A brand with bite

Pulling back from a planned stock market flotation can be cause for a few raised eyebrows, but Karan Bilimoria, who as a 27-year-old accountant founded Cobra Beer Ltd back in 1989 thanks to a £20,000 loan, sees his own company's delay in seeking a listing as a positive.

The group that produces one of Britain's most popular bottled lagers - at least throughout the nation's licensed curry restaurants - announced earlier this month it was putting a float on hold until perhaps mid-2009. But Karan explains that a new financing package of nearly £30m offered great opportunities and that a listing was inevitable, although it seems that for now the market will have to wait.

The £27.5m the group raised earlier this month will be put to good use, Karan says. Half the new funds will pay off preference shareholders a year early, while the rest will go towards developing and expanding the business here in the UK as well as the 40 or so other countries Cobra sells its product in, which include India, the US and South Africa.

"The new money is the largest funding at any time in Cobra's 16-year history," he says. "We saw the IPO [initial public offering] as playing a part in the growth of the company, but then we had the chance to raise this finance and decided to suspend our float, which we will do sometime between now and June 2009."

Going mainstream

One key priority will be getting the Cobra brand into the mainstream, Karan says. People have long seen the company's product on the table of their favourite tandoori eatery, and the concerns that sales of Cobra's draught beer might have eaten into bottled beer sales in such venues has proved unfounded.

But growth in other areas is starting to make an impression, and this year is the first when sales of the company's beer in Indian restaurants have been less than half of group turnover.

While the foundation of Cobra was the curry house, where customers "recognised that our beer goes well with spicy food", they also comment, almost as an after-thought, "that the beer tastes good". So there are plenty of new challenges ahead, says Karan.

"The job now is to turn round those people who viewed the beer that way, so that they see the product itself, as well as enhancing its appeal and bringing it more into the mainstream."

The group's drinks range includes the award-winning Cobra Premium Beer, King Cobra, Cobra Lower-Cal and a series of wines.

"We always wanted Cobra to be a mainstream brand and that is now starting to happen. Supermarket sales are booming, in some cases doubling month on month," Karan says.

But the biggest potential, he believes, is in the on-trade. "We're barely scratching the surface of the UK pub sector," he says. "There are 60,000 pubs in the UK and we're in a few hundred.

We have a major listing in Mitchells & Butlers (M&B) and we are talking to another major potential client."

The journey begins

According to Karan, Cobra was approached by M&B, whose marketing people "identified our beer as a rising star in the beer and brand arena". It's all about choice and drinkability, he says. And the move towards the mainstream "is vital for us, and it's a journey that has only just started".

In the UK, Bedfordshire-based Charles Wells brews the group's beers under licence, and Cobra is clearly determined to add to its current reputation in the bottled sector and get away from its "curry house-only" tag. "We've a great team here and a positive feeling towards what is a strong brand. That is a huge bonus for any company. Our brand is our biggest asset," Karan says.

And that postponed stock market float? His lordship - he was named Lord Bilimoria of Chelsea and decked out with the ermine trimmings last month - says the group will be looking to have doubled its market capitalisation to £200m by the time it is ready to open up to investors. "We're also looking at year-on-year growth in the next three years of 50 per cent," he says.

Meanwhile, the group is turning towards Karan's homeland, India, to help drive growth. In much the same way as the likes of Scottish & Newcastle has identified eastern Europe and Russia as markets burgeoning with potential, Cobra is slavering at the prospect of India getting up to speed in the beer demand stakes.

"India is seeing economic growth of eight per cent year on year," notes Karan. "India's per capita annual beer consumption is one litre. China, a huge growth market and the biggest beer market in the world, is on 20 litres. That gives you an indication of the growth potential."

Karan will, meanwhile, be hoping potential investors still have a thirst for Cobra by the time it is ready to come to the stock market.