The Breal Deal

Many years ago my parents lived next door to a successful businessman who I befriended – Swiss-born Mario Halbeisen (RIP) who set up Marcrist Industries and who was for a period the sole importer of diamond drill bits into the UK. He made a bit of a killing and like many people with money burning a hole in their pockets he decided to buy into property. When I questioned him why he’d bought a run-down house on a dodgy road near Doncaster town centre he said it would not be dodgy for long because he planned to buy all the dilapidated houses on the road and initiate a turnaround in the street’s fortunes.

Mario’s strategy came to mind with the recent news that Breal Group had acquired yet another troubled brewery, with the £2 million purchase of Purity Brewing that had been making losses in recent years and been on the sales block for the best part of a year. The likes of The Business Growth fund – among others – is unlikely to see anything back from its £7.5 million investment in the business.  

This deal is part of an ongoing splurge by Breal on various distressed brewery businesses encompassing Black Sheep Brewery, Brew By Numbers, and Brick Brewery that were each acquired from their respective administrators. Such activity leaves me puzzled because there is a lack of a precedent in successful roll-ups of breweries. In recent years we have seen the savvy Luke Johnson and his Risk Capital Partners have a go at such a play when it acquired Curious Brewery and then added Wild Beer Co. This was pretty short-lived and he recently sold the two businesses onto St Peter’s Brewery.

New Zealand-based Lion also had a dabble in the space when it purchased Magic Rock and Fourpure breweries, which it ran alongside its Little Creatures brewery (that included a flash but soulless tap room in King’s Cross) but this gambit came to an end in late 2022 when it sold them onto Kent-based Odyssey Inns.

Such deals only really stack-up if there are opportunities to drive efficiencies by consolidating the brewing processes – although Breal denied this is the case with Black Sheep when rumours of its closure circulated recently. But even then you have to question why you’d buy the infrastructures when it’s really the brewery name and IP you are after. The real prize in such deals are channels to market – in the form of profitable pubs – and the existing customer base.

Beyond the tap rooms of the breweries it has bought there appears to be only modest tied profitable sales for Breal. It closed three of the four Black Sheep pubs having deemed them unviable. It has suggested that its brewing sales team across the UK can expand the market for the breweries in its ever-expanding portfolio. This is fair enough but it’s a tough market out there as the acquired breweries know all too well.

What Breal can also tap into is its growing presence in the restaurant and bars sector as it is also on a mission to hoover up distressed assets in this area. It has so far bought Vinoteca, D&D London and a couple of bars that it has brought into its growing Andrea chain. There is clearly an opportunity to sell its breweries’ beers in these outlets but those volumes are certainly finite. And it does lead to the question of whether it needs quite so many brewing brands and beers.

Undoubtedly Breal has agreed financially sound acquisitions as it has been dealing with last-chance-saloon scenarios for the various breweries it has bought but the puzzle of how it will turn them into sustainably profitable businesses remains something of a mystery to me. Mario’s strategy ultimately came good but then when did good old freeholds ever let you down – regardless of whether we’re talking houses or pubs.

Glynn Davis, editor of Beer Insider 

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