How BrewDog showed the limits of community capitalism

Graffixion/Shutterstock When brewery and pub chain BrewDog invited customers to become shareholders through its “Equity for Punks” scheme, it appeared to represent a new model of capitalism. It invited beer enthusiasts to invest in the company and become small shareholders. This allowed the Scottish firm to present itself as a community built around rebellion, identity and participation. For a time, the BrewDog model looked remarkably successful – the company was once valued at £2 billion. But after its sale to American cannabis and alcohol firm Tilray for just £33 million, it is clear that there is more to the story. The real story here is not about one craft brewer. It is about a broader shift in modern capitalism, where companies increasingly use narratives to mobilise communities and raise capital. But at the same time, the institutional rules of finance still determine who gets what and when. BrewDog raised substantial capital (said to be £75 million) from thousands of small investors who were already loyal to the brand. Instead of relying exclusively on banks, venture capital or institutional investors, the company mobilised its own community to fund growth. Customers became shareholders, while the firm strengthened its reputation as a disrupter within the industry. Then came the bar closures, job losses and BrewDog’s sale to Tilray. These developments suggest that small investors from the Equity for Punks programme will see little financial return. In general, supporters tend to see themselves as partners in an entrepreneurial journey. Yet legally they remain minority investors. And minority investors occupy a very specific position within the institutional architecture of capitalism. The BrewDog story is a reminder that markets run on stories as well as money. The effect of this has been to blur the boundary between customer and investor. We believe that people rarely invest only because of spreadsheets. Our research on entrepreneurship shows that economic behaviour is shaped by trust, narratives and shared identity as much as by financial indicators. And the American sociologist Mark Granovetter argued that markets are “embedded” in social networks, meaning that people invest in people – and in their stories. This resonates with our broader research on how economic exchanges, including investments and purchases, are also often sustained through these factors. BrewDog’s Equity for Punks model captured this dynamic perfectly. But there’s also a question around what it really means to be part of a community when the balance sheet starts to matter. Cold beer, cold reality Community narratives may mobilise people to invest their money, but a body of strict rules and regulations shapes the outcome. Three points here are particularly important. First, while the equity-public model undoubtedly has appeal, it’s also true that companies operate within legal frameworks that determine ownership rights and the order in which creditors are repaid if the company is liquidated or sold. Second, lenders and structured investors typically enjoy protections that small retail investors, like BrewDog’s punks, do not. Third, corporate finance works through a hierarchy, so it should be recognised that this places creditors ahead of shareholders when companies face financial stress. Shareholders are last in line to recoup their money from a company – after lenders, tax authorities, employees and suppliers. When customers invest in companies they admire, they often interpret their role differently from conventional shareholders. Under BrewDog’s Equity for Punks programme, thousands of customers bought small stakes in the company not just for potential financial returns. This point resonates with our research on how businesses and communities interact. It shows that economic behaviour is often shaped by the rules, expectations and relationships that surround markets. In practice, this means that people do not make decisions based only on prices or profits.

None of this suggests bad faith on the part of companies like BrewDog. It simply reflects the fact that markets operate through institutions. Episodes like the BrewDog one serve as a reminder of a basic feature of modern capitalism. That is, when financial pressure appears, institutional rules take over. All that being said, community-driven investment models will probably become more common. Digital platforms make it easier than ever for firms to mobilise supporters around shared narratives and identities. But at the same time, the institutional rules that govern corporate finance have not evolved at the same pace as these new forms of participatory capitalism. If modern capitalism increasingly invites people to invest not only their money but also their faith, the gap between narrative and institutional reality will become harder to ignore. Communities may power the stories that fuel entrepreneurship. But when the balance sheet tightens, it is still institutional rules that decide who gets paid. BrewDog did not respond to a request to respond to the claims made in this article.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.