Sitting at the bar in my local pub, the Great Northern Railway Tavern, earlier in the year, I noticed the regular guest lager produced by the brewery I co-owned, Bohem Brewery, had been replaced by a specially-brewed lager for the pub by Gipsy Hill Brewery.

The deal had just been struck and the sales guy from Gipsy Hill happened to be in the bar celebrating securing a new regular line, having shoved out a competitor. I grudgingly congratulated him. This little cameo was indicative of the craft beer scene for some years. At times, I’ve sat at bars and seen a procession of brewery salespeople wander in flogging their wares to managers drowning in beer choices. 

It’s been so cutthroat that successes like that at the Great Northern have been insufficient to save Gipsy Hill from selling out to Sunrise Alliance Beverages Group. It has not been a celebratory exit for its founders but merely a move that helped it avoid falling into administration. The deal gave the brewery a valuation of £5m versus around £20m when it crowdfunded in 2022 as debts were mounting.

Its downfall follows that of another major London player, Wild Card Brewery, which ceased trading last month after racking up insurmountable debts. Again, it raised money through crowdfunding. These two operators are not alone in pulling in money from beer fans and accumulating debts as they seek to service pubs in an incredibly competitive market.  

My experience at Bohem Brewery, in which I was a founder shareholder when investing in early 2017, has highlighted how I reckon it is near-impossible for a start-up brewery to succeed if it does not have sufficient guaranteed channels to market – namely in the form of its own pubs and bars. Selling into the on-trade is incredibly tough and few small breweries manage to achieve sustainable profits. Even the very best brewers, such as The Kernel and Burning Sky, with exemplary products acknowledge the precariousness.

That’s not to say this was not recognised by the craft brewery industry (breweries operating pubs is hardly a revolutionary strategy) but many focused elsewhere. In the rush to drive down production costs, many breweries chose to expand their capacities, which meant they needed to sell even more beer beyond their own outlets and employ more salespeople to trip over each other in pubs up and down the country. Overcapacity has been rife, new brewing kits sitting idle and businesses haemorrhaging money.

The solution to these ills over the years has been crowdfunding, which has been the equivalent of life support for many breweries, which have invariably failed to deliver on the grandiose plans they promised their new shareholders. The money has ultimately been used as working capital, which has dwindled away as losses mount.

Many breweries would have been hopeful in the early days of ultimately selling out to a bigger player and retiring on the proceeds, but that dream died years ago. Only Beavertown Brewery and Camden Town have sold out to bigger players for significant premiums, but that was years back. The latter was almost a decade ago. 

The more likely and less appealing exit we have seen emerge recently is to sell to the roll-up players and private equity firms that have sniffed an opportunity as distressed assets abound in the sector. Among them are Cadman Capital Group, which has Conwy Brewery and Anglesey Ales in its portfolio, and Breal Group’s Keystone Brewing, which has snaffled up the likes of Black Sheep Brewery, Brew By Numbers, Brick Brewery and Purity Brewing. 

Gipsy Hill buyer Sunrise Alliance Beverages Group evolved out of St Peter’s Brewery in Suffolk and has also bought Portobello Brewing, Wild Beer Co and Curious Brewery. The latter two were purchased from Risk Capital Partners. The Luke Johnson-led firm had originally seen an opportunity to build a portfolio of beer brands, but it didn’t happen.

Beyond the fact these brewery brands and their assets are going cheap, I’m still puzzled that there is an appetite among investors to build portfolios of breweries and beer brands. There are no examples, to my knowledge, of where it has worked. It’s normally a recipe for closures. When Johnson and Risk Capital Partners tapped out, my concerns were further heightened.

My own involvement with Bohem Brewery has shown that independent breweries without a decent pub estate to sell their beer through will face ongoing pressures, and sadly, there will be more failures. It’s why I sold out at a painful 80% loss. Along with many other craft breweries, Bohem has produced some excellent beer, but as an investment, these businesses can leave a sour taste in the mouth.

Glynn Davis, editor of Retail Insider 

This piece was originally published on Propel Info where Glynn Davis writes a regular Friday opinion piece. Retail Insider would like to thank Propel for allowing the reproduction of this column.