The expansion of Scotland’s buoyant craft brewing and distilling sector is being curtailed because attractive tax and investment incentives that can finance growth and brand development are being over-looked.
Murdoch MacLennan, a finance industry veteran and head of our Brewing & Distilling sector, says that businesses can get distracted by the production process rather than focus on creating, funding, building and protecting high value brands.
“Scotland’s craft and micro brewing and distilling industry is thriving and creating outstanding products, but valuable tax and investment incentives are often being overlooked” says Murdoch.
“If tax management is used tactically rather than reactively, valuable savings can fund cash flow and allow a business to invest in R&D, technology, brands, sales and marketing. Craft brewing is booming globally, but it is exceptionally difficult to move from being a micro business to building a valuable national, or international brand.”
“Cash flow and working capital are crucial in the early years, and we need to help more entrepreneurs to use the tax system incentives to fund growth. For example, certain investments will attract 100 per cent tax relief, which coupled with grants and incentives means that many of these businesses are missing out on valuable cashflow.”
He added: “In the medium to longer term, success in the brewing and distilling industry is determined by building a strong, protected brand able to command a premium, however the product is sold to the consumer. Strong brands also tend to become acquisition targets, and hence offer more potential for an exit to a bigger business, and we are starting to see more evidence of these outcomes.”
An example of a company in the sector which has built a distinctive brand is Innis & Gunn.
Innis & Gunn has maximised available tax incentives such as R&D and reinvested the cash saved in building its brand. The strength of that brand both nationally and internationally (70 per cent of their turnover comes from overseas) has enabled the company to expand and raise further funds for expansion. Last year just under £3m was raised through a Mini Bond, helping fund the acquisition of the Inveralmond Brewery.
Chairman Tony Hunt says:
“The power of the Innis & Gunn brand is central to the success of the business, and is a key component in attracting investors to our Innis & Gunn community.”
Our brewing and distilling team has expertise in Tax, VAT, R&D grants, duty, export regulations and IP.
Innis & Gunn are currently crowdfunding to support the expansion of their award-winning Beer Kitchens. Find out more about their crowdfunding here.
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