King Cobra's bid to conquer the world

From The Publican

By Hamish Champ , 14-Jun-2010

Related topics: Company & City News

Lord Karan Bilimoria, the founder of Cobra Beer, says the clinking sound of a bottling line is "music to my ears".

 

Celebrating the first anniversary of the joint venture between his outfit and brewing giant Molson Coors - and marking the boxing of the first bottles of Cobra to be brewed at Molson Coors' Burton brewery - there is clearly a spring in the man's step.

 

"This is a completely new chapter for Cobra," says a delighted Bilimoria, who created the lager brand 21 years ago and has since pushed it to the forefront of the premium beer sector. "Partnering with one of the biggest brewers in the world can give the brand what it truly deserves, which includes exposure to global markets such as Canada and Japan."

 

With the financial and marketing clout of a brewer like Molson Coors the domestic and global reach so coveted by Bilimoria should now realistically be within reach.

 

Speeding up

 

Bilimoria says the Cobra Beer Partnership, which is 51 per cent owned by Molson Coors, will be "putting the foot on the accelerator" in the coming months, growing the brand in three major channels using its established links with curried food: curry houses, the off-trade and the on-trade.

 

Pubs, he says, present a big opportunity. "Pubs are very much a part of the new programme for Cobra. Virtually every pub in the country that serves food has a curry dish on its menu. We want to be associated with that offer."

 

Bilimoria says the partnership is in talks with some major pub companies to gain listings but he declines at this stage to reveal details.

 

But as Cobra-watchers will know, it's not the first time the brand has been given a concerted push. Today's ambitious growth plans recall a previous incarnation of the company a few short years ago when the drive to grow Cobra, led by what Bilimoria calls a "high-powered management team", proved almost fatal to the group's very existence.

 

"We had a strategy of high growth and we sacrificed the bottom line," Bilimoria says, "but we always made gross profits and our EBITDA (earnings before interest, tax, depreciation and amortisation) was always at least at break-even. To say the business never made a profit is nonsense."

 

Yet to fund more growth - and with timing which could be described in diplomatic terms as 'unfortunate' - Bilimoria enlisted the help of a US hedge fund, just as the financial markets went into meltdown. The company, weighed down by huge debts, sought a buyer, but with no luck. It went on the lookout for partners too, and for a while Diageo was linked as a possible suitor. The debts, meanwhile, mounted.

 

Finally Molson Coors appeared on the horizon. According to Bilimoria the brewer had wanted to form a joint venture through a company voluntary arrangement. This was scotched by one of Cobra's suppliers, Wells & Young's, which had been brewing the beer under contract since 1997 but which in May last year had stopped production of the beer over unpaid bills.

 

His lordship is a tad touchy on the subject, and of the subsequent collapse of his creation into administration with debts of £70m. He says he would rather not rake over an already well-recorded past. He does, however, concede that he found the whole experience "devastating", "very painful" and "upsetting".

 

Necessary move

 

Bilimoria says the administration process was a last but necessary resort and he intends to fulfil a commitment he made at the time to pay every creditor via his share of the partnership's profits. "We created the joint venture from the jaws of defeat. It is already cash profitable, even before the growth phase. Almost all the secured creditors have been settled already," he says.

 

However, Adrian Davey, the Molson Coors executive appointed as managing director of the partnership, says his company will keep the "lion's share" of any profits for the next couple of years, but he expresses absolute confidence that the brand will grow where it needs to. "We wanted a stronger association with the food sector and Cobra gives us that," he says. "We are not here to milk the brand for its profits."

 

Davey is one of a number of Molson Coors executives for whom Bilimoria has the highest regard, it seems. "We are working with their team in an aligned manner," he says. "There is a passionate belief in Cobra within Molson Coors and it has been declared a priority brand for their business.

 

"The focus and backing they have put in gives us enormous strength in many areas, not least distribution. This is not a small entrepreneurial business being swallowed up by a big business. This is an example of how such businesses can work together. The future is very promising."

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