The Big Interview: Innis & Gunn founder and master brewer Dougal Sharp
There have been many milestones notched up by independent brewer Innis & Gunn since it came into being 15 years ago. The Edinburgh-based company has developed a portfolio of products and last year sold about 2.5 million cases of beer around the globe.
Additionally, Innis & Gunn Beer Kitchens have sprung up in Scottish cities and the brand has been praised by characters in Irvine Welsh’s latest novel in the Trainspotting series. “What an incredible thing to happen,” says Innis & Gunn founder and master brewer Dougal Sharp of the literary nod.
However, one of his fondest memories in the development of the business was the closing two years ago of its Crowdcube-powered, AdventureCapital campaign. The £1 million equity crowdfunding target was achieved in three days and ultimately raised £2.5m. At the close of the campaign, the brewery had sold 4.79 per cent of its share capital (up from the original 2 per cent planned).
Sharp recalls being wowed by the realisation that the brand meant “something special” to those who had invested in it, while he looked forward to using the capital to drive the business forward. “And we really have,” he says.
The fundraising scheme proved a thrilling moment in the company’s history, he adds. “To really put yourself out there and to see that goodwill coming back in the form of investment was fantastic.”
Turnover was more than £14.3m in 2016, increasing to £22.4m in 2017, a year-on-year jump of 22 per cent, “so we’re really turning that goodwill into growth”. He adds: “It’s incredible to think that we’re 15 years old, because it genuinely to me feels like we’ve only just started. It’s gone past in a flash.”
The seeds of the business were planted in 2002 when Sharp was asked to create a beer purely to mature in bourbon barrels to imbue them with a sweet, malty flavour. The liquid was going to be disposed of, but Sharp wondered if it had actually improved during storage. So it proved and the business was born in 2003, taking its name from his middle name – Gunn – and his brother Neil’s middle name – Innis.
Sharp has spent more than three decades in the industry, starting out at Edinburgh’s Caledonian Brewery, with his father having led the management buy-out of the firm in 1987, and letting Dougal and friends have an evening in the brewery’s sample cellar as a reward for winning a rugby game.
A passion was ignited in Sharp junior, although he later faced resistance when Innis & Gunn launched its original flagship beer. A sceptical industry felt the beer was a leap too far, with too rich a flavour, but the brewery boss held firm and later credited his business with sparking a “craft beer revolution”.
To mark its anniversary this year, Innis & Gunn has launched a limited edition, barrel-aged double IPA named 15 that has been matured in 15-year-old whisky barrels. Sharp hopes that it is seen as a “fitting tribute” to the firm’s first 15 years, “and I still look forward to the next 15 with an equal level of excitement and passion, because I still feel that we’re only just over the start line with this brand, and people are in so many more numbers now getting into craft beer and into the craft beer scene. And it’s not just happening here – it’s happening in all of our core markets.”
He highlights how craft beer “really continues its march into the mainstream – and Innis & Gunn’s one of the brands that’s driving it”. Indeed, it is estimated that by 2025, the value of craft within the total beer market will almost treble to see nearly £1 in every £5 spent on it. “We are ideally placed to lead and benefit from this trend,” Sharp says.
The Society of Independent Brewers (Siba) said in a report that British drinkers last year enjoyed 506 million pints of craft beer produced by its members, which include Innis & Gunn. And 63 per cent of such companies expected their turnover to increase this year. “The results suggest that our members continue to move their businesses forwards positively and enthusiastically, despite the challenges of competition, increasing costs and low wholesale prices,” according to Siba chief executive Mike Benner.
As for where Innis & Gunn sees the main pressure points, Sharp believes that the biggest stumbling block “in any business – particularly one that’s growing at 22 to 25 per cent – is just managing growth and the complexity that brings. There are so many opportunities out there and we’ve got to be smart about picking the right ones. That’s always the biggest challenge, I think, and making sure that the culture of the organisation doesn’t get too stretched by the growth in markets and in numbers of people.”
Staff number around 120, from 95 in 2016, and last year marked the 14th year in a row of double-digit volume growth – although the company swung to a pre-tax loss of £388,000 from a profit of £331,000 as it invested in the business, including injecting more than £1m into developing its brewery. “All that turnover growth brings complexity and it’s just about managing change – it’s the biggest challenge,” says Sharp.
Helping accelerate growth has been the arrival of Connecticut-based L Catterton, which calls itself the largest and most experienced consumer-focused private equity group in the world. Other brands in its portfolio include workout apparel specialist Sweaty Betty and luxury skincare brand Elemis.
The US firm last year bought a 27.9 per cent stake in Innis & Gunn in exchange for “rocket fuel” growth capital of £15m. Sharp highlights the private equity business’s strategy of taking a long-term view of brands and brand values. “They’ve been a great partner, they’ve brought a lot of discipline into the business, they’ve offered up opportunities, they’ve provided support… it’s been a very, very productive relationship – and one which Innis & Gunn’s hugely benefited from in the last 12 months.”
He describes the last year as “transformational”, including a rebrand to unify its product offering. Further investment is planned for the Beer Kitchen side of the business, with sites in Dundee, Glasgow and Edinburgh. “We’ve changed the menu, we’ve got a wider range of craft beers, we’re working a lot more with local suppliers in Scotland,” says Sharp.
However, an outlet in St Andrews that opened in 2016 was later shuttered, a move Sharp attributes to the site being too small to give customers the “full Innis & Gunn experience”.
But he adds: “We’re really investing behind the trade in Scotland to grow distribution of lager and our barrel-aged range and IPAs. And that strategy’s going to continue, because clearly there’s huge momentum behind the business and the brand in bars around Scotland and we’re seeing a big uplift in sales through supermarkets and off-licences as a result of that strategy.”
Overall, he says growth in the UK, and particularly in Scotland, is being driven by its lager that launched five years ago, while Innis & Gunn is riding the craft beer wave seen around the globe – and a key role of his is building relationships with customers internationally.
In 2017, its beers were sold in more than 40 countries, maintaining its position as the largest craft beer importer in Canada and one of the leading imported craft beers in Sweden in addition to being the number two craft brewer in the UK off-trade. It has also entered the vast Chinese market.
But while Sharp acknowledges that it is positive to enter new areas, a great part of its global growth is coming from its current core markets. “And that is an ongoing focus of the business to continue to drive our sales there.”
Turning to fellow Scottish craft beer firm BrewDog, Sharp has “great respect” for what the headline-grabbing firm has achieved, and instead sees competition coming from other quarters. “I don’t see any other craft beer business as competition – we’re all kind of in it together fighting against the dominance of the big guys and that’s our focus.”
As for more acquisitions, after snapping up Inveralmond Brewery in Perth in 2016, there is nothing on the cards, although Sharp is not ruling anything out. “What we are focused on is really driving forwards the brand.We know that when people try Innis & Gunn it becomes part of their repertoire, it’s something that they will continue to drink and enjoy and that’s really the focus of the business at the moment, it’s driving it forward both here in Scotland and around the rest of the UK and then in our international markets
“It gives me a huge buzz any time I walk into a bar anywhere else in the world and I see people drinking Innis & Gunn – it just feels incredible that it started from this company in Scotland and it’s grown to be this big international brand. It’s really exciting.”