Tuesday, May 09, 2017
Is Craft Beer the Best Bet in Investing?
Looking for a big-win investment? Maybe you should consider craft beer. At least that’s the message after recent articles touting how one “long-shot” craft beer company is paying off huge for a small group of fortunate investors.
Scottish microbrew “BrewDog” was crowdfunded back in 2010. Today, those relative few investors, about 1,300 of them, are seeing a 2800 percent return on investment. Not too shabby. How could this happen? Well, it seems BrewDog caught the interest of TSG Consumer Products, which has agreed to pay about $265 million for about a quarter of the company, sending its value up to $1.2 billion.
BrewDog is the classic small business success story. Two friends, James Watt or Martin Dickie, started brewing in James’ mom’s garage. To expand, they sought investment funds from about 56,000 people. That grassroots effort positioned them to grow and to attract the attention of TSG. The big investment company loves success stories, and has made a habit of grabbing up-and-comers and turning them into mass-marketed winners.
What could that mean for the initial investors? Well, according to reports, one of the smallest investors gave the company about $260. That investment is now worth about $6,500. Not a bad return at all … and that was one of the smallest investments.
So, what accounts for BrewDog’s success? It starts with good beer, of course. But countless small brewers can tell you that good beer is not nearly enough to find success in this competitive and flooded marketplace. But BrewDog did well by creating 56,000 reasons for people to share the beer with their friends. By the rule of ten, that 56,000 could easily turn into 560,000, then 5,600,000. Given a good product and a great reason to share it with friends, thousands of customers can become millions in short order.
Another smart marketing move by the company is marketing itself as the counterculture brew. BrewDog had a definite “punk” feel in its branding and culture. They wanted to attract young people just getting into the beer game. These people likely didn’t already have a favorite brew, and they were looking for something their dads didn’t drink. BrewDog understood this and played to it.
So, will the big business name hurt that image? Perhaps, in the early going, but TSG knows enough to keep branding unique and distinct, stepping way back from the point of sale and leaving BrewDog’s “underdog” persona entrenched in the marketing. At least that’s what those lucky investors are hoping.