding and the apparently deliberately misleading version of events presented.

It amused me somewhat to see a commenter on the blog say that it was unfair of GBBF to expect an agreement when BrewDog were so obviously busy with EFP2. I'd invite that particular poster to check the very first line of the blog, and ask himself how many people have seen it. That may point a finger towards the real reason for this furore.

Thursday, 14 July 2011

Equity For Punks : I'm Out

Dragon's Den or Doghouse?
It's a staple of Dragon's Den that a wide-eyed and keen would-be entrepreneur brings himself in front of the business giants and asks for £250,000 for 10% of his company comprising himself and his prototype of three wooden spoons strapped together with elastic bands (or some other outlandish combination), only to be asked by the first Dragon to speak how they can justify a valuation of their company at £2.5million.

This is usually followed by a great deal of uhm-ing and aah-ing, or more entertainingly an explosion of accusations that the Dragons don't know what they're talking about, shortly succeeded by raised eyebrows and an early shower.

So it's with surprise that, following a link supplied by James Watt on Twitter, I read Brewdog's Equity for Punks prospectus to find that they're issuing 90,000 shares at £23.75 a share, representing a total 8% interest in the company. Some quick sums (23.75 x 90,000 / 0.08) reveal this to be a rough valuation of the company at £26.7million.

Bear in mind that the company's turnover for 2010 was £3.3m and there's an enormous gap between that and the supposed value represented in the share issue. The projected turnover for this year is better, at £6.5m, but that still leaves a gulf of £20m that remains to be filled.

What Say You?
Armed with this quick arithmetic, I returned to the Brewdog blog and posted a comment which can be seen in the image below:

A plea for justification
Shortly afterwards I refreshed the page to discover that the comment had been deleted and further comments disabled. I can only take that to mean that somewhere in an office in Fraserburgh, someone is working very hard to produce the justification and it will be published forthwith.

Timely Endorsement
A while later, James tweets that the Times have recommended the investment. Great news, if in fact it is true.

A picture followed shortly thereafter showing Brewdog staff holding the Times open at the page of an article on the share issue (right).

That article (behind a paywall here) doesn't so much recommend the investment as point out that the "groundbreaking" nature of the share issue means it is unvetted by any financial authority and is high risk, further pointing out that the "prospectus" should more rightly be called a "financial promotion".

The actual "recommendation", if it could be called that, is found several pages earlier in the paper, and is a paragraph or so in Patrick Hosking's Business Commentary. Again, though, there is little found to "recommend" the investment. The furthest Patrick goes is to entitle the paragraph concerning Brewdog "Liquid Assets Worth a Flutter", which is hardly a ringing endorsement, especially given that in the text of his commentary he notes that there is in fact no liquid market for the shares (they can't yet be traded, and even when they can it will be only by matched bargain through the website).

Mr Hosking does say that investors might be persuaded by the phenomenal growth shown by the company and its distinctive marketing to have a punt of a hundred quid; this isn't so much a recommendation as an invitation to gamble if you have the spare cash.

Exit Strategy
"Investing" in Equity for Punks does bring with it some benefits -- 20% discount in their online shop* and 5% discount in their bars. If you can stomach the faux-punk nonsense then these meagre offerings might do something to offset the ~£18/share surcharge, which may in itself be considered an ideology tax by those who strongly believe in what Brewdog are trying to do, and want to see them go further.

Personally, I like some of their beers (the best pint I've had in recent memory was a pint of Punk IPA at the Steampacket Inn on the Isle of Whithorn) but their attitude doesn't sit well with me, so I'm afraid I'm out.

*Spending £500 in the shop would appear to be the quickest way to get a return on your investment.