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Tapping into ECF

Published on 15/04/2021

Global interest in craft beer has risen exponentially over the last decade, and despite the continuous talk of industry bubbles and the limitations of global lockdowns, it's an interest that has continued to thrive. It is a growing investment opportunity in the consumer staples sector but also one on the fringes of the equities market.

The beer industry is bigger than you’d imagine - it’s also global and highly competitive. North American consumers spend well over $100 billion annually on beer and malt-based products, equating to nearly 30 gallons of consumption per adult per year. Statistics also show that more than 85% of Americans now live within ten miles of a brewery.

And that’s just the US, in 2019, British consumers spent £5.7 billion on beer. This is the highest consumer spending recorded in the past 13 years and the second time spending surpassed £5 billion. The average UK drinker will spend more than £38,000 on their pints over a lifetime, with Londoners paying £82,000.

Yes, you have your industry stalwarts, like Anheuser-Busch InBev (owner of Budweiser, Bud Light, Stella Artois, Beck's, and others), Heineken Company (owner of brands such as Heineken, Amstel, Red Stripe, and Sol) and Boston Beer Company (owner of Sam Adams and Angry Orchard products). But the tastes of consumers have been changing over the last five years or so, there are other, less mass produced opportunities out there for savvy drinkers and investors to choose from.

If you’re willing to invest outside of the equities market, the brewery industry is bubbling. Take Brewdog - love them or hate them - they’re doing something right. As of March 2021, the company has raised $100 million across various crowdfunding and private equity rounds, exports to more than 60 countries, and has a turnover of around £200 million. They branched out from brewing into the bar space and even hotels. And they’ve been eyeing up an IPO later this year - depending on pandemic conditions.

But they have staunch competition from the US-based Stone Brewing, Bell’s Brewery, and Sierra Nevada Brewing (the seventh-largest brewing company, and the third largest privately owned brewery in the US) as well as closer to home with Camden, Innis & Gunn and Cornish based brewer, Verdant.

Equity crowdfunding (ECF) is common amongst breweries, trying to compete in the shadow of the likes of Anheuser-Busch, and has varying levels of success. There is a level of being a sell-out should you allow your brewery to be bought by a giant, but the struggle is real if you are staying the course as an independent, being denied bank loans instead relying on your beer-loving community to keep you going.

ECF has become the new norm to fund expansion for many, where investors put in anything from the cost of a few beers up to thousands of pounds. It allows investors to get a part in the business, plus perks - anything from money off, merchandise or tap room tours.

Unlike stock market shares however, there’s no way to trade ECF shares publicly, so it can be hard to value them – but for most craft beer investors, it’s rarely about the money - it’s all in community: feeling connected to a company that brings joy and tastes great.

After marketing your product to an already captive and active global craft beer audience, willing to travel or pay a little extra to get their hands on your hoppy beers, the step to getting them to invest isn’t that far. Many craft beer aficionados are more than willing to step in and help a brother or sister out when fundraising season comes around.

But ECF investing can be thorny - the beer industry is one of the largest sectors in the ECF world, yet the lack of scrutiny can lead to disappointment and potentially damaging investment losses. Brewers may be able to rustle up a tasty pint, but many don’t know how to run a business. Through ECF they secure essentially “free” money, and when it all goes wrong, there are often no repercussions.

According to research by Fortune Business Insights, the craft beer industry is set to reach $190.6 billion by 2027, so it’s a booming and somewhat untapped, global industry. There are opportunities from the industry big dogs all the way past the Brewdog’s and into the micro level - a hop for every taste you could say.

There's an art to brewing a pint which can be sipped happily in the sunshine on a warm summer's day, and a science to being right.

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