Will the sale of Cobra Beer enable it to achieve worldwide growth?

Cobra%20BeerIndian entrepreneur Lord Bilimoria’s decision to sell Cobra Beer after 18 years could be viewed as the peer admitting defeat.

Despite successfully securing deals with the majority of Indian restaurants in the UK, the company has never recorded an annual profit, and questions remain over how “the less gassy” Cobra can get past its association with Indian cuisine.

Since its launch in 1989, the brand has continued to grow. In October, the company reported 37% volume growth and retail sales of £178m.

Lord Bilimoria’s decision comes after the reported failure of talks to sell a stake to Diageo, the world’s biggest spirits producer, in July.

Advisers from Rothschild are expected to begin contacting potential buyers in the next few days, which may include fresh talks with Diageo.

Brand appeal

Charles Stanley analyst Sam Hart says: “There is no doubt the brand will appeal to its competitors, as they strive tocompete in the expanding beer industry. Cobra has never recorded an annual profit and it wouldn’t surprise me if Diageo wanted to look at Cobra again and try to capitalise on the booming market.”

Positioned as an Indian lager, Cobra is now available on the market in a selection of ranges, including the double-fermented King Cobra, Cobra Light, Cobra 0% and the Cobra Bite range of fruit-flavoured premium beers. It has also signed new deals to offer the drinks in bottles, cans and draught.

Lehman Brothers analyst Ian Shackleton says: “Lord Bilimoria’s decision to sell Cobra is hardly a surprise. The company has held speculative talks before, and with the beer industry facing an increasingly tough climate, it seems a wise decision to sell it into good hands. The brand has a good reputation, particularly with Indian diners in the UK. The real question is how easily can the beer work internationally and what more can it offer?”The beer, once brewed in India, moved to the UK in 1997, while retaining its “finest Indian” status. In the UK, the company has backed its rapid market growth, with high-profile marketing campaigns.

Its latest integrated advertising campaign – “Now you’re talking” – was created by Joshua G2 and launched in May, backed by a significant £8.4m media spend. It promotes the brand as less gassy than other beers – an asset for those who like to talk over drinks.

Cobra has a stake in an Indianbrewery, and is looking to competewith established Indian beers suchas Kingfisher, owned by the United Breweries Group.

The right price

Just last month, United’s owner, Dr Vijay Mallya, told Marketing Week he was interested in buying rival Cobra Beer (MW November 5). “I can’t deny that Cobra has come with some very aggressive pricing and taken share from Kingfisher in the UK. And, though I do not believe it is a sustainable business, I would love to acquire Cobra for the right price,” he said. Kingfisher has a 29% volume share of the global beer market, according to Nielsen figures, ahead of Cobra’s 9%.

Cobra says it is now targeting major growth in pubs and bars in the next two years, aiming to achieve 20,000 new accounts by 2010. This has been pushed with a nationwide sampling tour and its £2m sponsorship of prime-time programming on UKTV’s male-oriented channel Dave.

There seems little doubt that Cobra’s unique branding and market position could help it achieve worldwide growth, but the real challenge will be to find a way of enhancing its somewhat limited offering. A fresh impetus of capital or a new owner may just help.

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