Categories
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?

Categories
breweries

Brewery merger amnesia

The recently announced ‘joint venture’ between Marstons and Carlsberg made us think about how modern brewery mergers are much more commercially savvy than 1960s and 1970s equivalents.

Nowadays there is a recognition that local brands are important and that if you keep then more or less the same then, after a while, people might forget that there is a new parent company.

A while back, for example, we were corresponding with a journalist about modern bitter brands and he was completely unaware that Marstons had taken over the brewing arm of Charles Wells.

More embarrassingly, I momentarily forgot that Magic Rock had been bought out by Lion in March 2019 – and I’ve written about Magic Rock at length on multiple occasions.

To be fair, it isn’t featured at all on their lovely pictorial history page, or on their about page, so maybe they forgot too.

We’ve also astonished friends by breaking the news to them that Camden and Beavertown are no longer independent. Those takeovers were big news for beer geeks but outside the bubble, people either missed the announcements, or instantly forgot.

And in one case, they were gutted about it, too: “Oh. I thought I was supporting a local independent brewery.”

You might say it’s too early to tell how things will play out with some recent takeovers. The Big Six in the post war period usually allowed a year or so before closing down breweries and rebranding products. (See: Usher’s.)

And consumer preferences change. During the takeover mania of the 1960s and 70s, CAMRA lambasted Watney’s and Whitbread for doing away with local brands. Now, you might argue that at least their uniform packaging and design was honest.

When there’s actual ownership and rights splits, provenance can be more obvious. So, for example, when Asahi bought the Fullers’ brewery, there was a requirement to set up a separate Fullers Brewery website to maintain the distinction between that and the pub operator. And that website does mention Asahi at a couple of points.

Interestingly, though, the first search results for “fullers beers” still takes you to the pub company’s website, so if you weren’t following closely, you might just assume it was business as usual.

All of this underlines that transparency isn’t a one-off event – ownership needs to be clear to consumers from packaging and promotional material on an ongoing basis.

Categories
News

News, nuggets and longreads 23 May 2020: Marston’s, Duration, Urquell

Here’s a round-up of beer-related news, commentary and history from the past week, from Carlsberg to classified information.

The week’s big news was the announcement of a ‘joint venture’ between multinational giant Carlsberg and the UK’s largest independent brewery, Marston’s. The new company, Carlsberg Marston’s, is 60% owned by Carlsberg and does not include Marston’s estate of 1,400 pubs. Carlsberg now owns, to all intents and purposes, not only the Marston’s brand but also Brakspear, Ringwood, Banks’s and others.


Martyn Cornell informs us that yesterday was the 299th anniversary of the first known mention of porter in print:

The passing mention came in a pamphlet dated Wednesday May 22 1721 and written by the then-23-year-old Whig satirist and polemicist Nicholas Amhurst (1697-1742). Amhurst implied that porter was a poor person’s drink, writing that “Whigs … think even poverty much preferable to bondage; had rather dine at a cook’s shop upon beef, cabbage, and porter, than tug at an oar, or rot in a dark stinking dungeon.”… The fact that Amhurst (who is buried in Twickenham, less than a mile and a half from where I am writing this) felt no need to explain what porter was suggests it would have been a familiar word to his audience, even if no one had ever put it into print before.

Categories
News

News, Nuggets and Longreads 30 March 2019: Magic Rock, Bottle Shop, Light Ale

Here’s all the news and commentary on beer and pubs that grabbed us in the past week, from takeovers to light ale.

First, some big news which would be more exciting if it hadn’t seemed inevitable, and if we hadn’t been through this cycle multiple times in the past decade: Huddersfield’s Magic Rock has been acquired by multinational brewing company Lion.

We’ve always found Magic Rock’s Richard Burhouse to be a frank, thoughtful sort of bloke, and his statement strikes home in a way these things often don’t:

Of course, I realise that this news will not be universally well received but I’m also conscious that internationally renowned brewing companies don’t invest in Huddersfield every day, and I’m delighted that the journey we started eight years ago has got us to this point… I’m proud that we continue to be a good news story in the town; the deal with Lion secures growth and longevity for Magic Rock, genuine job security for our employees and enables us to hire more people and contribute more to the economy of the local area going forward.

It’s interesting that of the four breweries involved in the founding of United Craft Brewers in 2015, three have now been bought by multinationals. We said at the time that UCB represented a statement of ambition, which ideas seems to have been borne out by the passage of time. Anyway, that’s one rumour down, leaving one more (that we’ve heard) to go…


More news, not perhaps unrelated to the above:


Light split (HSD and Light Ale).

Justin Mason at Get Beer. Drink Beer. has been researching and reflecting upon one of the most popular 20th century beer mixes, light and bitter:

Light and Bitter is, as you might expect, a half of Bitter (usually a bit more, three quarters wasn’t uncommon) served in a pint glass or mug with a bottle of Light Ale as an accompaniment. This was to be mixed as you saw fit, either in measured stages but more usually as half the bottle, taking it almost to the top, and the other half when you were down to the half pint level again… I couldn’t remember the last time I saw anybody order or drink a Light and Bitter in any pub I was in for at least ten years…


A mural in south London.

Staying in the realms of the old school, Deserter has been touring the working men’s clubs of south London:

Have you ever walked past those huge old buildings that have a Courage sign from another epoch, but offer no encouragement to enter? They’re members’ clubs, where the beer is as cheap as fibs and ‘refurb’ means a new snooker table. Liberal Clubs, Working Men’s Clubs, Social Clubs. A mystery to most. A sanctuary to some… Roxy and Gail had become members of a CIU club and that entitled them to visit any of their 1800+ clubs in the UK and take in their special ’70s-ness, low-price pints, massive function rooms and strong cue-sports presence. I borrowed a card and kicked off our club tour at the Peckham Lib.


J.W. Lees Harvest Ale 2002 & 2009.

Archive article of the week: can you imagine a newspaper today publishing anything as niche and geeky as this set of vertical tasting notes by Michael Jackson on J.W. Lees Harvest Ale from 1995?

The exact influence of age is open to argument. Ninety-nine out of a hundred beers will go downhill. Only the strong and complex might improve. Before this tasting, I would have said that Lees Harvest Ale might develop favourably for three to six months. Now, I think six or seven years. Beyond that, oxidation creates Madeira-like notes, which can become dominant. From day one, the herbal floweriness of the hop can recede, but it was still definitely evident in the 1990.


For more good reading, check out Alan on Thursday and Stan on Monday.

Categories
london opinion

Feelings about Fuller’s

On Friday it was announced that Asahi had acquired the brewing wing of Fuller’s, subject to rubber-stamping, and we felt, frankly, gutted.

Jess, being a Londoner, took it especially hard, though not, perhaps, as hard as the person who runs the London Historians Twitter account:

For Fuck's sake Fuller's. What's wrong with you?

With a few days to absorb and reflect we’re still feeling disappointed, despite commentary from those who argue that Asahi aren’t the worst, that it’s a vote of confidence of cask, and so on. It still feels as if someone you thought was a pal has betrayed you.

We know this is completely irrational, business is gonna business, and so on and so forth, but we kidded ourselves (or were seduced into?) thinking Fuller’s was a bit different.

Of course the signs were all there (the lack of respect for Chiswick Bitter, for example, in favour of anything they could slap SESSION IPA on) but there were positive indicators too – surely if they were going to sell up they’d have done it in 1963, or 1982, or… And why the interest in old recipes, in collaborations and so on, if there wasn’t some kind of sentimental attachment to the idea of the family business, heritage and beer?

Oddly, when the news broke, we were eating breakfast in a Fuller’s hotel-pub, and it seemed that the staff were as bewildered as us. As customers asked them for their views, they politely muttered, “We don’t know much about it, I’m afraid.” They appeared to be reading news websites and social media to work out what was going on in the company they work for.

We made a point of going into a couple more Fuller’s pubs over the course of the weekend, like mourners clutching at memories of the recently deceased. The beer tasted as good as ever – better, in fact, especially the stuff badged as Dark Star and Gale’s. Again, staff seemed on edge, in one case openly snapping at a beer bore who insisted on lecturing them about Asahi and how the takeover would ruin the beer.

It’s worth noting, by the way, that this was being talked about in several pubs we visited, including one non-Fuller’s pub, all of them, we’d have said, ‘outside the bubble’. People have heard of Fuller’s and were interested in this news, which got covered heavily in the mainstream press.

From a couple of sources, it became clear the brewing staff were in shock, too. Head brewer Georgina Young:

It was a long and very emotional day.

Here’s what one Fuller’s employee said to us in a private message on Saturday:

I wish I knew more – we all found out yesterday… It’s a rational business decision but a devastating one for beer. If we are not independent, what’s the point? What do we still represent? All this stuff about brands and growth is pretty meaningless to Fuller’s customers who will just be pissed off.

Maybe this will not damage the beer in the long run, who knows. We’re aware it’s a controversial view but we’ve been really enjoying Young’s recently, ironically in lots of Young’s-branded pubs where the average punter probably doesn’t realise the brands and the pubs parted company years ago. We’d certainly be quite happy to walk into pubs and find cask ESB alongside Pilsner Urquell. (And Frontier Craft Lager hurled into the skip of history.)

What we do worry about is those hidden gems – the non-flagship backstreet pubs in West London where grey paint and fake ghost signs have yet to take hold, and which still feel vaguely like boozers. They’re either going to get trashed, or ditched, aren’t they?

And we worry about whether this means Fuller’s, as a brewery, will stagnate. What will motivate disenfranchised staff to try new things, or throw themselves into reviving old recipes? It’s been hard to find London Porter in any format for a couple of years – will this finally kill it off for good, along with poor old Chiswick? Look at Meantime: the quality or the core beer may be good, but the breadth of the offer is now distressingly bland.

All that’s kept us going into Fuller’s flagship plasticky, faux-posh corporate pubs for the past decade is the beer. We go to the Old Fish Market in Bristol because we crave that distinctive yeast character once in a while, not for the branded coffee and gin experience in surroundings that resemble a hotel lobby.

We don’t know how this will turn out. We’re not going to boycott Fuller’s. We’re not ‘butthurt’. But something in the relationship has changed, and we will probably end up drinking less Fuller’s beer without thinking much about it.