Karan Bilimoria, founder and chief executive of Cobra Beer, has two missions: to brew the finest Indian beer ever and to make it a global brand. One of the fastest growing beer companies in the UK, Cobra Beer is well on its way to achieving both goals.

Cobra Beer tries to set itself apart from the competition by emphasising that its product is smooth and less gassy. The aim is to appeal to both ale and lager drinkers and to people eating Indian food.

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“We built the business in the UK on the Indian restaurant niche sector,” says Dynshaw Italia, the company’s finance director and chief operating officer.

 

Setting the company apart is Lord Bilimoria’s (he became Lord Bilimoria of Chelsea in June 2006) unrelenting entrepreneurial spirit and pursuit for excellence. A Cambridge law graduate and qualified chartered accountant, he founded the company in 1989 at the age of 27 with £20,000 of student debt.

“I saw that the market was dominated by harsh, gassy ‘Eurofizz’ beers, all poor partners to food,” he says. “I wanted to produce a premium, high-quality lager that would complement rather than fight against food.”

Change of location

In 1990, he began brewing Cobra Beer in Bangalore, India, from where he shipped the brand to the UK, the world’s most competitive beer market. Although demand surged, the brewer increasingly produced a beer of uneven quality and was late with consignments. Consequently, in 1997 he moved its production to the UK, where he established a licence with Charles Wells, a well-known brewer.

The company later hired Palm Breweries in Belgium and its subsidiary Browar Belgia in Poland as breweries to guarantee a diversity of supply and to meet the demands for Cobra in the European and worldwide market. Browar Belgia is one of Europe’s leading and most modern breweries and Poland’s fourth largest brewer.

“When we decided to look at various options and countries, a major criteria was matching the taste of the beer,” says Mr Italia. Browar Belgia was able to match the taste of the beer within two or three tries.

Success story

Today, Cobra Beer is so successful that it enjoys a retail value turnover of £125m, up from £80m reported last year. In 10 years, its compound annual growth rate has been more than 42%. Sold mainly in draft form, the beer is found in nearly 6000 UK Indian restaurants and 6000 bars, pubs and clubs. “We’re starting to expand to the supermarkets, as well as to the off trade and on trade markets,” reports Mr Italia.

Cobra Beer is exported to almost 50 countries and maintains subsidiaries in India, South Africa and the US, but the UK remains its largest market.

Now the company is positioning itself to enter the big leagues of the beverage industry. “To go to that next stage requires a giant leap,” says Mr Italia.

To make the push, in the past two years Cobra Beer has undergone major changes that include increasing its staff from 10 to 113. A well-known managing director and a marketing director from major beverage and spirit-related companies were hired. Next, Cobra plans to extend its brand in the UK to different occasion categories and expand its position overseas.

“At the moment people associate the beer with Indian food,” says Mr Italia. “But people are starting to drink it on different occasions.”

Indian market

Cobra is also stepping up its presence in India. Tariffs there are so high that importation makes it difficult to compete against the local brands. Consequently, Cobra Beer has partnered with Mount Shivalik Group, India’s largest independent brewing company, to brew Cobra under licence for India’s rapidly growing domestic market. Most significant, Mount Shivalik Group was capable of matching the taste of the Cobra Beer brewed in the UK, which resulted in Cobra Beer being awarded a gold medal at the Monde Selection in Brussels.

Since 1999, the beer has won a string of awards, including one grand gold medal and 11 gold medals at the 2006 Monde Selection; two grand gold medals and nine gold medals in 2005; two grand gold medals and four gold medals in 2004; and gold for three successive years at the 2003, 2002 and 2001 awards. Monde Selection also presented Cobra with the International High Quality Trophy in 2006 for its achievements.

To maintain quality control, Cobra Beer retains its own staff in the outsourced breweries. Consequently, within a year it has already captured 1.5% of India’s beer market. The upshot is huge, especially given that the beer market has been growing by 7% to 8% a year in the past five to six years, and in the past year has risen by a staggering 27%.

“What’s really fascinating is that regulations regarding licensing laws are starting to show signs of becoming more lenient,” says Mr Italia. Given the potential that the Indian market provides, Cobra Beer’s executives see India as an opportunity that the company cannot miss.

Supporting demand

Exporting remains an important function, although not the company’s primary focus. “We are taking a more reactive than proactive approach there by supporting demand in South Africa and the US without overinvesting in those markets,” says Mr Italia.

Although South Africa is a limited market, sales are doing well. And the company has a small office in the US, where the beer is sold under the name Krait because American brewing giant Anheuser-Busch produces a malt liquor called King Cobra. Brand recognition has been the company’s biggest obstacle in the US.

An underlying philosophy of Cobra Beer is to do things differently and to do them better. For example, while other beer companies sold beer in small bottles, in 2003 Cobra introduced its award-winning embossed bottle. To penetrate the supermarket sector, it introduced a full range of packaging formats, including cans and multipacks. Product development has also created significant sales opportunities. In 2005, the company launched Cobra 0.0%, an alcohol-free beer; Cobra Lower Cal, with half the calories of a regular Cobra; and King Cobra, the world’s first double-fermented strong lager sold in Champagne-style bottles.

“Now we have launched fruit-flavoured beers,” Mr Italia says. The drink is brewed as a beer first and fruit extract is added.

In March 2006, Cobra launched The Cobra Foundation, its own independently run charitable trust, and in April held the inaugural CobraVision Awards, which were attended by British film and television stars.

Finance initiatives

Innovative financing from government-backed small loan guarantees to invoice finance and factoring have played an important role in moving the company ahead. “We are one of the first companies in the UK to use what is called a payment-in-kind instrument,” says Mr Italia.

Adopted first in the US, the instrument operates like an unsecured loan with no cash payments and no dilution of equity to shareholders, but a build up of interest.

“At the time, you exit the company or in five or 10 years, you pay back the debt plus the interest that has added up,” he explains.

It is a risky loan, but executives at Cobra Beer believe that the value they are building with the company far outweighs the debt.

“When you are a small company competing with the giants, you have to do things differently,” says Mr Italia. “This is how you change the entire marketplace.”