Crowdfunding is a proven and popular way for craft beer brewers to raise money to expand or accelerate growth, or even to start in the first place. It is also a popular way for many thousands of beer drinkers to be able to say “I own part of a brewery.” Here is what I consider to be the key factors.
Funding sources for craft beer brewers
Crowdfunding is popular with craft beer brewers because there are few barriers to using it, beyond the hard work it involves. And many brewers already have a crowd of buyers and drinkers to appeal to who consume their products on a regular basis.
Bank and P2P loans are restricted to businesses that are already trading, with an income and a future order book that looks solid enough to make the repayments. An existing brewer may be able to secure a bank loan, but a new startup won’t. Banks also require guarantees against loans, and if a brewery goes bust its owners will still be liable for the debt. That’s not a comfortable feeling.
As for VCs, the craft beer sector is very fragmented with many small players. From 2018 to 2022 the number of UK brewers grew from 1,489 to 2,426.
Number of breweries in the UK from 2018 to 2022
Source: © Statista 2023
Organic growth is typically slow. It can be difficult to scale fast as it is the antithesis of being a craft product. An exit strategy of an eventual sale to a big drinks company would be difficult to achieve as they have already had their pick of the crop. The Budweiser owner, AB InBev, acquired Camden Brewery; SABMiller purchased Meantime, which was local to me in Greenwich, south east London; Carlsberg took over London Fields; and Heineken acquired Beavertown, founded by Logan Plant, son of the former Led Zeppelin vocalist Robert Plant.
As well as limited opportunities to scale, many of the newcomers seeking funding don’t want to raise enough money for VCs to even consider them in the first place.
Crowdfunding is flexible
During Covid, several brewers turned to reward-based crowdfunding to ask customers for their support. Pre-Covid, the Manchester Union Brewery had relied on keg sales in on-trade outlets. When lockdown closed the pubs, they asked their community for donations to install a canning line that would enable them to switch to online orders for home delivery. Incentives to support their appeal included discounts off future purchases, shorter waiting times for deliveries, and inclusion on a “Wall of Honour.” It raised £46,141 from 617 supporters in 64 days.
This method of crowdfunding continues to be used by breweries to raise money to build or expand taprooms (which are on-site public bars). As an example, in March 2021, the Skinners Brewery in Cornwall raised £152,301 from 2,449 supporters in 28 days to build an outdoor drinking area at its site in Truro. Perks for donors included beer vouchers, tickets to exclusive events, branded merchandise and online sales discounts.
Bringing forward demand to generate pre-payment by offering beer vouchers can ease short-term cashflow issues, but has to be carefully judged so that those issues aren’t merely delayed until another time.
Many startup breweries offer shares in the business through equity crowdfunding. One running in November 2023 was Signature Brew, whose business model is to brew collaboration beers with bands and musicians. Founder and CEO Tom Bott had exceeded the £700,007 target for 4.59% equity by +25% with a few days left before the round closed.
Crowdfunding is popular with startups, but not it’s exclusively for startups. Exmoor Ales was established in 1980, and in March 2024 it closed a crowdfunding round that had raised £330,048 from 329 investors. Perks for investors included the standard branded merchandise, discounts on online orders, and a limited amount of free beer for life for larger investors as long as they remained a shareholder.
Good crowdfunding is good marketing
Running a crowdfunding campaign can generate significant media coverage and social media buzz. It serves as a marketing tool, creating awareness about a brewery and its products. This increased visibility can attract not only backers but also potential customers.
In 2023, the southeast London Gipsy Hill Brewery brewed the first carbon-negative beer without using offsets. In October ’23 they began a round of equity crowdfunding and announced their aim to be the world’s first carbon-negative brewery by 2030. The crowdfunding raised awareness of the brewery’s carbon reduction accomplishments to date and future aims. The founder and CEO was interviewed by the Sunday Times, and a television station camera crew turned up to film him at the brewery.
Crowdfunding empowers consumers
Benefits for backers
The most commonly hoped for outcome from investing in an equity crowdfunding campaign is a good return on investment. The founder of Camden Town Brewery, Jasper Cuppaidge, used equity crowdfunding in 2015 to raise £2,749,860 to build his own brewery in London. The amount of equity this involved meant the brewery was valued at around £50 million. Eight months later, having come to its attention, and seeing the extent of its public support (good crowdfunding = good marketing), AB InBev bought Camden Town Brewery for an estimated £85 million. In under a year, the 2,172 crowdfunding investors had secured a 70% return.
Successful crowdfunding does not always mean that a brewery will go on to achieve long-term commercial success. There is a risk. After 25 years the Skinners Brewery in Cornwall was forced to close in October 2022, despite its new outdoor venue paid for with crowdfunded donations.
However, small-scale investors know that a low entry cost to buy some shares can be recovered through using the online discounts that are often offered as perks. When they have saved enough money it effectively means they have reached a breakeven point and become a shareholder at no cost.
When businesses are registered under the HMRC’s EIS and SEIS schemes, crowdfunding investors who are UK taxpayers can reclaim from 30% to 50% of their initial investment. Any eventual return on investment is outside of Capital Gains Tax, or if the business sadly fails then even more of the initial investment can be reclaimed through the taxman.
Beyond ROI, sociable investors like to meet like-minded people at investor events, and can visit a brewery’s taproom bar at any other time to seek out kindred spirits.
Some investors like to invest in several breweries to create an annual schedule of perks of free or at least subsidised beer deliveries at home.
And of course there is the opportunity to drop “I’m a part owner of a brewery” into conversations.
Non-monetary benefits of a brewery having a crowd of backers
Crowdfunding is not just about raising money; it’s about helping to build a community around a brand or a business.
New crowdfunding research findings reveal that crowdfunding backers enjoy a sense of deciding which companies and products will make it to the marketplace. It gives them a tenuous link to the buzz of entrepreneurship with little personal risk – depending on the size of their investments.
I believe it’s then reasonable to consider that having contributed to the existence of a brewery, its new brewing equipment and premises, or a taproom, the crowdfunding backers will be very loyal.
Regular visitors to a brewery taproom can be encouraged to try limited quantities of new beers and give their feedback. Or packaged products could be delivered to crowdfunding backers at home. This form of product validation helps decide which new beers to take to full production.
Brewery supporters, whether investors or donors, can also be very useful as brand advocates. They can give word-of-mouth support and encourage friends and colleagues to try a brewery’s products. They may be able to provide vital business connections and make introductions, and also personally offer to provide a range of services from accountancy and legal advice to decorating offices and servicing vehicles.
To summarise, beer is a product that relationships can be built around, rather than simply regard an investment through crowdfunding as a transaction. Anyone who leaves it at just taking the money is missing a trick or two.
