COVID-19: From distilling spirits to making hand sanitiser
When one country after another took measures to slow the spread of the coronavirus, BrewDog faced a 70% drop in revenue because customers could no longer visit its 102 bars worldwide. The Scottish brewer, distiller, and bar operator decided to switch from producing gin, vodka, and rum to making hand sanitiser. Ben Press, ACMA, CGMA, BrewDog’s retail finance manager, explains how the international company managed to change production quickly and how it plans to survive the economic impact of the coronavirus pandemic.
What you’ll learn from this episode:
- Rapid growth since its founding 12 years ago required agility that helped the company switch production quickly.
- Company culture was key in how the idea to repurpose the distillery came about.
- Changing production and donating the hand sanitiser is generating a lot of goodwill for the company in the UK.
- UK government relief programmes help the company keep their employees on the payroll and manage cash flow.
Play the episode below or read the edited transcript:
To comment on this podcast or to suggest an idea for another podcast, contact Sabine Vollmer, an FM magazine senior editor, at Sabine.Vollmer@aicpa-cima.com.
Transcript:
Samantha White: Could you start off by telling us a bit about your role at BrewDog and how long you’ve been there, that kind of thing?
Ben Press: Yeah. I have been at BrewDog three years. Currently I am the retail finance manager — so I am the head of finance for all of our managed bars worldwide. So, we now have over 100 bars in many, many countries around the world, and me and my team look after all of the management accounts of those. Prior to that I was a cost accountant, so I was actually working on the brewery side looking at standard costing, production variances, and management reports for the operations team.
White: Tell us a bit about BrewDog. So, obviously it started off as an independent craft brewery, and then it diversified into quite a wide range of different strands.
Press: Yeah, so still independent, still craft, much, much bigger than when they started. So, 12 years ago, it was just [founders] James [Watt] and Martin [Dickie] and a dog, the original BrewDog. And nowadays we’ve got 3,000 employees worldwide. We’ve got breweries on three different continents; so there’s the one in Ellon, Scotland, which is the main one, which is our HQ. We’ve got one in Columbus, Ohio, which provides beer for the US and Canada. We’ve got one in Australia, which is our most recent one that obviously provides for the Australian market. Yeah, and 100-plus bars. It’s 102 now worldwide.
We have also got a German brewery as well, which we acquired from Stone in Berlin.
White: That’s quite a lot of diversification and a lot of geographies in 12 years. Wow!
Press: And it’s not just beer now we focus on as well. We’ve got a distillery that produces a range of spirits, we’ve got a cidery for producing cider, and we even roast our own coffee up at HQ for our bars.
White: You’re an international operation — how long before the UK lockdown came into place had BrewDog been monitoring the coronavirus situation?
Press: So, at a high level we’ve been watching it closely as soon as the reports started to come out. But how quickly it went from being “coronavirus is a threat” to “oh, dear, everything’s got to lock down” was a bit of a shock, I think, for everyone in the brewing industry and in the hospitality industry.
And for BrewDog that meant a drop in revenue of 70% overnight. No matter what we had in place, I think it’s really hard to prepare for something of that scale.
White: And how did the hand sanitiser project come about?
Press: I think this is one that came from the top, so James Watt, our founder, he saw that there were shortages, knew that we had the kit available to be able to produce hand sanitiser, and literally that was all it needed. In our charter we have that we believe a business can be a force for good. And so, if we weren’t to act on that, I think we would be lying to ourselves. We’ve always wanted to give something back, and we feel like the best companies do. As well as that, we have the ability to react very quickly to any changes, given that we’ve been growing so fast, we’ve been doing it for years, it’s kind of normal when you’ve been at BrewDog a while.
BrewDog has a history of everyone chipping in and doing what needs to be done. So even though I’m an accountant, I have been known to pack bottles of gin before, or do a shift in the bar, or work in the lab, or work on the packaging line in the brewery.
White: That adaptability, that flexibility is sort of inherent in what you do?
Press: Yeah. What it means is, we could very quickly switch around from producing in our distillery to changing it to producing hand sanitiser. We saw that there was a shortage, we knew we could help, and we just switched over everything on the distilling side to make that happen.
White: And so, what was the alternative? Would the plant have been mothballed if you hadn’t been sort of switched over production?
Press: We could still be producing at the moment. So, our brewery is still running producing beer for online sales and supermarkets as they’re the only customers left open — so we could still be producing in the distillery, but we feel that this is a much better use of our time and resources at the moment. Because at the end of the day, we’re all in this together.
We’ve been getting lots of very good feedback and I think what’s nice is as well, is that it’s going to the board and then they’re sharing it out across all the employees. So, we’ve had things from Grampian Hospitals Intensive Care Unit, the ARCHIE Foundation, and, I don’t know if I’m pronouncing this right, but it’s Aberlour [Scottish children’s charity]. The response has been overwhelming.
We just didn’t realise, I think, when we started how important this is and how much of a problem it is to actually get hold of this at the moment.
White: And just to clarify, the ARCHIE Foundation looks after children who spend a lot of time in hospital, is that right?
Press: The ARCHIE Foundation provides like hotel accommodation for parents of sick children so that they can be with them when they’re in hospital if they have prolonged stays, so obviously they are quite an at-risk group from COVID-19.
White: What did you need to put in place as a company?
Press: Our head distiller Steven Kersley, he was following World Health Organisation guidelines on the production of hand sanitiser. So, he made sure that what we were producing was compliant and effective and in the specification for what was required.
We didn’t need a great deal of change on the actual equipment, but we have had to obviously buy in additional materials — things such as hand pump dispense bottles, the little plastic bottles, which unfortunately due to supply and demand means they are now about ten times more expensive than they were a few months ago. But still not hugely costly, and yeah, it’s mainly the people time — that’s the big expense on our side.
White: Sure. And in terms of that, you mentioned that it’s hard to get the sort of pump bottles there. What sort of creative options have you come up with?
Press: The first batch we did, we couldn’t actually get any of the hand pump bottles in time. So, we just used what we had lying around the brewery! So, the first ones actually went out in beer bottles, and then we had, I think they were sauce bottles that the next batch went out in.
And then now we have got the squeezy hand pump bottles that everyone recognises. But it wasn’t easy getting hold of them and again it wasn’t cheap, but we got there in the end.
White: From the decision to produce the hand sanitiser to the first batch, how long was the time lag?
Press: Pretty sure, I think it was a few days it was turned around in.
But, yeah, as soon as the decision was made, we just stopped everything, switched over, and, I believe, there was a little bit of training on new production processes, and we had to reassign some of our team members over to distilling to help make it, and pack it, and distribute it. And, I believe, even James and Martin were there helping out to package it on the first run.
As soon as our founder James put the word out there that we were switching to hand sanitiser, we were bombarded with requests through social media, our mailboxes from people trying to get hold of hand gel, which just shows how in demand it is — and what we’ve done is our team have worked with certain charities, frontline key workers, and the NHS [National Health Service, the publicly funded health care system in the UK] to see what they require and we’re trying to distribute it as fair and evenly as possible.
White: Fantastic. And you’re using your existing sort of delivery truck drivers and all that kind of stuff to get it out, to distribute it to where it’s needed?
Press: Yeah, so we have a few vans that we use for sort of local deliveries — they’ve now shifted over to either deliver hand sanitiser, or another scheme we are doing at the moment is we are delivering meals to people who are isolated or in rural areas, just to help out anyway we can really.
White: And obviously our listeners are management accountants, so they are going to be interested in how you finance this project.
Press: We didn’t plan in advance how we were going to finance it, we just sort of, in a very BrewDog way, knew what we wanted to do and made it happen.
Like I said, we lost 70% of our revenue overnight. And luckily, we’ve had some help. So, things like the government furlough scheme, that’s helped with cash flow, rates relief. And I don’t know if you’ve seen this as well, but our founders James and Martin have forgone any salary for 2020, and our COO Dave McDowall has taken a voluntary 50% pay cut, and the rest of board have also followed suit with reducing their wages, so it’s all these little things like this that add up and keep us going, I guess.
White: Wow, so that’s helping you keep your existing employees on and sort of assume your responsibility as a company for them as well.
Press: Yeah, that’s it. Any communication from the top at the moment is: we’ve got two goals in mind. Keep BrewDog going. Keep as many jobs as possible.
White: And just because obviously a lot of the listeners won’t be in the UK, can you tell us a bit about the two schemes you mentioned, the furlough and the rates relief, just in terms of what that means to you as a company?
Press: Yeah, so the furlough scheme is one that is essentially to avoid any redundancies being made in the UK as a result of the economic impact of the coronavirus. So, what companies can do is anyone who they place on the furlough scheme, they will have up to 80% of their salary, up to £2,500, paid by the government and they can still remain an employee — but they’ll be in what’s called a furlough state — so they won’t actually be working, but they’ll still be getting paid. With the idea being, when things start to pick up again, the employees can all come back and take their existing jobs, and hopefully go back to things being as normal as possible. For us though, the furlough scheme is a huge help, especially in our retail division. We have 102 bars and none of them are allowed to open. The biggest ones have up to 100 staff. So, when we have zero revenue coming in for that bar, it would have been very hard for us to keep those people on, were it not for that scheme.
White: Absolutely, yeah. I can understand that, and then in terms of the rates that you mentioned, that’s business rates on the premises?
Press: Yeah, so business rates on the premises, properties up to a certain value will be given rent free relief for up to 12 months, so they won’t have to pay the usual rates to the local council. For any company that has a lot of bars like us, that’s millions of pounds a year that we’ll be saving there, which we can use to help with our cash flow.
White: Can you tell me about the other changes that you’ve made in response to the pandemic?
Press: So, obviously there’s the sanitiser. We’ve touched on that. Then, there’s the delivery of meals to people in rural, isolated areas, as well. We repurposed our vans to do that. We also have in our Columbus brewery, so in Ohio, which is where the brewery is based, there is a shortage of packaged water — so what we’ve been doing is we’ve been canning water and shipping it out to the local homeless shelters, and to charities and we’re also selling it to the local community at cost. What we’ve done is, we’ve put it into sort of repurposed beer cans — so they’re beer cans that we had on site — we relabelled them, filled them with water, and we’re sending that out.
White: And can you tell me a bit about the virtual bars? What’s been going on in the virtual bars?
Press: The virtual bars was an idea that we came up with so that people who were a regular to a certain bar would still be able to go in and catch up with all the people that they might normally see in the bar whenever they go out. And they can still have a drink together without leaving the comfort of their own home. The first one was last Friday, and we’ve just had the one, and it was probably more than 1,000 people attended, because people were dropping in and out. But due to the limits on the technology, we could only have a 1,000 people in the bar at one time. And we had a traditional pub-style quiz. We had the founders were on — James and Martin — and they were doing some guided beer tastings and we even had some live music from one of the bands that were due to play our AGM [annual general meeting] which has now been postponed — all through the power of Zoom.
White: Fantastic! What have you learned from it, and that can be business lessons, career, people, organisational culture, what have you learned from this situation?
Press: Yeah, so for me, I think, the thing that stands out for me is that when you look at how certain companies have been reacting to the pandemic, some have been trying to do everything they can to help out, and to look after their staff and make sure everyone’s looked after — BrewDog’s amongst that — but there’s a lot of others out there that are taking really good care of their staff and looking after them. And I think that makes me even more proud than I already was to be able to say that this is the sort of company I work for.
As a management accountant, I think once this is all over, this is going to be maybe a good thing to look back on, because if you ever get that question in an interview again about crisis management, well, here we go, we’ve got the perfect example. It’s been a complete rollercoaster ride for BrewDog, and I imagine a lot of other places, seeing our revenues just drop off a cliff and trying to figure out how we manage our cash, what we can do to control it, doing so without putting other people, without causing any problems for other people. It’s not a case of we said, right, we’ve got no money coming in, we can’t afford to pay anyone, but we’re like, well, we still want to pay people, we need to figure out how to do that, and we’ve got to work with them to see how we can all come together to get through this.
White: Fantastic!