Batch Brewing Co. has acquired Bucket Boys after a difficult period for the beer retailer and venue operator.
During the COVID-19 lockdowns, “the weight of keeping the doors open became too great and we realised we needed some help to keep this dream and brand alive,” according to an email to investors from Bucket Boys co-founder Johnathan Hepner.
Batch founders Chris Sidwa and Andrew Fineran and Bucket Boys have worked together before on the 12 Beers of Christmas Advent Calendar. Batch, which raised $1.5 million on the Equitise crowdfunding platform last year, has now acquired the brand and assets of the business.
“I really like what Batch does,” Hepner told Brews News. “I used to work for them, so it was a good relationship already, and for me it’s like I wanted someone who would keep the Bucket Boys brand alive and who wanted to expand on it. That’s what really enticed me, they are keen to take Bucket Boys and move it forward.”
“I don’t think anyone had a good time [during COVID], unless you sell toilet paper or RAT tests.
“It’s really tough, and obviously tough financially and mentally and everything in between, running a hospitality business during COVID.
“A bigger business can manage the fact that business goes up and down. But we made a big play right before COVID at the end of 2019 and one of them was a major traffic venue, which relied on the foot traffic of tourists and people in offices, and then we got stuck in COVID.”
Even having its retail arm could not protect Bucket Boys or offset the losses in the hospitality division.
“Essentially, a lot of lockdown was people going out as little as possible, and were cautious. You might skip your local business, go to Coles or Woolies for everything and then BWS is right next door – buying habits were a matter of convenience,” Hepner said.
Bucket Boys’ Marrickville shop and online store will remain branded as Bucket Boys, but its Darling Square Bar will be rebranded as a Batch venue, and its Bucket Boys company will be wound up.
Bucket Boys undertook an equity crowdfunding round in 2019, when it hit its target on the first day of the campaign and was valued at $10 million. It closed in May of that year having raised $398,564 according to its page on the Birchal platform.
The new deal with Batch has implications for Bucket Boys’ crowdfunding investors.
“It’s with a heavy and exhausted heart that I have to tell you that your investment is now worth nothing,” Hepner wrote in an email to investors.
“I’m so grateful for your trust and hard-earned capital, but with everything we were up against, our gambles didn’t pay off in the time, and cash flow, we had. But there’s good news.”
Hepner said he had negotiated for each investor to be offered roughly 25 per cent of their initial CSF investment with Bucket Boys in the form of Batch ordinary shares.
“I wish it were 100 per cent, but in this situation, we’re getting a good deal and I’m pleased with the generosity of Batch’s leadership – they didn’t have to do this, but after a long debate on what was fair, we collectively decided to honour the support you gave Bucket Boys and bring you along into the broader Batch family,” he said.
Bucket Boys investors will also be put on the current CSF discount structure at Batch which will go live soon.
However, to be registered as a Batch shareholder, Bucket Boys investors will have to opt in by 30th April 2022, by emailing [email protected].
According to accounts filed with ASIC for the year to 30th June 2021, Bucket Boys Craft Beer Co Pty Ltd reported total income of $1.5 million, and a loss of $138,191.
The company said it was a challenging year due to COVID-19 lockdowns and its impact on the hospitality industry.
Bucket Boys closed its Penrith location in early 2021 due to the pandemic and re-focused on Marrickville and Darling Square. During much of 2020, it said, the company was operating under restrictions in both its bars with some restrictions in its bottleshops, including reduced trading hours, and even full closures during the Christmas and New Year trading period. Rental abatements were not enough to offset losses incurred during the period.
Growth plans and investors
The acquisition provided an unexpected avenue through which Batch could deliver its growth plans.
“It’s very exciting, it’s been a long time coming, this week has been crazy because we’ve finally got the deal finalised, and Johnathan has had COVID,” explained Andrew Fineran, co-founder of Batch.
“We have built our team up to be able to expand and be able to do it without causing stress throughout the business and this is a good opportunity for us to do something a little bit quicker.
“It allows us to go in and take over something that’s already established rather than starting from scratch.”
Johnathan Hepner will also be staying on at the business to help progress plans.
“The stars aligned on this project, so we’ll take the baton, see if we can revitalise the business and harness John’s passion – we can harness that energy and excitement across the team and share that responsibility.”
Hepner explained that he was happy to stay on and continue to work with the Batch team.
“People are going to have their own opinions but I feel like we’ve done some really cool stuff, we haven’t always executed everything perfectly, but what I think we’ve done is be really innovative,” he said.
“[Now] I get to do what I want to do – work on ideas and innovation and being out front – I’ll still feel some ownership even though I don’t own it.
“I’m excited about staying on board and for me it’s a bittersweet thing, but it’s exciting, I finally have the team I always needed,” said Hepner.
In terms of shareholder value, the team said, it was a positive outcome for everyone.
“We worked that out collectively,” explained Hepner. “These investors are important not only to what Bucket Boys has done but to what Batch will do, so let’s find a way to keep them involved and find a way to help them.
“You see people who have already gone belly up and their investors got nothing, and I didnt want to be one of those statistics.
“It’s not great for everyone but at least it’s something.”
The move was also a way for Batch to help out not only shareholders but a close business as well.
“We weren’t able to offer the full amount in the context of the whole deal, but we are able to retain them and give some value and work our asses off to get to the point where it’s back to the full value, if not more, than what they invested at some point,” said Fineran.
“Obviously there’s a small dilution creating other shares, but it’s minimal considering the overall value.”
Batch co-owner Chris Sidwa acknowledged that the deal would raise some issues in the market.
“There’s going to be some questions from folks in the market and investors – how do we know that’s a good deal?
“If you’re a qualified business analyst and look at it from a helicopter view, it’s not traditional, it’s not like what you see in the newspapers. You see businesses get to their absolute lowest point before they are bought.
“[But in the brewing industry] there is an element of community. If you got on the phone with Johnathan in December you might have thought, ‘this person will fall out of love with craft beer soon’. We wanted to get him while he’s still got juice in the tanks, we saw a person of value and an asset and a project – so let’s grab it now and get the business before it went into insolvency.
“Investors did get a good deal out of this, when you have a struggling business that goes under, you can’t expect anything. But we could turn it into something that’s of value for them and our shareholders.
“We told [our investors] we’d be delivering on revenue gains, and what we’ve achieved is immediate revenue in nine months [since the campaign].
“What we were expecting is to have the next venue open in 12 months and see that cash flow and then layer others on after that. But we’ve done that in 10 and a bit months, so we’ve kicked the goal here.
“[Brewing] is not a traditional business, even though the bigger it gets the more it looks like a traditional business. But we got into it and we left jobs in other careers because we’re passionate about it, and we don’t need to treat each other the way traditional businesses treat each other. We’re moving forward to a bigger and better place,” Sidwa said.
“This isn’t the end of the expansion for us,” finished Fineran. “We’ve still got more to do and it’s exciting, this is just the first step.”
This article was updated on 3/3/22 at 1.45pm AEST to include comments from the founders of Batch and Bucket Boys.