marketing opinion

Startups and the runway to buy-out

Some businesses are founded with the intention of being sold for big money in five, six or seven years’ time. How can you spot them?

This isn’t a post about a specific brewery – though clearly Cloudwater has been on our minds this week. Perhaps our observations don’t apply generally. And maybe they don’t apply in brewing at all. But let’s have them out anyway.

We’ve both ended up with day jobs where we’ve been working with or on behalf of a number of startups recently. They’ve been across a range of businesses including food production, professional services and technology.

What we’ve noticed is that, despite the range of sectors and business models, they all have certain characteristics in common.

Six tell-tale signs

First, they tend to have a c.5-year business plan which acknowledges the business may not make a profit for several years, if ever.

Secondly, they have external funding from private sources – either founders and family, or venture capitalists. Funding from the latter is usually raised in multiple stages with late funding being dependent on hitting certain targets relating to sales, number of customers, market share and so on.

When late-stage startups make surprising decisions, this may well be what’s driving it.

Thirdly, they put sales to the fore. While it’s nice for them to be able to show that eventually the business will be profitable, the sales-growth trajectory is more important.

Consequently (item four) marketing will be conspicuously important to the business early on. There will be highly sophisticated marketing collateral from an early point in the business’s life, such as a cutting-edge website, a full suite of professionally-designed brand assets and a strong social media presence. It’s not unusual for these companies to have permanent marketing staff before they have an in-house finance team, or even their own manufacturing capability. 

Underlying all that there will be (five) a remarkably clear brand position and proposition, often focusing on an exaggerated difference between their product and established competitors. This is the essence of ‘disruption’ – at last someone is going to do this properly, cut through the bullshit and show the complacent dinosaurs what’s what!

This isn’t to say the product isn’t important. You certainly have to believe in it and be able to talk about it with convincing passion for several years. So, six, there will probably be a focus on new product development and heavy investment in it, at least in the early years.

What’s the endgame?

The final goal for this type of startup is usually a buyout of some description, in a set period of time – often five years.

Even if the founders want to stay in the business after that, they need to repay capital to early investors, so there’s always a ticking clock built in.

In the final stretch, you’ll often see a flurry of activity as they seek to maximise the value of the brand and of the company, which is what we were getting at when we last tackled this topic back in 2018:

There might be surprising partnerships with ‘evil’ companies; there may be contracts to supply supermarkets; or plans to have beer produced under contract, with more or less transparency… This kind of thing usually comes with a rush of blurb explaining how, actually, this way is even crafter because it widens access to the product, challenges the status quo, and so on, and so forth… The tying off of loose ends is another thing to watch out for, e.g. the sudden settling of legal disputes… The emergence of a dominant beer in the portfolio might be the biggest red flag of all.

The thing is, these companies will rarely, if ever, admit to their customers that the endgame is to sell it. After all, it’s a bit awkward when your marketing messages are all about what makes you distinct, different and superior.

That, we think, is why buyouts always seem to land as a massive surprise to customers and suppliers.

Contrary to what you might hear, people get just as narky about independence in other sectors as they do in beer. For example, we’ve both observed surprise and fury among boutique software users when products they love are bought out by a much bigger competitor. “I chose Quirple specifically because I liked their different approach and didn’t want to work with X-Corp,” they say, “and now I’m an X-Corp customer whether I like it or not? Quentin has betrayed me!”

It’s also worth saying that many businesses of this type never make it past the early stages. There is a high rate of failure with startups and even industry experts may never have heard of the ones that didn’t work out, or will forget them quickly.

What’s the alternative?

What does a growing business look like if it wasn’t built with that planned five-year-on payday in mind? Well, these businesses can still be successful, and still sell for big money, but their growth will tend to be organic, showing…

  • Lumpy sales growth and production – growing in fits and starts instead of on a smooth curve. 
  • A reluctance to invest in slightly intangible things like marketing because it all hits the bottom line.
  • A tendency to be behind the curve with new technology and production methods – they want to see it works before they invest hard-earned cash reserves.

As we said at the start, this isn’t really a post about breweries. We don’t work with breweries and it’s possible that not a single brewery has ever been founded as a startup with the aim of eventually selling to a larger competitor.

Perhaps every single one of those success stories (“Wow, great work guys, and well deserved!”) is a genuine surprise to the founders.

But it seems pretty unlikely, doesn’t it?


Craft beer – ‘ripe for parody’?

Every now and then someone decides that “craft beer is ripe for parody” – is it really?

Earlier this week the comedian Alistair Green posted a short video in which he played both the part of Matt, CEO of Punk Squirrel brewery, and Matt, Matt’s business partner and head of marketing.

Mr Green is one of those people who can make merely passable material seem good through the strength of his performance and his commitment to the bit. It’s part Vic & Bob outsider awkwardness, part Victoria Wood observation.

His piece from last year about Adam and Eve discovering the concept of death was particularly brilliant, we thought, somehow conjuring three characters and the Garden of Eden into being with a single talking head and a blank white room.

So when we saw Punk Squirrel pop up on our non-beer Twitter feeds, we watched it, and sure enough, it made us laugh out loud a couple of times. The line “I’m 43!” seemed particularly funny, perhaps because Ray is, indeed, 43 and recognised the look of despair in poor Matt’s eyes.

The punchline also rang true. We know people who weren’t remotely interested in beer until they hit 40, moved to the suburbs and had kids. Now they’re all over Cloudwater and Camden and definitely will order “a two-thirds of that, please” at the local craft beer festival, yeah, yeah, yeah, cool, cool, cool.

We’re also always fascinated to see commentary on beer from outside the ‘beer community’ and the response to this video was interesting, too, with hundreds of people replying with variants on, “Ugh, craft beer wankers… I swear I know these guys.”

So, without overthinking it, we gave it a Retweet from the Boak & Bailey account.

We were then surprised later in the day to find that other people were less amused.

Some were even, it seemed, a bit angry and upset. We won’t embed those Tweets here but they were impassioned: “Fuck that guy” said one.

This made us pause and reflect. For one thing, we think we understand where this pushback is coming from.

We’ve lost count of the number of times some godawful Twitter account called, e.g. ‘The Craft Beer nobhead’ has popped up, managing twelve weak Tweets about checked shirts and IPA before running out of steam.

And Matt Curtis in particular has been the victim of some limp, mean-spirited ‘parody’ over the years for reasons that aren’t exactly clear to us – “He’s just zis guy, you know?”

It also made us think about how this latest two minute swipe fits into a long history of taking the piss.

We could go digging into the far past – Falstaff, Pickwick, all those mid-20th century books which caricature the kinds of people you find in pubs and so on.

But the recent example that’s probably most useful is the ‘Real Ale Twats’ from Viz, whose creator, Davey Jones, told us the full story a few years ago.

What’s interesting there, with The Beer Nut’s comment in mind, is that the RATs debuted in 2001 – about 20 years after the bearded real ale bore stereotype first evolved.

People are often surprised by that, assuming the strip dates from the 1980s, but it does take a while for these things to breach the bubble.

Rewatching Mr Green’s sketch, we find ourselves reaching a few conclusions.

First, this is not an attack on craft beer drinkers or brewers, if you can call it an attack at all. It’s about the privileged founders of a certain type of big money, brand-led operation – specifically Camden, Beavertown and BrewDog. It’s punching up, not punching down.

Secondly, when a professional comedian notices your hobby, it means it has broken into the collective consciousness. That’s potentially pretty exciting.

And, debate aside, it did make us laugh – that’s a fact. Comedy is one of the few areas of creativity whose effectiveness on an individual can be measured with any degree of objectivity. Did they crack a smile? No? Then they probably didn’t find it funny. If they did, however, it worked and was therefore, kind of, in some way, good.

Finally, we don’t, as it happens, think craft beer is particularly “ripe for parody”.

What is there to say about hipsterism that wasn’t covered in Nathan Barley 20 years ago, or more recently by Portlandia?

And most of the people involved in the business of brewing seem to us to be earnest Heriot-Watt types trying to make a living.

Of course if people think there’s an angle, we’ll certainly always be interested to see what they come up with. We just can’t promise to laugh.


News, nuggets and longreads 27 March 2021: Ireland, New York, Lancashire

Here’s all the writing about beer and pubs that we felt moved to bookmark in the past week, from Manhattan to Clitheroe.

The big story this week is the flying of a policy kite around vaccine passports for pubs: no certificate, no entry. It’s triggered some passionate pushback from… Well, almost everyone, from publicans to those concerned about creeping authoritarianism. As always, there’s a lot of deflection and bad faith argument, such as people who don’t care about disability claiming that’s why they’re opposed to it, not because they’re dog-whistling at anti-mask, anti-vaccine types. Do we have an opinion? Oof. It’s probably a bad idea, even if we don’t relish the thought of finding ourselves sat next to some berk who didn’t have a vaccine as an act of defiance to the lizard people.

Harvey's bottled beers: Sweet Stout, Blue Label, IPA, Brown.

Yvan De Baets of Brasserie de la Senne has provided Craft Beer & Brewing with notes on the beers that have inspired him, hinting at an emerging super-canon of classics:

The first three beers I’ve selected are, for me, some of the very best examples of styles and beer cultures that influenced my approach to beermaking. As a Belgian, I have, of course, been influenced by the beers of my homeland (perhaps most importantly by lambic) but maybe even more so by traditional English bitters—with their low ABV and super-high drinkability—and by German pilsners, with their clean palate and the precision used to brew them. Those are the main causes of what my beers are today—or, at least, what I’m trying to do with them. Funnily enough, both those brewing cultures deeply influenced Belgian brewing in the second half of the 19th century.

SOURCE: Good Beer Hunting/Breandán Kearney

For Good Beer Hunting Breandán Kearney has written an overview of the growth of craft beer in Ireland over the past few decades:

When Tom Delaney was born, on Dec. 1, 1982 in Roscrea, County Tipperary, there was just one independent brewery on the island [or Ireland]: Hilden Brewery in Lisburn, Co. Down. Then, Ireland was a bastion of religious conservatism. Now, its younger generations lean progressive, particularly in the Republic, where they have led the fight for legislation in recent years in favor of equal marriage and reproductive rights, and support pro-European, left-of-center policy in the face of rising global nationalism… In beer, Ireland has experienced a change of an equally dramatic nature. In 2002, the year that Tom Delaney moved from Tipperary to Galway as a 20 year old, there were in the region of 15 independent breweries on the whole island. At the end of 2020, 18 years later, there were around 150 businesses producing beer. One source suggests 99 breweries operating with their own kit, and a further 51 companies producing beer on contract.

We saw this being fact-checked live on Twitter shortly after the link was first published; even if the numbers were up for debate (they’re always tricky to pin down) the story is what matters here.

Pete Brown took advantage of the birthday of William Morris to talk again about the origins of the concept of ‘craft beer’:

The word “craft” goes back to at least the 10th century, but its specific meaning today was invented by Morris. Before the Industrial Revolution, craftsmanship was just the way things were done, the way they’d always been done. Arts and Crafts arrived at a time when industrialised productions had become the normal way things were done. “Craft”, in its modern sense, is an alternative, a choice, a reaction against mainstream industrial production, against the way things are normally done.

SOURCE: Corto website.

Opening a bar during a pandemic – what are you thinking? That’s more or less the question Katie Mather has been asked point blank on numerous occasions in the past year. Now, for Good Beer Hunting, she explains exactly what she was thinking, laying out every step on the path towards opening Corto in Clitheroe, Lancashire:

“Did you know you can get down under the flooring?” our always-happy landlady beamed, on a final visit to sort the fire alarms. No. We did not know that. We’d agreed not to mention the storage issues for our sanity’s sake, clueless about how we were going to overcome the challenge of managing inventory in such a small space. Tom had only just stopped having nightmares about having to fill the entire ground floor with bathrooms. “The hatch is under the stairs, in the cupboard.” When she’d gone, we pulled back a plywood plank covering the hole, and shone our phone flashlights into the void. A poured concrete floor. We lowered a set of ladders in and Tom disappeared for a while. When he came back he was laughing. “It’s massive,” he said, climbing out of the hatch, covered in cobwebs. “A proper cellar! We kept the faith.”

SOURCE: Wikimedia Commons.

For VinePair Aaron Goldfarb has written about ‘Manhattan’s forgotten first wave of brewpubs’, reminding us that craft beer was once “yuppie beer”:

On a Thursday night in November of 1984, the Manhattan Brewing Company opened its doors on the third floor of a former Con Ed transformer station on Thompson Street in SoHo — “on a block that soaks up lots of bad vibes from cursing Holland Tunnel travelers,” according to New York Magazine’s David Edelstein — four blocks from where Torch & Crown currently stands… The 5,000-square-foot space offered six copper brew kettles, including one that was 14 feet high, purchased from traditional European breweries located in the Swiss Alps, Bavaria, and the Black Forest of Germany. On opening day, the Emerald Society of the Police Department played a bagpipe rendition of “Amazing Grace” as a memorial to all the Manhattan breweries that had come (and gone) before it.

For more good reading check out Alan McLeod’s round-up from Thursday.

breweries opinion

Recognition, demand and supply

It’s probably too soon to make this point but… Some breweries have done better than others in the past year, haven’t they?

It’s been a rotten year for everyone, obviously, but nonetheless it feels as if there have been, relatively speaking, winners and losers.

Now, because it’s bad taste to boast, not many breweries are admitting to having adapted to the difficult circumstances of 2020 with any success. We did, however, notice this interesting piece on an accounting industry institute body’s website:

All that time spent on spreadsheets modelling scenarios paid off in May. This is when we switched our bars/taprooms to bottle shops. As only one staff member is needed to manage a bottle shop, it’s kept costs low. They’ve done an amazing trade because they’re based in suburban areas. With everybody working from home, customers regularly visit on their daily walks.

And Jeff Alworth has covered some similar stories from the US:

We breweries of course sell beer by the case, and here in Oregon you can buy three cases at a time, per person.  So it’s pretty easy to stock up with minimal trips out of your house. I don’t think any of us realized this advantage when this all started. But in my mind it explains everything about why breweries were able to better survive this economic/epidemic crisis. Sure, delivery helps. But restaurants can do that as well and they haven’t fared nearly as well as we have. It’s funny, because it reminds me of the fact that for hundreds of years one of the main reasons people drank beer was because it’s safer than water. During this past year it’s been safer to pick up beer at the brewery than food at a restaurant—again due to the packaged durability of beer.

Breweries that rely entirely on the pub trade have obviously been at a disadvantage but those which rely on a certain type of pub trade even more so. The cut-price cask ale merchants, that is, whose beers nobody is ever delighted to see on the bar, but which they might tolerate at £2.50 a pint when everything else is a quid more expensive. Makers of rough and/or dull beer designed to please landlords with margin to make rather than drinkers. Let’s be honest, we’ve got Wickwar in mind, now deceased, but you’ve probably got a local equivalent.

Those which have done better, we suspect, are those whose names live near the front of everybody’s minds – the ones with fans, the ones that people will cross town to drink.

We ordered a box of Oakham beers this week, for example, because we haven’t had a pint of Citra in more than a year and missed it. In the past year we’ve also ordered from, among others:

  • Thornbridge (reliably great)
  • Good Chemistry (local, interesting beer, reminds us of The Good Measure)
  • Lost & Grounded (local, proper lager)
  • Fyne Ales (Jarl, Jarl, Jarl)
  • Elusive (varied styles, always interesting)
  • Cheddar (local, solid, reminds us of The Drapers Arms)
  • Bristol Beer Factory (local, reliable, reminds us of The Grain Barge)
  • Harvey’s (Sussex Best is the best)
  • St Austell (in honour of Roger Ryman, reminds us of Penzance)

We have tried to find ways to explore new breweries – selection boxes from online retailers, our standing order with The Drapers Arms delivery service – but when you’ve got to choose your weekend beer no later than Tuesday, you tend to stick to what you can trust.

As well as good beer, and the ability to distribute packaged beer directly to consumers, the breweries on the list above are known and liked. (Or were, at least, until the small brewers duty relief disaster.) They’re either old and venerated almost by default or they’ve invested serious time and energy into making themselves known through strong branding and an active online presence.

It will be interesting to see what’s on offer in UK pubs this time in 2022. Could there be (again, feels rude to say it) a survival of the fittest effect? Or will we find ourselves missing beers we couldn’t order to drink at home, or forgot existed?


What dreams may come?

Writing about your dreams is boring, we all know that – but what if we’re all having the same dream together?

We’ve both found ourselves having similar dreams in recently months, replacing the usual nightmares about zombies, rats and missed trains.

Now, it’s all about mundane experiences in the real world: checking into hotels in seaside towns out of season; catching buses through East London or central Somerset; going to the cinema to watch mediocre films.

And, of course, going to the pub.

It turns out the pub of our dreams is utterly, wonderfully unremarkable. Here’s Ray’s dream:

It’s a standard town pub with three ales on the bar, mid-afternoon. The TV is on. I order a pint of the guest ale and take a seat near the window. I read my book, watch the world go by. The beer is fine but not amazing so, for the next round, I go for good old Butcombe Bitter. While I’m on my second pint of Butcombe, with a bag of crisps, an elderly man asks if he can sit at the other end of the table. I say, of course, no problem. He reads his newspaper, I continue reading my book. At about 3pm, I decide it’s time to go. I take my glass back to the bar, say goodbye to the landlady and the chap I’d been sitting with and step out into the drizzle.

We don’t know if dreams really have a purpose or function but these feel like opportunities to practice or rehearse. Yes, that’s right – that’s how this all works. But maybe it’s just about administering a small dose of the pub experience to keep the cravings at bay.

What’s interesting is that we’re not alone – this might be close to a universal experience during lockdown.

After seeing a few tweets like this…

…we ran a poll:

That’s a pretty remarkable result – 58% of all respondents said they had dreamt about being in a pub.

But of course our followers might be said to be prone to thinking about pubs so, for a bit of extra info, Ray ran the same poll on his own not-just-about-beer account. With far fewer responses, the result was similar:

Our assumption that this is our brains running preflight checks before we can go back to the pub for real isn’t the only possibility.

It might simply be that, in difficult times, our collective subconscious is throwing us a bone. Here’s what one website says it means when you dream about pubs:

A public house, pub or bar represents a positive self-image and a deep sense of happiness and fulfillment. It could also represent the places you go to try to escape your problems.

Well, yes. Overnight therapy indeed.