BrewDog reports GBP 24 million operating loss despite revenue growth

United Kingdom | The Ellon-based brewer and pub operator, BrewDog, reported substantial losses for the third consecutive year, despite showing a 12 percent rise in revenue to GBP 321.2 million (USD 412 million) in calendar 2022.

On 6 June, BrewDog released its annual report for the financial year ending 31 December 2022. Despite a rise in revenue, earnings before tax came in at just GBP 600,000. It also reported a GBP 24 million (USD 31 million) operating loss.

The company disclosed that beer output had grown 66 percent in comparison to pre-pandemic levels but did not give any details.

Rising costs

According to media, BrewDog’s Chairman, Allan Leighton, explained that investments in people, brand and infrastructure, together with significant impact cost headwinds “had a detrimental effect on the financial performance of the company in 2022”.

CEO James Watt added: “In 2022, we saw energy bills for our [Ellon] brewery increase by a staggering threefold, and with price increases affecting nearly every element of our supply chain, the cost of producing Punk IPA increased by an eye-watering 34 percent year on year.”

Likewise, the prices of hops, malt, CO2, cans, bottles, packaging, food and utilities were hit by “unprecedented” price increases, the brewer said. However, revenue at BrewDog’s 115 bars (it also owns four breweries and five hotels) across the world grew by 69 percent year-on-year, signalling the revival of the hospitality sector.

Investments galore

During 2022, the group opened its two largest bars, at London Waterloo station and in Las Vegas, alongside new bars in Atlanta, USA, Brisbane, Australia, and a number of smaller locations in the UK.

The original brewing facility in Ellon was upgraded with a new brewhouse and an additional canning line, which has more than doubled capacity.

The site also got a new anaerobic digestor to improve sustainability, while tree planting finally began at BrewDog's 9,308 acre Lost Forest, alongside peatland restoration work.

Scottish media reported that Phase one was approved by Scottish Forestry in June 2022, with tree planting commencing in March 2023 and due to be completed by the end of June - with 400,000 trees having been planted. Phase two was submitted to Scottish Forestry in February, and it is anticipated that works will begin sometime this summer, potentially finishing in the spring of 2025.

More red ink

In a separate filing (28 April) BrewDog reported that its US division – BrewDog USA – in calendar 2022 continued to make a loss. Yet, total US revenue for the year was USD 37 million, an increase of 19 percent compared to 2021.

BrewDog’s Australian arm (6 April) filed its report for the 2022 calendar year, showing a loss of AUD 1.49 million (USD 1 million), while delivering revenue growth of 38.1 percent. Again, no further details were given.

Condemned to growth

The website brewsnews.com.au commented that there is pressure on the company to grow ahead of any stock-market listing. “BrewDog sold a 22 percent share to private equity firm TSG Partners for GBP 213 million in 2017, giving BrewDog a notional value of more than GBP 1 billion.”

“The investment came at a high point for brewery valuations, just two years after Constellation Brands bought Ballast Point for USD 1 billion. The TSG Investment is a ticking time-bomb for BrewDog, and particularly its many equity punks hoping one day for a return on their investment, with TSG to receive a compounding 18 percent return on any liquidity event, before any other shareholders.”

The US drinks site vinepair.com noted that under this arrangement “unless the company’s value outpaces the guarantee it promised TSG, equity punks stand to lose money at a public listing, because BrewDog would have to dilute their shares to pay that 18 percent compounding return.”