How damaging will the BrewDog staff’s ‘culture of fear’ letter prove to be?

Brewdog’s skeletons have come tumbling out of the closet, in the form of a damning open letter from its past employees.

The letter, which at the time of writing had been signed by some 300 former staff members (and, it alleges, a smattering of current ones) went viral on Twitter last week.

Published by an account called Punks With Purpose, it outlined a litany of allegations against the brewer, dubbing it “a lightning rod for some of the worst attitudes present on both the internet, and in real life”. Crucially, it claimed founders James Watt and Martin Dickie had created a “culture of fear”.

The tabloids were quick to pile on, making the most of the fact BrewDog has spent past years positioning itself as a more ethical, progressive force in the beer industry.

 “If BrewDog were a supermodel, its sponsorship contracts would have been dropped by now”

The situation was compounded when an internal letter from BrewDog to its staff, asking them to sign a letter in defence of their employer, leaked online, where it was met with equal public scorn.

“Talk about dirty laundry,” says a senior industry source. “Clearly this was flawed – it’s emotional, defensive and seeking to counter-argue – but this is what happens when you’re dealing with a live crisis.”

Finally, James Watt (who has not responded to a direct request for comment) issued a public apology, promising the brewer was not going to “make excuses” but “take action”.

But after such damaging allegations, what should BrewDog do next? What does this mean for its senior leadership team? And how badly could this crisis actually damage the brand?

Quite significantly, argues drinks & hospitality consultant Jessica Mason. “If BrewDog were a supermodel, its sponsorship contracts would have been dropped by now,” she says.

“People don’t want to be seen to be associated with wrongdoing and nor do businesses and other brand owners”.

Punk problem

Put simply, it’s the kind of thing that could get a smaller brand delisted. It could also affect BrewDog’s ability to raise capital, which has proven a crucial tool for Watt and Dickie.

One of their shrewdest moves was the introduction of its Equity for Punks investment scheme, which allowed fans to buy shares in return for perks such as discounted beer and, crucially, a feeling of being part of a business that shared their values, aspirations and attitude.

Such an explosive PR crisis could hamper this scheme and also derail any plans for BrewDog’s long-anticipated IPO, says our industry source.

“They have aspirations to become a public company either in London or New York, and Deliveroo has already showed that you cannot have any suggestion of being unethical or not doing the right thing by people in order for large, institutional shareholders to get on board with your business.”

From the open letter to BrewDog

• “Growth, at all costs, has always been perceived as the number one focus for the company, and the fuel you have used to achieve it is controversy.”
• “We felt that no matter how [qualms] were raised, the likelihood was we would be met with some variation on ‘that’s just the way things are’.”
• “Put bluntly, the single biggest shared experience of former staff is a residual feeling of fear. Fear to speak out about the atmosphere we were immersed in, and fear of repercussions even after we have left.”
• “We believe these toxic attitudes towards junior staff trickled down throughout the business from day one, until they were simply an intrinsic part of the company.”
• “Now is the time for genuine, meaningful change at BrewDog – and we mean more than starting the search for a mental health ambassador.”

BrewDog has been teasing said IPO for years now. A glorious exit – which Watt, in an interview with The Grocer in 2018, said was poised for 2021 or 2022 – was one of the key draws for many of those same Equity Punk shareholders who have invested to date. Let alone TSG Consumer Partners, the US PE firm that owns a 22% stake in BrewDog (though TSG has never spoken publicly about an IPO).

Now there are some signs of worry at TSG: the firm’s MD, Blythe Jack, was parachuted in over the weekend to lead BrewDog at board level as chairwoman.

“More than anything, Americans hate reputational risk – it is a real disaster for them, because TSG will probably have been pushing BrewDog to IPO,” says a City source.

The full extent of Jack’s authority – and exactly what changes she will make – remain to be seen. But such a senior role will likely be read as an attempt to remove power from Watt and Dickie, whose iron grip is notorious in the industry.

This could prove easier said than done. Attempts to draw in talent from more traditionally corporate businesses across the wider fmcg sector into BrewDog have not all gone to plan. Take former Red Bull MD Andy Shaw, for instance, who was drafted in as ‘CEO of beer’ in 2019 but left after just five months.

“More than anything, Americans hate reputational risk”

Its first ever CMO, former Lucozade Ribena Suntory marketing director Jon Evans, lasted just three months. Then there was the case of Just Eat FD Dom Neary, who was meant to join as CFO in 2019, but – according to his LinkedIn – never actually started at the brewer.

It’s perhaps telling that the people who could have helped BrewDog successfully go public – those who could implement the right corporate structures and checks to deal with the demands of investors – didn’t stick around.

At least, that’s how it would be viewed by potential investors. “They’ve got to have management stability – a revolving door is a serious red flag that puts people off even considering it,” the City source adds.

Whatever happens, Jack won’t be a silver bullet. BrewDog knows that, hiring independent specialist on diversity and beer Ren Navarro to lead on sorting out its culture.

The biggest issue is the perception of Watt and Dickie themselves. Our City source says it may be time for the pair to hang up the marketing gloves and instead focus on the business essentials, such as profit. “If those guys are going to stay, they’ve got to give it at least two years to prove that 2020 wasn’t a disaster, and that profitability from investments they’ve made is coming through.

“They need to get their heads down and improve their disclosure substantially. If your management can’t comfort people, you do it by reporting and being as open as you possibly can.”

BrewDog’s path to redemption – and floating – could be long. But it’s important to remember this is a business that, in its relatively brief lifespan, has pulled off some incredible feats. It was, after all, instrumental in building the craft beer category in the supermarkets.

It’s also worth noting that bigger names than BrewDog in food and drink have come back from far worse – Tesco’s comeback after its accounting scandal and McDonald’s after Super Size Me come to mind.

Which sets a good precedent – as long as BrewDog’s bosses are willing to dedicate the effort needed to get its culture and public image back on track.