Investing in Microbreweries

[Szanne]

I haven’t found a discussion about my beloved hobby, which is craft brewery beers. They’ve popped up like mushrooms after rain in recent years, and now the saturation point is probably near. In addition to buying beers, you can also become an investor in many craft breweries through share issues. Most often, participating in share issues can be just a way to support your local business or get shareholder benefits, rather than a pure profit-driven investment.

I own shares in Pyynikin Brewery. I bought them earlier just for support and the shareholder discounts. On their behalf, I can say that the investment has been profitable enough so far. The company itself has not been convincing financially; it feels like it has been managed a bit haphazardly as a hobby. Its precise focus for the future has been lost, and everything imaginable has been done, without concentrating on the most essential products. There has been a lot of sprawling. Now, however, things seem to be going better, even though there’s an annual loss of 400k. A share issue has been launched for the recently acquired brewery facilities operating in Estonia, after which the aim is to expand production and thus improve international reach. Still, I’m not convinced this is a good investment case, at least not yet. More issues are likely to come in the future, and the share is available on Privanet. Let’s hope that a stock market listing will also happen in the future!
https://pyynikin.com/osakeanti/

On Privanet, at least Nokian Brewery and Laitilan Virvoitusjuomatehdas (Laitila Soft Drink Factory) are available, but they are also starting to be a bit larger than traditional craft breweries. I’ll also add a few older links that have discussed craft breweries as investment targets.
https://www.salkunrakentaja.fi/2020/01/sijoittaisinko-pienpanimoon/
https://yle.fi/uutiset/3-11769610

How interested are you in craft breweries, and would any of them be an investment for you purely for profit?

[Marcelo2]

Interesting topic. I’ve also tried to figure out how to invest in, for example, RPS Brewing Ltd.

[CoktailJet]

I don’t really know these, I only own a large brewery. But as you yourself pondered, they seem a bit like hobby projects. Is the best way to support them simply by buying their products and investing larger sums of money in professionally managed companies?

A bit of a useless answer from me, but at least one of Buffett’s investment wisdoms is universally applicable: “Never lose money.”

[Kustaa_Bertelskold]

Good opening! The topic interests me, and I’ve certainly thought about investing in craft breweries purely for support, though I find valuation quite challenging for them.

It’s a shame I missed Sonnisaari’s share offering back when I lived in Oulu. I would have invested then just for support, and nowadays I think they’re one of Finland’s best breweries.

Orava Brewing’s share offering is currently underway, and I’ve been considering participating. This brewery certainly seems to have convincing plans, for example, a quite solid-looking investment plan:

The image was copied from Orava Brewing’s website, where you can find more information about the offering.

I haven’t invested in this yet because I haven’t tasted any of their beer. Whether a brewery’s beer is good ultimately determines if it’s worth being an owner

[Ylikersantz]

I am interested in this I need to get my hands on the product to taste it. A small slice could be a good investment if the product is on point.

[noggela]

I’ve been an investor in Pyynikin craft brewery right from the very first share issues. Originally, the idea was to be involved purely in a supportive capacity, and the shareholder discounts and other benefits weren’t too bad.

I’ve been following the development of this particular brewery with great interest over the years. Share issues have become almost continuous; it feels like no sooner is one issue closed than a new one is already on its way. The issues, of course, stem from the management constantly having new projects that spread and expand in every direction, like the famous “Jokinen’s snacks” (a Finnish idiom for something that keeps growing uncontrollably).

They’ve bought a restaurant boat, a biogas reactor, expanded the brewery’s facilities, bought brewing equipment, and so on. And now, most recently, they bought an entire brewery in Estonia.

The problem I’ve experienced is that as this so-called “craft brewery” expands, first across Finland, then Europe, and soon, reportedly, possibly even to China (!), it has occurred to me more than once that I hope they haven’t been blinded by speed!

As for the company’s products, Pyynikki’s are excellent; as a former professional in the field, I believe I can assess this. It’s just that they should focus on certain products instead of constantly pushing new ones out. I’m not entirely sure how many different beers and ciders they’ve brought to market in the last five years, for example, but there are many. This creates its own problems.

I don’t believe this will ever become a profitable investment as it is. The shareholder benefits were better in the early days, but they’re not so special anymore. I wouldn’t count on this company ever going public, though that would certainly be a positive surprise. Perhaps the new CEO, who started early this year, will bring new winds to the operation. We’ll have to wait and see!

[Miihhael]

In 2018, I invested in the local Iso-Kallanpanimo brewery, purely out of support, as did many others. It was probably my first investment, and even though this investment hasn’t brought anything other than a T-shirt and good beer a bit cheaper, it sparked my interest in investing. So, I could say that every euro I’ve made from investing is thanks to this ( #humor ).

I’ve been following the company’s activities a lot, through social media and financial statements. After moving from Kuopio to study, it’s become a habit to visit the brewery whenever I’m back home.

Now, IKP is having its second share issue, and there doesn’t seem to be the same rush to subscribe as, for example, for a Kreate IPO

I don’t believe any small brewery will ever be a goldmine for anyone; the competition is really tough, and breweries keep popping up. In these share issues, the valuations are indeed wild, and the growth targets are even wilder. I’ll take “my own company” as an example.

In the 2018 share issue, the 2020 revenue was forecasted to be around €1.3 million; the actual revenue was €550,000. Of course, the corona pandemic affected things, but 2019 also didn’t quite hit the forecasts to the cent.

Even though revenue hasn’t exploded exponentially to the moon as expected, I believe in the company’s work and eagerly await what the next years/decades will bring.

[Jpk63]

https://www.kotkasteambrewery.com/, they have a share issue going on.

[Ylikersantz]

So there’s plenty of these available from many small breweries, but are they an investment, or just support? It would be nice to make a profit, of course

[Szanne]

{“content”:“I second what you’re saying! It’s puzzling why there’s been talk about a lack of production capacity, yet a completely insane number of different products are being made, even though focusing on a select few would seem more sensible.\n\nAlso, especially when watching Orava’s (Squirrel’s) offering, it occurred to me that an exit is probably very challenging for an investor. Finding a buyer as an unlisted company is likely problematic. Furthermore, growth targets are unrealistic for many, or there isn’t even a real desire for them, making an IPO unlikely. Also, few want to buy these breweries, except from bankruptcy estates. Orava also had the peculiarity that the shares in the offering have no voting rights.”,“target_locale”:“en”}

[Ylikersantz]

I was thinking the same thing, it’s easy to buy but really hard to exit.

[Lewisville]

I’ve been investing my money in beer for much longer than in stocks. The goal has been to get at least 4.5%, but at my best, I’ve reached around 7-8%.

[osakemonni]

This morning I marked Pyynikin Käsityöläispanimo (Pyynikki Craft Brewery). I see their strong brand, the awards Pyynikki has won, and potential future growth into the German market as competitive advantages. Their growth so far has been strong, which clearly indicates market growth. Exit sometime in the future, if ever

[CloseToStupid]

I invested in Brewdog 6 years ago for support and the shares have already paid for themselves with benefits. I haven’t invested in Finnish breweries based on taste. I might consider Coolhead or Salama if the offering was reasonable. Brewdog’s beer isn’t the best in the world, but they really excel at marketing, and their growth has been tremendous. brewdog Revenue Growth last 10 years - Adventure Bagging. A good example of this is that they already rose to the TOP-20 most valuable breweries in 2019, and that includes bulk breweries as well. BrewDog breaks into world’s 25 most valuable beer brands. Rumors say an IPO might be coming this year, but it’s not certain yet. They’ve had 6 offerings so far.

[Toomas_Rahula]

Currently, 69% of all production consists of the nine best-selling beers. I wouldn’t call that critical sprawl yet.

[Toomas_Rahula]

According to the offering circular, Pyynikin Käsityöläispanimo’s estimated operating profit for 2022 is €391,000. This would also be the brewery’s first profitable year, according to the circular. With the number of shares after the next share issue (88,760 pcs), this would mean an EPS of approximately €4.4. For comparison, Olvi’s EPS is currently around €2. Olvi distributes about 50% of its earnings as dividends, and the dividend yield at the current share price is about 2.17% with a P/E of 21. With a similar dividend policy, Pyynikin’s corresponding figures at the offering price would be a dividend yield of 1.76% and a P/E of 28. I may have made a calculation error, and these figures are based only on forecasts, but if the company’s growth continues as predicted, I believe the share is moderately priced.

[Gadus]

I don’t really see anything interesting in these. There seems to be a big boom in the industry, and undoubtedly demand, and microbreweries have popped up on the market like mushrooms after rain.

Stiff competition with other breweries is, of course, one thing that makes it difficult to stand out from the crowd. However, a bigger problem is the great power of the chains, both S-Group/Kesko, and of course Alko. Shelf space in stores is limited, and the shelf fees alone are often such that one has to wonder if it’s even worth trying. If you make a round to half a dozen Alko stores, you’ll find the same beers from the same breweries on the shelves. There’s constant talk about distance selling and stall selling, but the state’s attitude, regardless of the government, is extremely hostile.

It’s not easy, no. As a beer lover, I tip my hat to every microbrewery entrepreneur, because in the vast majority of cases, a rocky road surely lies ahead.

[Szanne]

It’s not about total production, but about total beer production, which still accounts for the majority, or 84% of total production. In my opinion, for a brewery of this size, there are a great many different products. Pyynikin Panimo calls those nine their volume products. Even marketing them with limited resources sounds like a challenging task to me.

[Kustaa_Bertelskold]

@Gadus

However, the bigger problem is the great power of the chains, both S-Group/Kesko and of course Alko.

This is a good point, by the way. It seems to be largely up to the merchant in, for example, Kesko stores what is put on the shelves. For example, the owner of my current local K-supermarket seems to be a big beer lover, and there’s a selection from all over Finland and the world. This is not the case in all stores.

Finnish alcohol legislation is something that, in my opinion, severely restricts the operations of small breweries. For example, the products of Orava Brewing, which I mentioned earlier, seem to be quite difficult to get if you don’t go to Turku to pick them up. Alko sometimes has some batches, but not very often. It would be much easier if you could order samples to your doorstep, but that’s not possible in Finland, as the nation might become alcoholic due to small brewery beers (I’ll stop here before it gets too political).

These are a bit difficult investment targets at the moment.

[Cadel]

True that these have popped up in recent years and I’ve been waiting for when they would start to disappear. Unfortunately, there isn’t room for everyone in the Finnish market. Part of the reason is the great power of the chains you mentioned, but also the varying quality.

I’ve tasted products from several breweries whenever I’ve come across them and also visited several different breweries. It’s been nice to see the enthusiasm that has shone through. For some, it’s mainly a hobby alongside their main job, while others make a living from it for themselves and perhaps two or three other employees, and some dream of conquering the world. I salute everyone and will continue to explore new products.

So far, the only small brewery I know of that has gone out of business is Taiwalkosken Panimo. Its products were mainly found between Oulu and Kuusamo. I’m sure there are others.

Good luck to all small brewery entrepreneurs.