Revenue and losses both grow for BrewDog's Australian arm
Scottish brewer BrewDog has released first-half results for its Australian venture showing continued revenue growth, while still finding profit elusive.
BrewDog Group Australia has reported revenue growth of 74 per cent for the six months ending 30 June, achieving sales of $7.2 million for the period.
Retail sales through its own venues, DogTap Brisbane and its Fortitude Valley bar grew 63 per cent to $5.5 million.
Despite the revenue growth, losses for the six months grew to $1.19 million, up from $755,000 in the prior corresponding period, which had been flood and COVID affected.
Australian Group CEO Ed Bott told Brews News that despite the absence of the challenges of the previous year, the market is still tough.
“In terms of the summer period, I think everyone’s hoping for at least some normality to return to the industry,” he said.
“It’s tough out there in terms of everyone, not just the brewery and brewing industry, that’s the cost of living crisis.
“It’s not easy. Everyone’s mortgages are obviously going up massively, rent going up. Consumer confidence is not what it was and that’s all part of the macro environment for everyone.”
He said that while the company’s brewery venue, DogTap, continues to be a strong performer for the group, its Fortitude Valley bar – opened last November – hasn’t performed as hoped.
“DogTap really attracts a family audience, it’s a local community destination for south and southeast Brisbane and it’s continued really well for us,” he said.
“Whereas Fortitude Valley is…a little bit more craft beer orientated and it certainly has been softer than we would have hoped in the first six months.
“And that’s something we’ve adjusted to when we’re finally finding our feet a little bit with Fortitude Valley in terms of what’s the right run rate, how to manage costs associated with that, so that’s been a different experience for us versus DogTap.
He said that apart from increasing input costs the results had also been impacted by capital expenditure in the brewery.
“We’re also spending about $900,000 – almost a million – on the brewery this year, quite a bit of which we spent in the first six months on a centrifuge, which was quite a large ticket item for us.”
“Also a new Westrock packager to fully automate our packaging as well.”
He said the brewery had invested in new tanks arriving in October to increase capacity further.
“So I guess the six months is not full year [results] for us,” he said.
“We’re very confident about finishing [the year], the growth is already there through the first half of the year, all our sales channels are in growth for the first six months.
“It was just that there were more costs in the business than we probably anticipated, given the softer market, given the underperformance of Fortitude Valley to expectations and our own readjustment of our own planning for Fortitude Valley, but also things like investing in the brewery for capability and capacity.”
Bott said that the brewhouse was currently able to produce about 20,000 hL, with the new tanks to add another 10,000 hL, giving them enough capacity for the next 18 to 24 months.
He said it was difficult to estimate when the brewery would hit profitability, but that if it hits its current capacity the business should enter the black.
“And obviously it comes down to the product you’re producing, it comes down to labour and lots of other things as well,” he said.
“I’d anticipate that if we got to the 20,000 hL mark that we would as a business in terms of our retail revenue – because retail is a big part of our revenue as well – and brewery revenue that we would be in the direction of profitability.
“You never know what’s going to happen in the world, anything could happen, but I would expect by that stage we should be posting decent cash flow, translating it into profitability as well.”
In June, BrewDog’s Scottish parent company reported losses of £24 million (AU$45.9 million) for its reporting year ending 31 December 2022, despite 12 per cent revenue growth to £321.2 million (AU$614.46 million).
BrewDog lowers staff profit share
Meanwhile, the Scottish brewer has quietly backed away from its prominent pledge announced in May last year to share 50 per cent of its bar profits with staff.
In BrewDog style, the company announced it was “setting the bar higher for hospitality workers everywhere, and democratising the benefits of working for a successful business in our industry”.
“You read that right. 50% of all profit made in BrewDog Bars will now be shared evenly with the fantastic people who work in them,” the company announced last year.
However, despite the fanfare of the announcement, within months the pledge had quietly been shelved and replaced by a performance-based payment.
The prominent profit share announcement came at a time when the company and its founder, James Watt, were facing intense scrutiny for its employment practices.
The now-abandoned program generated extensive positive coverage for the company when it was announced in the wake of a number of allegations by former employees, that culminated in the company losing its coveted B Corp certification.
But Head of Australian Operations Calvin McDonald told Brews News that there’s “not much point” sharing profits that don’t exist.
“Sharing 50% of profits with staff is something that had never been seen in hospitality before, and we were proud to be first,” he said in an email.
“However, in all parts of the globe – but particularly in the UK, the energy crisis took hold. Costs spiralled and the economic situation deteriorated badly.
“Put bluntly – there’s not much point sharing 50% of bar profits if there’s little profit to share.”
He said that in February 2023 the company had a global consultation with its bar team members.
“The outcome of which was moving to a new system called Customer Champion. Each month, every bar globally is mystery shopped,” he wrote.
He explained that if staff in a review venue met performance requirements, staff now receive a $2 per hour bonus that month.
“With Customer Champion, the emphasis is being put back on service and customer experience, as well as financial performance,” he advised.