Lord Bilimoria: Beer emperor’s plan to boost small firms

Lord Bilimoria, founder of the Cobra Beer company, has an innovative idea of how to create jobs and he should know: his firm is growing

Article by Andrew Cave | Telegraph UK

 

5f58a770-ea47-11e3-ba7b-19983acec606_Bilimoria-crop Help for small businesses, better access to bank funding and immigration will feature high on the political agenda ahead of the Queen’s Speech this week. Lord Bilimoria of Chelsea has strong views on all three.

Lord Bilimoria brought Cobra Beer to Britain’s licensed Indian restaurants, an impressive 98.6pc of which now stock the brew to help customers wash down their curries.

He also survived a “pre-pack administration” after his Cobra Beer company’s highly-geared operating model came unstuck in the global financial crisis.

“That was a horrible episode,” Lord Bilimoria recalls of the 2009 meltdown.

The solution was injecting Cobra’s brand into The Cobra Partnership, a joint venture with America’s Molson Coors. Last week, David Cameron marked the venture’s fifth anniversary by visiting its Burton-upon-Trent  brewery.

“We came very close to losing everything but managed against all the odds to restructure the company, form the joint venture and save the brand and the business,” says Lord Bilimoria.

“Next year will be Cobra’s 25th anniversary, and I have nearly lost the business three times on that journey. Each time, I have been lucky in that I have been able to get through those crises and I hope I have learnt from the mistakes I have made.”

c804f190-ea4f-11e3-ba7b-19983acec606_COB_SL4x330ml_Bottle__RENDER_0911 More of that later. First, Lord Bilimoria, who came to Britain 30 years ago to qualify as a chartered accountant at what is now Ernst & Young and then to read law at Cambridge University, wants to set out his agenda to help small businesses.

(Molson Coors) Cobra beer is bottled at the breweryHe was born Karan Bilimoria in Hyderabad, India, into a prominent Zoroastrian Parsi family with strong military and business connections. He co-founded Cobra Beer with his friend Arjun Reddy in Fulham in 1989 when he had £20,000 of student debt. They raised £30,000 of bank loans to fund their vision of a less gassy lager that could be enjoyed with Indian food.

Lord Bilimoria, who was made a peer in 2006, believes Britain’s banks should be doing much more to help small and medium-sized enterprises (SMEs).

“Our biggest problem throughout the years as a growing business was raising money,” he says.

“It’s ironic that banks were able to take huge risks in areas that collapsed but are not willing to take relatively tiny risks with growing small businesses.

ab339540-ea4e-11e3-ba7b-19983acec606_COBRA_Pint_Glass_10111-2- “They should be lending to them far more than they are doing. I hear regularly from small businesses that they are struggling to raise finance.

“What’s ironic is that the Government controls some of our biggest banks but still can’t seem to force them to lend to SMEs.”

Lord Bilimoria also wants more government incentives for small business to create employment, and says the Government should extend its business-loan guarantees activities.

“Having some really serious National Insurance breaks would help,” he says. “There are already some but I think they could go much further. The Government could also do more on capital allowances to encourage businesses to invest more.”

He has approached the Government with an idea for it to stage an annual competition to give small businesses free places on business school courses.

“I’ve done such courses,” he says. “They were invaluable at getting outside the business and interacting with other entrepreneurs. Companies that attend those sort of courses do grow faster.

“Ideally, the Government should be having a competition where hundreds of businesses a year get to go on these programmes. The benefits to the economy would be huge.

“I have suggested this, and Business Secretary Vince Cable was very interested in it, but I got a bureaucratic reply from the Department for Business, Innovation and Skills, saying that it cannot favour one business school over another so therefore could not have a competition like that.”

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(Molson Coors)The peer, who is also chancellor of Birmingham University, is concerned that immigration measures are deterring foreign students from enrolling at UK universities, pointing out that the number of Indian students coming to Britain fell by 25pc last year, while the overall number of foreign students coming to Britain fell by 1pc.

“Our immigration policies are not working,” he says. “Foreign students are not immigrants. The vast majority return to their country.

“We should also be encouraging foreign entrepreneurs to come and set up their businesses in this country. This country wouldn’t be one of the top 10 economies in the world without immigration.

“We need a much more balanced approach to immigration. We need to look at all the immigration that benefits us and stop the immigration that’s harming us.”

However, Lord Bilimoria is optimistic about the state of British entrepreneurship.

“Thirty years ago, when I arrived as a student from India, entrepreneurship was quite frankly looked down upon,” he says. “It had an image of Del Boy and second-hand-car salesmen.

“Now, there’s a culture where it is celebrated and cool to be an entrepreneur in Britain. People aspire to be entrepreneurs.

“Just about every entrepreneur has had successes and failures. It’s par for the course, as long as you can learn from your mistakes, pick yourself up and carry on. That’s the key thing. The most important thing is how you deal with failure.”

He learnt that lesson in 2009, when Cobra Beer went into administration with reported debts of £70m.

Molson Coors paid a reported £14m for its joint-venture rescue, which gives it 50.1pc and Lord Bilmoria and other shareholders the remainder.

“We had too much debt,” he admits. “In the times when brand value was being created and growth had a lot of value, being highly geared was all right, but the moment the financial crisis hit, cash didn’t just become king, it became emperor. Being a highly geared company was a huge disadvantage.”

Now, he says, the Cobra Partnership is focusing on profitability as well as growth. Profits have risen from £4.46m to £7.68m since 2010, while turnover is up from £47.5m to £58.4m.

(Reuters) Tour buses featuring various MillerCoors products are parked outside the Coors brewery in Golden, Colorado …

Secured creditors of the old company have been settled, says Lord Bilimoria, promising that unsecured creditors will be settled over the course of the joint venture. Cobra’s turnover in the first four months of this year is up 20pc on the same period of last year.

The other two times he nearly lost Cobra were “completely different”.

“One was a strategic investment when it was raising finance from a potential backer two weeks before Lehman Brothers collapsed in 2008.

“The other was a boycott of Cobra’s beer by Indian restaurants in 1998 after an article in a trade magazine caused a “war of words over beer”.

Its strategy now is tied to the strength and global reach of Molson Coors, which has 2,000 UK workers and four British breweries.

A big area for expansion is pubs and bars, where Cobra currently has only very small distribution. “The next five years will see enormous expansion in that area,” says Lord Bilimoria.

He’s also eyeing further global expansion. Cobra exports to 45 countries, including Chile, Japan and New Zealand, but is small in Canada, where Molson Coors has obvious strength.

(Molson Coors)Australia is another target, and the peer believes there is great potential in India, where it has a separate three year-old joint venture with Molson Coors.

In the US, where Coors Lite is the number two beer brand, the Cobra Beer name cannot be used because of a potential clash with Budweiser’s King Cobra brand. However, Lord Bilimoria says there is nothing to stop Cobra from selling its beer in the US under another brand name.
“The export potential and global expansion of Cobra is huge and is part of our strategy for the next five years,” he says.

“In the US, a new brand name is probably the only way we can do it but that’s quite normal for multinational companies, and we can have the same look, feel and brand approach.

“America could happen at any time.  At the moment, we’re got all these opportunities.”

Lord Bilimoria’s CV

Age: 52

Born: Hyderabad, India

Family: Married with four children

Job: Chairman of the Cobra Beer Partnership

Other roles: Chancellor of Birmingham University; non-executive director of Booker Group; founding member of the Prime Minister of India’s Global Advisory Council