Innovative investment schemes open the door for UK drinks firms
The UK drinks industry is fast becoming one of the hottest areas of investment, with wineries and brewers finding increasingly innovative ways to raise money.
Gone are the days where the only place a drinks producer could get a loan was from the bank.
BrewDog brewery, through its Equity for Punks funding schemes, and more recently Chapel Down, through a partnership with investment specialists, the HotHouse Club, have shown the way forward with successful ways to raise capital to fund growth.
BrewDog, the independent Scottish brewery, started raising capital with its Equity for Punks scheme back in 2009, selling B shares to the public, and has since raised almost £3 million. It announced last month it is offering additional shares in the hope of raising another £4 million.
“We were tired of the corporate banks not lending to small businesses, and we wanted to do things differently. We wanted to open up investment to anyone and everyone,” said co-founder James Watt.
Crowdfunding is a useful alternative, where companies do not have to cater to banks or traditional shareholders.
BrewDog solicits feedback, has opportunities for shareholders to vote on certain beers and holds an annual meeting informing investors of the state of the business, but ultimately the company makes independent decisions.
Additionally, a shareholder cannot sell shares should they need to liquidate the investment, but an exchange platform is reportedly in the works. It seems, for now, investors are happy with the biggest perk of their investment: a lifetime discount on the brewery’s beers and at BrewDog bars.
Another alternative for funding is partnering with an investment club, which is what Chapel Down has done to raise money for its English sparkling wine operation and growing brewery business for its Curious Brew brand.
Chapel Down partnered with the exclusive HotHouse Club, to raise £2.4 million as part of a larger investment plan to build a brewery and expand its winery.
The HotHouse Club’s five principals have decades of experience in beers, wine, spirits and finance between them. In particular, it focuses on smaller businesses with high-growth potential that have products with the ability to grow into a mainstream brand.
Alex Masters, a principal in the HotHouse Club, said: “We focus on companies that we can truly partner with; we are not looking to be a majority stakeholder in them, but want to look for opportunities where we think that our experience could help bring these companies to the next level. “More than money, we offer a wealth of experience that can help brands reach their greatest potential.”
Frazer Thompson, chief executive of Chapel Down, said: “There is a temptation to take the first money offered. But the person that comes with that money could be incredibly valuable to your brand because of their experience. The talent and experience we now have around our boardroom table will help us to realise our greatest potential.”
As part of the HotHouse Club model, the principals will commit a certain sum of money and then bring the opportunity to other club investors, allowing them to invest additional capital.
It is just one of the many new investment schemes available, with the internet bringing what would have been unknown business partners together and helping them grow in ways that were not conceivable a decade ago.
* If you want to learn more about crowdfunding, see our YouTube Channel at www.youtube.com/harperswine