Cost pressures

Innis & Gunn expected to reveal another loss

Dougal Sharp
Dougal Sharp: not discussing profit or loss

Innis & Gunn, the Scottish brewer and pubs business, is expected to report another pre-tax loss for last year as cost pressures continued to take their toll.

Ahead of filing its full accounts to Companies House, the company declared a rise in gross profit to £7.76 million (2021: £7.38m) and a rise in turnover to £22.7m for the year to the end of December 2022 (2021: £21.14m).

But Dougal Sharp, founder and master brewer at the Edinburgh-based company, declined to comment on the bottom line figure for 2022 or whether the business would be profitable this year, which is being extended to the end of March 2024.

Mr Sharp said: “We are not commenting on whether we make a profit or a loss. It is not something we discuss publicly.”

Companies House accounts show it made a pre-tax loss of £1.2m in 2021.

Mr Sharp made it clear that the company had faced a number of cost pressures, which have continued into 2023.

“We are looking to drive down our input costs. Brewing is energy intensive and has high energy costs,” he said.

The company, which brews its products in Perthshire and at the C&C-owned Wellpark brewery in Glasgow, said the 2022 figures reflect a return of consumers to bars and pubs following the Covid pandemic.

However, a return to profitability this year is uncertain. The post-results period has been dominated by rising interest rates, a continuing squeeze on consumer spending and the bitter row over the deposit return scheme. The government is also proposing an increase in the minimum unit price of alcohol.

The DRS, which was aborted because of a dispute between the Scottish and UK governments, cost Innis & Gunn a six-figure sum in preparatory work and will be written off, said Mr Sharp.

DRS collection point at Aldi - deposit return
Innis & Gunn wrote off a six-figure sum afer the DRS was abandoned (pic: Terry Murden)

He said the Scottish Government had not engaged in an alternative recycling scheme that he proposed at the height of the backlash over ministers’ plans. There have been no offers of compensation.

“We will wait and see what happens. There are various bodies considering the industry’s position,” he said. Legal action was not being considered at this stage.

He said the proposed rise in the minimum unit price of alcohol “will have a significant inflationary impact on all products in the alcohol sector. At this stage we have to see the full detail.

“But what I can say with absolute certainty is that it will drive significant additional cost on to Scottish consumers. If it is implemented at 65p per unit it will impact on household budgets and it will be up to consumers to decide how they feel about that.”

He said the company’s retail outlets were performing robustly, despite consumers going out less frequently.

Asked if there were any current plans to raise capital or sell a stake in the business, he replied: “Not at the moment.” He said there were no plans for a public flotation.

Despite the cost environment he said Innis & Gunn had continued to grow and there had been investment in the brand through sponsorships such as the Royal Highland Show and the Royal Edinburgh Miltary Tattoo.

Massed Pipes and Drums at the Military Tattoo
The brewer sponsored the Royal Edinburgh Military Tattoo (Pic: Terry Murden)

New product launches and innovative limited editions helped recruit new consumers “and illustrated the brewer’s continued investment in innovation”.

These included Islay Whisky Cask, in partnership with Laphroaig; Cherry Kriek Sour Beer and the sixth edition in the iconic Vanishing Point annual release series. The company also launched a non-alcoholic lager.

On the stalled plans to build a brewery at Heriot-Watt University, he said: “Whilst we are weathering this crisis of cost inflation and consumer confidence we just don’t think it is the right time to build the brewery.

“We have a strong and very long working relationship with C&C Group. We manufacture 80% of our products there and that relationship has stood the test of time.

“So we don’t think building the brewery right now is the right thing to do. It is a still a strategic priority for us when it is the right time for the business.”

He said that some of the £3.3m raised in a crowdfund to build the brewery has been spent on the project, while the rest remains on the balance sheet.

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