From a £1bn dream to a brutal collapse: How Brewdog hit the rocks

"All self-respecting captains go down with their ships," James Watt declared in his finance memoir Business for Punks in 2015.

But as the beer company he transformed from a garage start-up into a billion-pound behemoth foundered and slipped into administration last week, Watt was no longer at the helm of the good ship Brewdog.

He abandoned ship in 2024 after several years of bad press and financial losses. Co-founder Martin Dickie followed suit.

Their Brewdog dream was over. But having cashed out to the tune of £100m in 2017, they move on to their next ventures as wildly rich men.

Left to survey the wreckage are the hundreds of staff summarily culled in a brutal 11-minute Teams call from HQ and the 200,000 plus investors, or Equity Punks, who will likely see no return for the more than £100m they ploughed into the company.

For some, the rise and fall of Brewdog has been a cautionary tale of unchecked ambition, rapid expansion and hubris.

So how did it come to this?

The story of Brewdog's beginnings, rooted in Fraserburgh in the north east of Scotland, became the stuff of legend.

The co-founders were childhood friends. James, the son of a fisherman, was bombastic with an entrepreneurial streak, while Martin was the more reserved beer geek.

In the mid-2000s the pair set off to revolutionise the craft beer industry.

Making their early brews from cobbled together kit in Martin's mum's garage, and then in a small industrial unit in Fraserburgh, they were undeterred by the early rejections they faced.

Watt says they would sleep only a few hours a night, often on sacks of malt on the brewery floor, and told of the financial hardship they faced.

He would tell of working as a captain on a fishing boat to make ends meet.

"We constantly missed our loan repayments… we could never sell enough beer to pay our rent."

They had faith their flagship beer, Punk IPA, would be a winner - and so it proved.

They won a craft beer competition in 2008 and a lucrative contract to supply Tesco supermarket. They boasted of telling lies to a bank to secure the loan required for a massive scaling up operation.

Their rags-to-riches tale would be slightly undermined, however, when it emerged Watt was a millionaire's son.

James Watt Senior was one of the most powerful figures in the north east fishing industry and supported his son's business in the early days.

Brewdog's success was built on developing a loyal following who loved the company's irreverent take on a craft beer industry thought to be tired and stuffy.

"They shook up an industry that needed shaking up. There's no doubt about that, and I will always give them credit for that," said beer writer Melissa Cole.

Driven by Watt's marketing genius, the fledgling company pulled stunt after attention-seeking stunt, each crazier than the last, and they were rarely out of the news.

The self-proclaimed Captain of Brewdog, Watt regularly attacked the "bland and insipid" big beer companies like Heineken.

He and Dickie even filmed themselves sending bottles of Heineken into the air attached to exploding rockets.

Warning: This article contains language that some readers may find offensive

From driving a tank down Camden High Street, to throwing stuffed "fat cats" from a helicopter over London's financial district, to creating the world's strongest beer and sticking it inside a taxidermied squirrel – there appeared to be no limits to Brewdog's punk revolution.

But this revolution needed an army - of investors. In 2009, Equity For Punks (EFP) was born. Fans were encouraged to invest in the company in return for shares, as well as benefits like beer discounts.

Over the next 12 years, in a series of EFP fundraisers, about 200,000 investors would bolster the firm's finances by more than £100m.

Andrew Morgan, a beer entrepreneur himself, was one of the first to invest.

"It was revolutionary in changing the nature of how people could support businesses," he said.

"And these guys were different. They were bringing something new to the industry and it was exciting."

With every EFP round came fresh promises they would never sell out to "big beer".

The EFP cash injections helped pay for an £8m custom-built 5.5-acre brewery on a sprawling site at Ellon.

Watt put the environment at the heart of the expansion and would claim Brewdog had become the first ever carbon negative brewer, even purchasing a forest in the Highlands to help offset carbon.

By 2017 turnover had reached £111m and they had more than 50 bars and 600 staff.

Watt and Dickie's ambition seemed limitless. They wanted Brewdog to be global, to become a unicorn - a billion-pound start-up company, of which there were only around 40 in the UK at the time - and they didn't have time to wait around.

"They'd started to believe their own hype. Hordes of people would cheer them on stage and it became a bit of a cult. A cult that James was happy to be the head of," said Melissa Cole.

By 2017, cracks had started to appear. There were whispers of a toxic culture, summary sackings were observed and rumours about the CEO's behaviour started to swirl.

Observers believe the pivotal moment in Brewdog's trajectory came in 2017.

Watt and Dickie sold nearly a fifth of their shares to US private equity fund TSG for £50m each.

TSG pumped another £113m straight into the company to help supercharge its growth, acquiring a 22% stake in the company.

Watt and Dickie became multi-millionaires overnight.

The equity punks were also given the option to sell shares to TSG, although only up to a maximum value of £527 – which didn't feel very equitable to some.

"The TSG deal changed everything," said Morgan.

"If he'd taken the £50m, got some proper people in to run the business who knew what they were doing, rather than his ego letting him go off on a bender, we could have a different story."

In his 2015 book, Watt had written: "Why spend your own money when you can spunk someone else's?" Staying true to this mantra, within six months of the co founder's £100m windfall they went back to the public for yet another EFP raise.

This time, Equity Punks were charged £23 a share – £10 more than TSG had paid. And yet it was still the most successful raise yet, bringing in £26m.

This put the company's value at £1bn.

Watt had now achieved his dream of founding a unicorn. The company was growing fast, opened hotels and ballooned to 100 bars worldwide with 2,000 staff.

It had even launched new gin and vodka brands.

But there had been a catch.

"It's seems likely that TSG hadn't the same confidence that Brewdog was worth as much as Watt believed, so they inserted an incredibly punishing rate of return to protect their investment," says financial analyst Nick Hyett.

The 18% compound annual interest rate was also designed to ensure TSG would be first in line for any payout if the company was sold or floated.

For Brewdog, it meant hitting at least 18% growth every year just to give Equity Punk investors a chance of seeing a return.

The deal also gave TSG seats on the board and significant influence, which increased over the years as the interest accumulated.

But the target which had been set was unrealistic and profits stalled. New bars that had showed early promise began to flatline.

Rifts in the relationship between TSG and Watt emerged.

Documents seen by the BBC revealed that in 2018 TSG believed Watt was "spending aggressively… desperately trying to create growth stories in order to reach an unattainable valuation", and that his valuation goal was "not realistic".

The pandemic deepened the company's financial troubles, yet huge flagship sites continued to open. These included London Waterloo and Las Vegas, and a DogTap hotel in Manchester.

"James is a clever guy but he didn't always make good decisions," notes Morgan.

"£50m is going to change you. Pre-TSG he is fighting the good fight. He gets £50m himself, and £100m to grow the business, and he does stuff like Brewdog Airlines and the hotels."

The last year Brewdog would turn a profit was 2019. Despite this, the company claimed it was valued at £1.8bn in 2020 when a final Equity for Punks round raised a further £30m.

Brewdog had prided itself on being a great place to work. It lived by the Brewdog "charter" – a series of commandments which included "without us we are nothing", "we are geeks" and, famously, "we blow shit up".

By 2021, this had worn thin with some.

A group of staff calling themselves Punks with Purpose published an open letter calling out a toxic culture at Brewdog, laying the blame squarely at the feet of Watt.

The BBC's Disclosure team started to investigate. We revealed a series of claims that Watt engaged in inappropriate behaviour towards female staff, and that Brewdog violated import laws and fabricated many of its marketing stories.

Tales of Watt and Dickie changing their names to Elvis, sending beer to President Putin and brewing beer on a plane all turned out to be made up.

The film also revealed that despite his public position on "big beer", Watt had spent £500,000 on Heineken shares - much to the surprise of equity punks who'd witnessed Watt punish craft brewers who'd sold their business to the Dutch brewing giant. He later admitted this had been one of his biggest mistakes.

Watt strenuously denied any wrongdoing alleged in the film and threatened to sue the BBC. He would later say he sometimes missed social cues because he has autism.

Following the programme, Brewdog said it was putting in a raft of measures to improve workplace culture.

Watt pledged 20% of his own shares to a scheme that would benefit employees.

Meanwhile, Brewdog threatened legal proceedings against one of the BBC's US-based contributors and sent private detectives to try to unearth dirt on at least one of our UK-based interviewees.

Brewdog complained to Ofcom about the programme and, following an 18-month investigation, the TV regulator dismissed the complaint in 2024.

TSG's iron grip on the company had tightened further and by 2024 was due something north of £700m.

This meant that for the most recent round of equity punks to see anything for their investment, the company would have to be worth in excess of £2.2bn.

Hikes in National Insurance and business rates had eroded profitability all through the hospitality sector, and Brewdog seemed especially vulnerable.

The 2023/24 accounts made for grim reading.

Watt stood down as CEO in May 2024, but remained on the board with title Captain and CoFounder. Dickie followed suit 15 months later.

The schoolboy friends' relationship had deteriorated and they were rarely seen together, usually travelling separately to corporate events.

Brewdog shuttered the distilling arm of the business, which had been Dickie's focus in later years.

A series of bar closures followed.

About 1,800 pubs across Britain ceased stocking Brewdog draught beers.

A £25m Covid loan, underwritten by the UK government, was due for repayment in full.

Even their forest had failed to grow properly.

The writing was on the wall.

On Monday, it was announced that Brewdog had gone into administration before the Ellon brewery and 11 bars were bought by US firm Tilray for £33m.

However, 38 other pubs have closed and 484 staff have been made redundant.

In a statement on LinkedIn, Watt described the news as "heartbreaking".

He had reportedly tried to buy the business for £10m, although this remains unconfirmed.

It is still unclear just how much of a hit on its £213m investment TSG will need to absorb.

The latest accounts show TSG has already provided £41m in loans, and a further £15m was issued in September last year. HSBC are also in the hunt for its loans of up to £30m.

There are elements of the company yet to be sold, like the US brewery and bars. It is also not clear how much cash reserves the company had when it went under.

But whatever the current state of the finances, there seems little doubt TSG's investment has gone sour.

Watt and Dickie will also lose out on their remaining shareholding which, according to the £1.8bn valuation in 2020, would have been worth hundreds of millions.

The Equity Punks will likely get nothing, although many joined the Brewdog revolution not to make a profit, but to become part of a club with benefits.

Watt told his followers on LinkedIn he'd made "many mistakes" while the business "expanded too fast and diversified too broadly". He said he "did not control spend well enough".

"I would have loved to save every single job and every single equity punk investment. Ultimately, I couldn't. That will stay with me."

This may come as cold comfort for hundreds now facing unemployment, and their legion of investors.

"They are gutted," said Morgan. "People who have Brewdog tattoos on their arms committed in a way I don't think James ever did.

"The reality of where we are right now is an absolute mess and if there's one person you can look at – it's James Watt. It has to stop with him."

Brewdog's meteoric ascent from garage start-up to unicorn had been one of Scotland's best and brightest business success stories.

James Watt, brash and at times brilliant, had undoubtedly been the driving force behind this. For many people, he is Brewdog.

Others believe he drove the business to the brink of destruction on the back of a lucrative deal that would prove to be the company's undoing, then walked away with millions.

The Brewdog brand may endure under its new owners, but its legacy will be forever linked with that of its former captain.