The surprising sale of Cobra Beer

Cobra has long been a favourite of us at Tutor2u – not just because we may enjoy the occasional tipple, but its founder, Lord Bilimoria is an inspirational entrepreneur who has shared his experiences and insights with many Business teachers and students. So what’s behind his plan to sell up?

According to an article from the BBC website the fizz appears to have gone out of its fortunes. Recent talks to sell the business to global drinks giant Diageo collapsed in the summer after the two sides could not agree a price. The problem seems to be a lack of profitability – and plunging demand for premium lagers.

In the year to 31 July 2007 Cobra made a pre-tax loss of £13.1m, despite a 42% rise in sales. Part of these losses can be put down to the costs associated with the brand, like a series of witty and inventive adverts.

Some analysts have turned their attention to the idea that the business has been too successful and expanded too fast. That might seem like a nice problem, but when you consider that Cobra has spent £40m on marketing since its launch in 1989, as well as a fortune on expensive overseas expansion, it’s easy to see how their outlook has gone sour. It didn’t help that the firm failed to gain the right to use the Cobra name in America.

Tougher criticism comes from those who argue that the lager is in fact nothing special. And it is not so easy to trade on its Indian image as it has been made in England since 1997.

The BBC quote brand expert Jim Boulton, a partner at advertising agency Story Worldwide who said Cobra hadn’t fully exploited its early success. “The lager market is hugely competitive and how Cobra gained a toe-hold via the UK’s Indian restaurants was inspired,” he says. “However, this early success has not been exploited. Cobra forgot its maverick roots and tried to take on the big boys by replicating their approach, and in the process became just another ‘me too’ brand. Without a point of difference, any brand in an overcrowded market is going to go flat.”

I’ve still got huge admiration for Lord Bilimoria and the Cobra brand still has huge potential in India. I’m sure we’ll be hearing more from him in the near future.