Innis & Gunn’s founder toasts a decade of growth
THERE is nothing quite like acquiring a business at the height of a worldwide financial crisis.
Reflecting on perhaps the most seminal moment in his company’s early history, Dougal Sharp, brewer and founder of Innis & Gunn, recalled that the global financial system came close to collapse shortly after he bought out his former joint venture partner in early 2008.
Innis & Gunn was formed as a partnership between Mr Sharp and William Grant & Sons in 2003, shortly after the former head brewer of Edinburgh’s Caledonian Brewery stumbled on the idea of maturing beer in bourbon barrels.
Five years later, just months after putting his house on the line to get the deal done, US bank Lehman Brothers collapsed. The world watched in disbelief as global banking institutions teetered on the precipice.
Despite the unfolding chaos, something in Mr Sharp assured him things were going to be all right for Edinburgh-based Innis & Gunn.
“It very quickly became apparent that things were going to be fine, because the company had good cash flow, we were growing [and] more and more people were using craft beer when the recession was at its height, ” Mr Sharp said. “It was an affordable treat. Instead of going out twice a week they were maybe staying in on one of the nights, but they would buy some really good beer to drink at home.
“Right through that time, over the last 10 years, we have grown enormously. We are probably 10 times the size we were.”
Of course, there has been a lot more to Innis & Gunn’s progress in the last decade than the fact craft beer has remained affordable throughout difficult economic times.
And it was certainly not all plain sailing in the early days. With key business functions previously “in-sourced” to William Grant under the joint venture, Mr Sharp said he had to build up an entire infrastructure – sales, logistics, customer service, supply chain, and planning – from scratch.
“It was all on the job learning, which many say is the best way to do it, because your mistakes really hurt!” recalled Mr Sharp. “It was going back to being a start-up.
“We were all flying by the seat of our pants a little bit. There was a lot of making it up as we went along, but fortunately we got more things right than we got wrong.”
The Innis & Gunn story cannot be told in isolation from the explosion of interest in craft beer over the last decade. Hundreds of new brewers have sprung up around the country in that time, with Scottish brands, including Innis & Gunn, leading the charge.
Long gone are the days when the choice for drinkers in pubs was limited to a small and unimaginative range of standard lager and stout.
Mr Sharp, who won the Champion Beer of Britain title for Deuchars IPA during his long spell as head brewer at the Caley in Edinburgh, admits that challenging the status quo had been a key motivation for setting Innis & Gunn up in the first place.
“If you go right back to the origins of Innis & Gunn, the reason I set the company up was that I was just so utterly p ***** off at the state of our industry,” he said. “I had been working in our old family company for all these years, and we were making amazing beer – Champion Beer of Britain [for Deuchars] – and I saw a sea of uniformity in the bars and in the supermarkets. It all looked the same, it all tasted the same, it was all made with the same ingredients, [and] all the packaging said the same things. To me, it felt all beer was about was getting you drunk.
“Then I looked at what the guys in the wine and spirits industries were doing, and it was a quantum of a difference. They were making amazing-tasting products that had amazing stories.
“That sense of frustration was the fertile ground into which the Innis & Gunn Original discovery fell. When I first tasted that beer, I remember thinking that this is the thing that I can change this industry with.”
Mr Sharp contends the “explosion of choice” in the last decade has been great for consumers, and is convinced that the “dark days” of limited beer ranges are not coming back.
Yet, while it may seem that the bar tops and supermarket shelves in Scotland are now awash with interesting beer, craft remains a small part of the overall beer market.
“I still believe we are only just over the starting line,” Mr Sharp said. “Craft beer in the UK is only three per cent of the market. In America, it is well over 10%, so there is a long, long way to go.”
Innis & Gunn itself has undergone massive change in the last decade. An early mover in the export market, it is
now firmly established as a leading imported craft beer brand in Canada and Sweden. Sales are growing rapidly in France, too, while the firm began exporting to China for the first time last year. Last year exports accounted for
45% of the firm’s sales, which totalled £22.4 million.
Domestic sales have been helped by a move into the on-trade through its Beer Kitchen concept, which has outlets in Glasgow, Dundee and Edinburgh. It has also installed a brewery in Glasgow’s Argyle Street Arches. Other Beer Kitchens may follow, but for now Mr Sharp said the emphasis is on fine-tuning the offer at its existing outlets.
“For us the Beer Kitchen is really a place for our fans to come to get a real Innis & Gunn experience, over and above going to the local pub which might sell Innis & Gunn along with lots of different beers,” he said. “It is about the way that our staff interact with our customers, the way we present the range of beers, the style of food, the décor, the ambience, everything. It is about delivering a place that feels to us like an Innis & Gunn brand home.”
The beer Innis & Gunn, which employs around 160 staff, is known for has changed, too. It may have burnished its early reputation with strong, flavour-packed beers “finished” in whisky or rum casks, but it is the brand’s lager will be its driver of growth for years to come.
The lager was only available on draught when it launched in the bar trade five years ago. But since becoming available in cans in the off-trade sales have “exploded”.
“It just seems to have really caught a mood and is resonating with drinkers,” Mr Sharp said.
This year Innis & Gunn forecasts a
30% rise in sales in the UK its current financial year, driven by lager, its
“For a craft beer business that is now 15 years old, to still be growing at these rates I think is astonishing,” Mr Sharp said.
Yet Mr Sharp says the increasing dominance of Innis & Gunn lager has not dampened the firm’s experimental nature.
The company, which outsources most of its actual production to Tennent’s Wellpark Brewery in Glasgow, continues to make barrel-aged beers, including its Blood Red Sky and IPAS.
The most recent IPA, which launched in the summer, is mango-flavoured, going under the name Mangos on the Run.
“Our fans have loved it,” he said. “Everywhere you go, where it is on draught, it is the first thing to sell-out. People have gone crazy for it.”
Mr Sharp is equally upbeat about his relationship with L Catterton, the US private equity firm that took a near-30% stake in Innis & Gunn as part of a £15m investment in the business around a year ago. The deal valued Innis & Gunn at £54m.
“I’m delighted, genuinely delighted,” he said. “Because of the breadth of industries that they work in... they do add a great deal to the business at board meetings, informal conversations, their network of contacts and the way they approach business. It’s very refreshing and enlightening for us as a business.”
Dougal Sharp believes there is still huge scope for the craft beer sector to grow in the UK. The beer firm is building a portfolio of Beer Kitchens, including this outlet (above right) in Ashton Lane, Glasgow, to give consumers the “real Innis & Gunn experience”.