Finance

BrewDog boss admits to 'taking shortcuts' that broke US import laws



The chief executive of BrewDog has admitted to “taking shortcuts” on shipments of beer to the US, in contravention of federal laws.

The BBC spoke to staff at its Ellon brewery who said they were put under pressure in 2016 and 2017 to ship beer with ingredients that had not been legally approved.

Two of its flagship products, Elvis Juice and Jet Black Heart, contained extracts not approved in the US.

Chief executive James Watt published a lengthy blog post detailing the mistakes, after the BBC wrote to BrewDog detailing the allegations last week, which will be aired on a programme on Monday.

Watt admitted that its first brewery in North America only had 100 staff and no beer in place, due to delay in getting brewing equipment set up, meaning beer had to be imported from Scotland.

“If we didn’t have beer to sell, we could have gone bust in the US in our first month,” Watt stated. “The process of importing our own beer was new to us and we took some shortcuts to get the beer to America on time and we made some mistakes with the paperwork on the first few shipments.

“All applicable taxes were always paid in full, but the paperwork was not always correct in the first few months back in 2017 and we did not realise we needed to get things like the Elvis Juice recipe and ingredients approved in advance (although this was subsequently approved).”

Watt conceded that the company made numerous “oversights in labelling and paperwork”, claiming it was due to the task of running a growing business on one side of the Atlantic and starting a new one on the other side.

He added: “We subsequently contacted the relevant authorities the Tobacco Tax and Trade Bureau (TTB) to inform them, they looked into the matter and have responded and told us no further action would be taken here.

“We also consulted Tom Niekamp, the former TTB senior counsel to get his view on the matter – he confirmed that the errors we made would not risk an importer’s licence as was put to us recently.”

Watt added that BrewDog now has a “fantastic compliance team” making sure everything is always “shipshape”.

Watt hit back at the BBC and British culture, stating: “In the US, people who take risks and create jobs are celebrated; in the UK the best they can expect is to be tolerated.”

He continued that the national broadcaster has a “barely disguised distaste for entrepreneurs”, adding that “the whole purpose of Dragons’ Den, for example, is to present entrepreneurs as deluded fantasists”, while arguing the same is true with The Apprentice.

Watt noted that the BBC rejected BrewDog from Dragons’ Den back in 2009, “preventing the Dragons from capitalising on what would have been by far the most lucrative deal in Den history”, although he now sees this as a stroke of luck that “we didn’t sell 20% of our business to someone else for £100,000”.

He also criticised the BBC again for a show called Who’s the Boss, which looked at the company’s recruitment policies.

“The show was a complete hatchet job – we were lied to and sent candidates completely unsuited to the role we were hiring for and then made to look crazy for trying to protect our team and our business.”

Watt’s LinkedIn post went on to explain five other mistakes the company made during its rapid growth period, which saw him publicly denounced by former employees for creating a “toxic” workplace.

A group of current and former employees called ‘Punks with Purpose’ and accused founders Watt and Martin Dickie of building “a cult of personality”.

This led to an in-depth review of the business during 2016 to 2018 that found a “distinct gap of perception” between former employees and current employees.

Watt conceded: “Any entrepreneur wants their business to grow fast, but in the period of 2014 to 2017 we were growing like crazy and I often ask myself if I was too focussed on that element at the expense of others. On reflection, I was.”

He explained that he is now often asked about the “same dilemma” by other business leaders and admitted the leadership team should have been more “mindful of the toll that puts on our people” and “the lesson here – don’t let growth, even if it feels exciting at the time, come at the expense of looking after your people”.

During its period of high growth, BrewDog took an investment from private equity firm TSG in a deal that valued the business at £1bn.

Watt admitted that this “changed everything” and BrewDog lost control of its culture. He said: “The saddest part of this was how many people we had to let go for savagely abusing their expenses.”

BrewDog also spent around £1m on sending managers to development retreats, while hiring “an experienced and expensive senior management team”. But within 12 months, the company had parted ways with all seven of them.

“The more bloated our headcount became the more clunky, bureaucratic and slow our operations became – the intention was right – but the delivery was wrong and it had potentially fatal implications for BrewDog.”

When Covid-19 hit in 2020, the company lost around 70% of its revenue overnight and had to close almost 100 locations globally, “and I genuinely did not believe our business would make it through the storm”, said Watt.

Around 5% of staff were let go through voluntary redundancy, while many leaders took pay cuts.

However, since then, the company has added 600 new employees during 2021 and is planning many more hires over the next 12 months.

BrewDog should open 30 new locations this year, including Atlanta, Paris, Milan, Berlin, Mumbai, Las Vegas and London Waterloo.

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