The founder of Cobra beer has become a minority partner in UK, exited USA and downsized in India
The Karan Bilimoria sitting across the table at House of Ming in Delhi’s Taj Mahal Hotel is not the same brimming-with-plans businessman he was a couple of years ago. Mention the apparent drop in energy levels, however, and he professes surprise, adding that it could be blamed on a lack of sleep — he has slept for just two hours each the last two days, he says, shuttling between continents.
By Indulekha Aravind / Business Standard
That could be true. What is also true is that the man behind Cobra beer has in the last few years exited the United States, dropped plans to enter China, downsized in India and sold his flagship business in the United Kingdom. It has been a roller-coaster ride for the London-based entrepreneur and Cobra, the “less gassy” beer he launched in 1989 with partner Arjun Reddy (whose share he bought out in the early 1990s).
For one, he is now a minority shareholder (at 49.9 per cent) in Cobra Beer Partnership, with US brewer Molson Coors holding a 50.1 per cent stake. The day-to-day operations of the business he built from scratch, starting when he was 28, are now being taken care of by Managing Director Adrian Davey, a Molson appointee, though Bilimoria remains the chairman. The joint venture, signed at the end of May 2009, is for 10 years, after which either partner can buy the other out. The financial details of the deal are still under wraps; in the days preceding the deal, Bilimoria had valued Cobra at $300 million.
Until recently, Bilimoria has been gung-ho about expansion and growth, including plans for China and India. Now, the first Parsi member of the UK House of Lords is more reflective. Molson Coors wants a course-correction at Cobra. Under Bilimoria the company had chased volumes even at the cost of profits. This is something the new partner is keen to avoid. “In hindsight we should probably have taken a break from our growth, consolidated, started getting on a profitable footing and then started to grow, which is what we’ve been doing for the past 19 months. But at that time we needed to build critical mass,” says Bilimoria. “As a company, Molson is very focused on profits, even willing to sacrifice growth; but that’s a very secure way of growing.”
To bring back the profits, Cobra has raised prices and stopped supplies to customers who pose a credit risk. It has also shifted the brewing of Cobra to Burton-on-Trent, where India Pale Ale was once brewed for British troops in the Indian empire. Cobra sells in 97 per cent of Indian restaurants in the UK, and supermarket sales have also increased. The comparison with Kingfisher is irresistible. “Our UK sales are almost five times bigger than Kingfisher’s,” he says.
Cobra plans to launch a new marketing campaign, which is likely to focus on the Indian heritage and the curry link. “Our research showed us the customer is very aware and wants to know more about Cobra’s roots and heritage,” says Bilimoria. “This is music to my ears, because that’s something I’ve always wanted, too.”
The US is another story. There Bilimoria launched a brand called Krait (naming it after another dreaded snake from the Indian “cow belt”). He had launched Cobra in the US in 2002 but quickly realised that the American brewing giant Anheuser-Busch had a brand called King Cobra in the market. He then decided to call his beer Mogul. Just before the launch, he found out that a small brewer based in Oregon had the rights to a brand called Mogul Madness. Finally, in 2004, Bilimoria launched Krait. But it failed to create a buzz. He has mothballed all plans for the US market. Bilimoria remains a one-brand wonder.
The news from India isn’t good, either. Cobra’s sales have taken a knocking, and its market share has fallen to 1 per cent from 3-4 per cent a few years ago. But it’s a market Bilimoria remains bullish on. He expects Cobra to become profitable in a year. “I intend to spend more time in India, now that Cobra’s global operations are well established. I still believe we’ve only started to scratch the surface of the Indian beer market.” The Indian operations, though outside the ambit of the joint venture with Molson Coors, are not exempt from mission consolidation.
Lifting Cobra out of the red will be no small challenge. The company has pulled out of Rajasthan because the regulations there made the business unviable, and Mumbai, where it was unprofitable despite the city’s beer-guzzling reputation. But one bet does seem to be paying off. In 2008, the company bought a brewery in Bihar which nobody else was prepared to touch. “Everyone told me I was mad to buy a brewery there, but I’d heard good things about the chief minister [Nitish Kumar] and that a turnaround was happening,” says Bilimoria. “And sure enough, the risk that I took was worth it — Bihar’s economy is now one of the fastest-growing in India, as is its beer market.” He intends to meet the chief minister, a suggestion also made to him by his friend and fellow UK peer, the economist and Labour politician Meghnad Desai.
So what can we expect next from Bilimoria, the entrepreneur? “My focus is to help the joint venture reach a broader stage, but even after that I’ll remain very much involved. I don’t think I’ll ever reach the stage where I just attend board meetings,” he says, and does not rule out starting something new. The terms of the joint venture prohibit another beer venture, though Bilimoria says that’s not something he would do anyway. His other commitments — in the House of Lords, as the president of the UK-India Business Council, on the board of the Man Booker Prize, and courses at Harvard — ensure he has his plate full at all times.
Perhaps because he is in a reflective mood, he pauses for a long time when asked where he sees himself in five years. Then he says, “Five years ago, I wasn’t in the House of Lords, we’d just started making Cobra in India and I couldn’t have foreseen what was going to happen to Cobra itself. So to look ahead five years from now, I can only tell you I’ll be focusing on the joint venture, on my work in the House of Lords, and continuing my lifelong learning through lectures at Harvard. When you are on that road you see opportunities other people don’t see. So who knows what I might see and do, along with what I’m focusing on?”