Cobra to gain from big brewer’s network

COBRA Beer should become profitable now the brand is being combined with the British network of US brewer Molson Coors which makes Carling, Britain’s best-selling beer.
 
"The Cobra brand has been run through a relatively small organisation and business model," Mark Hunter, chief executive of Molson Coors (UK) said yesterday, citing Cobra’s high marketing spend and third-party brewing for it making a loss.
 
"If you take the same brand and put it through an existing go-to-market infrastructure, like our own, more of the revenue drops through to the bottom line; so from that perspective, we see the brand as a profitable brand," he said.
 
Cobra Beer was bought by a joint venture between the world’s fifth biggest brewer, Molson, and Cobra founder Karan Bilimoria last week in a pre-packaged administration deal where a sale is agreed without a business being offered on the market.
 
Bilimoria developed Cobra as a less gassy lager that would be easier to drink with food, and the beer became popular at many of Britain’s curry restaurants, and had been trying to expand into the pub market. Despite spending £40m ($65m) on marketing in 20 years, the business never made a profit.
 
Hunter said Molson would work to make Cobra profitable "as quickly as possible". Cobra reported an underlying loss of £15.9m ($26m) for 2008 and had forecast losses for the next three years. 
 
He said the plan was to produce Cobra at Molson’s existing British breweries – the beer is currently brewed under licence by regional brewer Charles Wells of Bedford. A consultation is under way with Cobra staff about job cuts, he said, but would not comment on how many jobs could be on the line.
 
Bilimoria, who set up Cobra in 1989, had put the company up for sale in November 2008 after failed talks earlier in the year to sell a stake to the spirit and beer giant Diageo Plc, after he was seeking around £200m ($328m) for it.
 
Molson, whose brands include Coors Light, Caffrey’s and Worthington’s, put up just £14m ($22.8m) however, paying off Cobra’s secured creditors in return for a 50.1 per cent stake. "We think we’ve paid fair value," said Hunter. "We’re happy with how the deal has been constructed."
 
Hunter said Molson – the second biggest brewer in Britain with about 20 per cent of the market – had been attracted to Cobra as a brand with a good consumer pool which would allow it broaden its existing portfolio.
 
Cobra has suffered in a falling British beer market as the economic downturn has forced pubs to close and has hit supermarket beer sales.
 
Hunter said while the market was tough, the depressed state of the beer market should not be overstated.
 
"Clearly it is tough but within that the brands that are invested in are still performing well," he said.