THE former boss of one of Scotland’s biggest beer firms has invested more than £1 million to launch a craft brewery.

John Dunsmore, the drinks industry heavyweight who used to run Scottish & Newcastle (S&N) and C&C Group, has insisted there is still plenty of growth to come from Scotland’s burgeoning craft beer sector as he unveiled the Edinburgh Beer Factory.

Mr Dunsmore, who steered S&N through its £7.8 billion takeover by Heineken and Carlsberg in 2008, has invested alongside his family in setting up Edinburgh Beer Factory – the first private venture of his own.

Edinburgh Beer Factory arrives after Mr Dunsmore spent the period since leaving Tennent’s owner C&C Group in 2012 investing in a series of food and drink start-ups, including gluten-free bakery Genius Foods and Chapel Down, the leading English wine brand. His investment fund the HotHouse Club holds a majority shareholding in the Scotch Malt Whisky Society in Edinburgh, while he has been a director and investor in Fuller’s, the London-based brewer and pub company, for a number of years.

Despite the scores of microbreweries which have sprung up in Scotland in recent years, Mr Dunsmore is convinced the market is far from reaching its full potential.

Revealing that he and his family had looked at acquiring other craft brewers before settling on developing their own, he said: “First all of all, we don’t see other craft brewers as competition because between us all we have got about three per cent of the market.

"Although there is a lot of dynamism and a lot of noise, we have three per cent of the market whereas in America craft brewers are 11 per cent of the market. So we think there is a lot of natural growth because of the excitement around craft beer.

“We see the market as having had a first wave, where a number of pioneers have come out with a whole raft of different products which have been extremely successful.

“Essentially, we take the view we have got to be a lot more rifle shot in our approach in terms of coming up with products which are going to fill a gap in the market.”

Based in a converted industrial unit, Edinburgh Beer Factory is billed as an “unashamedly modern, urban microbrewery”.

Its name is inspired by two of Mr Dunsmore’s personal heroes – the late Tony Wilson, founder of Manchester’s Factory Records, and Andy Warhol, whose New York studio was known as The Factory.

But the inspiration for its debut beer was found much closer to home. Paolozzi, a 5.2 per cent alcohol by volume lager brewed in the Munich style, is named after Eduardo Paolozzi, the Edinburgh-born, Scots-Italian artist and polymath credited with being a major influence on the 1950s Pop Art movement.

The beer has been endorsed by the Paolozzi Foundation, which will receive a donation for every bottle and pint sold. Mr Dunsmore cited the opportunity to develop exports on the strength of Paolozzi’s influence in Germany, where he taught the “fifth Beatle” Stuart Sutcliffe in Hamburg and Italy. New Zealand, Canada and the US are other potential markets.

Mr Dunsmore said: “We think this is very fertile territory to develop the brand with. He is not a typical Scot – this is a person who is completely international and open-minded in outlook.”

Paolozzi lager will be available in Edinburgh venues such as Vino Wines, The Beerhive and The Holyrood 9A, between now and Christmas. It has also been listed by Citation Tavern & Restaurant in Glasgow’s Merchant City.

The brewer intends to build up a small portfolio of beers in time, but more concrete are plans to launch a visitor centre at the brewery by the summer next year.

As well as Mr Dunsmore, wife Lynne and daughter Kirsty, the team includes ex-Tennent’s and Harviestoun sales manager Gregor Harris, and Rosie Nicholson, part of the family behind Sunderland’s Vaux Breweries. Head brewer David Kemp and Mile Meletopoulo have been recruited on the brewing side from Heriot-Watt University.

Mr Dunsmore originally joined S&N as a graduate trainee in 1980. He left to forge a career in the City before returning to S&N in 1996. He succeeded Tony Froggatt as chief executive in 2007 and led its takeover defence. He went on to lead C&C Group between 2008 and 2012, overseeing its acquisition of Tennent Caledonian from AB InBev in 2009.