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Sacha Bright has his say on Craft Beer crowdfunding in The Times. Say cheers as craft beer flows into the mainstream

2 years

Published by The Times https://www.thetimes.co.uk/article/say-cheers-as-craft-beer-flows-into-the-mainstream-dz0mxbfkq

The home brew industry is burgeoning, with investors keen to enter the land of hop and glory

Following in the footsteps of a famous parent is no easy task. For Logan Plant, the son of Robert Plant, the Led Zeppelin frontman, the job got a little easier in June when Beavertown Brewery, the craft beer producer he founded in 2011, netted £40 million in funding from Heineken.

While traditionalists boycotted Beavertown’s brews, accusing the company of selling out, the deal was the latest measure of how the UK’s craft brewery scene has moved out of its hipster shadows and into the sights of investors.

Opportunities have mushroomed. Since 2009 the number of breweries in London has increased twelvefold to 110; over the same period the number in the UK has increased from 696 to 1,732, according to the Campaign For Real Ale.

Crowdfunding is the principal route investors use to turn home brew into the land of hop and glory. “BrewDog is the great crowdfunding craft beer success story,” says Sacha Bright, the chief executive of Businessagent.com, a crowdfunding data provider. Early supporters of the Aberdeenshire company were offered the chance to cash in up to 15 per cent of their shares last year, which the company said represented a return of 2,800 per cent for those who had bought them in 2010.

Breweries have been a common sight on crowdfunding platforms, but Redemption Brewing presents the only opportunity at present, according to Businessagent.com. The north London craft brewer has raised a third of the £300,000 it is seeking through Crowdcube. Crowdfunding investments can be part of an Enterprise Investment Scheme (EIS) and Seed EIS investments. Benefits include 30 per cent income tax relief for an EIS, 50 per cent for a Seed EIS and exemption from capital gains tax on both.

However, success stories such as BrewDog are the exception. Platforms sometimes publish annual return data, but these often reflect the success of businesses in raising money from investors rather than returning it to them. To realise any profits on crowdfunding investments you’ll need a buyout — those 2010 BrewDog investors had to wait until 2017 for Heineken’s offer — or a public listing. If you’re lucky you’ll get a dividend before then, but these are rare. Without a route to cash in your investments, claims about annual returns are theoretical. “It is also worth noting that not all shares are created equally,” Mr Bright says.

Early investors in BrewDog have a different share class, based on a different company valuation, than those who invested in 2017.

“If you are going to invest this way, make sure you know where you stand in the pecking order and keep an eye on voting rights,” he says. There is also a risk of dilution if the company issues additional shares to raise more money, decreasing the value of those that have been sold already.

With only one craft brewer crowdfunding, EIS and venture capital trust (VCT) funds offer an alternative route into the beer market. “Managed EIS and VCT trust funds have been particularly active in the pub space, as the property assets provide an element of security,” says Jason Hollands of Tilney, a financial planner. He recommends the range of VCTs from Puma Investments, which backs the Brewhouse & Kitchen chain of 23 UK microbrewery pubs.

Another route is through the main listed beer and drinks companies. “While edgy craft brands represent a small proportion of overall earnings for companies like Diageo and Heineken, these stocks provide a very accessible way to invest in beer and provide superb free cash flow,” Mr Hollands says.

Laith Khalaf, a senior analyst at Hargreaves Lansdown, an investment company, recommends one of the oldest largest European brewers, AB InBev, which owns Budweiser, Corona Extra, Stella Artois and Becks, as well as a range of craft offerings. The stock is yielding 4.25 per cent “but is trading at a price-earnings ratio of 25, making it expensive,” he says.

Closer to home, and with a range of craft beers alongside stalwarts such as Abbot Ale and Old Speckled Hen, is the pub firm and brewer Greene King. “It has a great track record of dividend growth: turnover and dividend per share have doubled since 2005,” Mr Khalaf says. He has one final warning: be aware that the squeeze on wages is hitting the demand for drinking and eating out, with profits falling at some companies.

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