The press misheard: Scottish craft brewer Innis & Gunn is not for sale

United Kingdom | What a brouhaha: Speaking to media at the firm’s AGM in October, Innis & Gunn’s CEO Dougal Sharp said that “the firm is for sale”. He referred to a subsidiary, Flavourly, but some hacks thought it was the Scottish craft brewer itself. At the end of October, the brewer had to issue a statement, saying that Innis & Gunn has no plans to sell up.

How could reporters misinterpret Mr Sharp’s remark? Well, the Scottish brewer and pubs chain posted a GBP 2.4 million (USD 3 million) loss last year. This figure only emerged after a media statement highlighted a rise in turnover and gross profit, prompting a flurry of frothy articles on Innis & Gunn’s “strong performance” and growth plans. Innis & Gunn reported a 5.2 percent rise in gross profit from GBP 7.4 million to GBP 7.8 million (USD 9.8 million).

In an interview at the time with the newssite Daily Business, Mr Sharp admitted that 2022 had been a tough year and that 2023 had continued to be one of continued cost pressures.

However, when asked if the company had made a bottomline loss, he said: “We are not commenting on whether we make a profit or a loss. It is not something we discuss publicly.”

The loss widens

The accounts, which were published by Companies House, tell a different story. The company’s pre-tax loss for the calendar year 2022 widened to GBP 2.4 million from GBP 1.2 million in 2021.

Mr Sharp also declined to say whether the company would return to profitability this year. But media took note that Innis & Gunn’s financial year was extended by three months to the end of March 2024.

Asset-light

Like its peer BrewDog, Innis & Gunn has been very good at making headlines, usually of the boisterous sort, but has often failed to come up with sound financials. After 20 years in business as an asset-light firm that is a remarkable achievement, commentators pointed out.

It was founded in 2003 by Dougal Sharp, who is the son of Russell Sharp, the founder of Caledonian Brewing. He is what you would call brewing royalty. Though Innis & Gunn is famous for beers matured in oak casks previously used for maturing spirits, many craft beer aficionados consider them merely gateway beers. Nothing extreme, they say.

Its beers are brewed at Tennent’s in Glasgow, an industrial brewery. This has led to repeated speculation if all of Innis & Gunn’s beers are actually matured in casks - or if there is a secret workaround. Per media reports, the contract with Tennent’s came to an end in 2020 and was renewed in 2021, when Tennent’s owner, Irish cider and drinks group C&C, was given an 8 percent stake in Innis & Gunn.

Brewed in Canada

Since 2016, Innis & Gunn has owned a brewery in Inveralmond on the outskirts of Perth, plus several bars. To save on shipping costs to Canada, its major export market, its beers have been produced by Brunswick Bierworks in Toronto since 2019. Canada currently accounts for about 40 percent of Innis and Gunn’s international sales. The production process in Canada remains a secret too.

Innis & Gunn made some waves when it was granted planning permission for a large brewery, a taproom, plus a visitor centre at Heriot Watt University's research campus in 2021, which would have made it the first large brewery to be built in Edinburgh in 150 years. However, plans have since been put on hold.

Spilling red ink

The firm may have sunk into the red on and off over the years, but it has a backer with potentially deep pockets. In 2017, it accepted a GBP 15 million investment from L Catterton, a US private equity firm, backed by luxury group LVMH. L Catterton was awarded a 27.9 percent stake in the craft brewer … and Mr Sharp probably a nice payout. A year previously, Innis & Gunn had raised GBP 2.4 million in a crowdfunder.

It therefore remains a mystery, why Innis & Gunn allowed its fulfilment company, Flavourly (it would pick, pack and dispatch orders), to collapse. According to its critics, Flavourly relied on a business model, which would have paid the brewers a pittance, while luring punters with subscriptions they could not get out of.

The sale of Flavourly is now firmly on the agenda, Innis & Gunn said.