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Thu 21st Sep 2017 - BrewDog eyes Equity for Punks Five to bridge £90m funding gap
BrewDog eyes Equity for Punks Five to bridge £90m funding gap: BrewDog is eyeing Equity for Punks Five (EFP V), a fifth round of crowdfunding, to fill a £90m funding gap as it aims to become a company worth £5bn, Propel has learned. A blog on the company’s website, believed to have been written by co-founder James Watt, sets out the company’s funding requirements – only so-called Equity Punks have access to the area of the website that carries the blog. The blog states: “Loads of people were asking why we needed an Equity for Punks Five so I thought I would run through some plans and numbers so that you guys are completely in the loop and up to speed on our latest thinking. I am not going to touch on the Unicorn Fund in depth (but) essentially I see this 10% as a very smart investment, which we will get back at least three-fold as well as doing loads of good in the world. I believe we will be more profitable because we are giving an extra 10% of our profits away so the Unicorn Fund will decrease, as opposed to increase our medium and long term cash requirements. As outlined, our plan is to try and turn BrewDog into a £5bn company in five years. This is an insane target. This will require a hell of a lot of hard work, plenty of fair winds, a few crazy gambles and a huge amount of capital investment in big projects. We currently have £90m of the TSG money in the bank which is our entire capital reserve. £10m has already gone into paying off some older, more expensive debt, working capital and our amazing new Krones bottling line.

Here are our current capital requirements through to the end of 2018:

1) Working capital: We need an additional £25m-plus just to get us to the end of 2018. Stock and debtors are currently at £25m, this is our current working capital requirement. However we are forecasting to double sales in 2018, this means we will need at least double the amount of working capital. Potentially more as to grow sales that quickly involves increasing sales to larger customers who generally take longer to pay.

2) Ellon expansion:
Ellon expansion part one: This is to extend our additional fermentation tank deck and fill it with fermentation tanks. Build our new building opposite the site three brewhouse and add an additional seven-vessel 300-hectolitre Zieman Brewhouse in it. This all amounts to £30m.

Ellon expansion part two: This is to exercise our strike option on the recycling building (opposite site one) and build a new building on the site that the recycling centre was located on. This building will then house an amazing new high-speed canning line and two kegging lines. This all amounts to about £25m.

Ellon expansion part three – Overworks and Lone Wolf and miscellaneous: Lone Wolf needs a small bottling line, as does Overworks. We also want to expand Overworks based on the initial pre-orders from all of our customers as well as build the Overworks mezzanine bar. We also have to do various upgrades, utilities such as water connection, gas connection, electricity connection and waste water treatment. All in all, these projects amount to £10m. So, £65m will be spent in Ellon. This year we will ship about 410,000 hectolitre of beer and all of the projects above will take our Ellon capacity to 1.6m hectolitre (or maybe a little bit above that) which is not crazy given our current rate of growth.

3) US expansion: We now have beer flowing into the market in the US which is great. We are continuing to invest in our US brewery with additional fermentation and packaging capacity coming online in 2018. We are also due to start building our hotel and sour beer facility in November and we have two great new bar sites opening over the next few months with more to come. 
Capacity expansion – £5m
Hotel and sour facility – £6m
Franklinton and Short North – £2m

4) Asia expansion: I am actually currently en route to China to look at potential locations to build a brewery there. China is now our biggest export market and is going like a train. We would build something on a similar scale to Columbus so this would be a £30m spend.

5) Australian expansion: Zarah is back and now looking for sites in Australia. This would be a smaller brewery just to supply Australia and New Zealand and the investment would be about £10m.

6) International bars and brewpubs: The number here is still quite fluid, but we are looking to open flagship brewpubs in our top ten export markets over the next two years. This will likely cost £15m to £20m. Oh, and we are close to announcing an amazing site in London for one.

Summary: All of this adds up to £163m. It would make sense to add a 10% contingency on to all of these projects too. That puts us at pretty much £180m. This is without considering additional projects such as expanding Lone Wolf, the Ellon hotel, any big marketing initiatives or any other opportunities which may come our way, such as building a brewery in Vegas.

Now EFP V won’t get us an additional £90m. But if we raise a decent amount then I can bridge the gap with various forms of bank financing. Our plans are full on, but we have amazing momentum, a brilliant team and an outstanding Equity Punk community. We want to build a brilliant and enduring business. We want to redefine beer and we want to create a whole new blueprint for a socially responsible 21st century business. And we want to enjoy being on a journey to try and achieve something truly remarkable hand in hand with our team and our equity punks. Becoming a £5bn company is a pretty crazy target. But we have a habit of hitting crazy targets.”

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