Drink to success: Cobra Beer mastermind Karan Bilimoria

Company: Cobra Beer
Founder: Karan Bilimoria
Age at start: 27
Background: Chartered accountant and law graduate
Start Year: 1989
Business: Premium lager producer and retailer

Anybody who has eaten at an Indian restuarant in the last decade will almost certainly have come across Cobra Beer - becuase it's served in 90% of the 6,000 which serve alcohol.

Less well known is that it also has a rapidly growing presence outside the UK, and particularly India. Its founder, Karan Bilimoria, was honoured in 2006 with a peerage, making him Lord Bilimoria of Chelsea.

Through the bottom of a beer glass
Like many business initiatives, Karan's inspiration for the business came from dissatisfaction with existing products; as a 19-year-old student from India studying in the UK, Karan found Britain's beers too gassy and harsh to accompany Indian food.

An English friend introduced the teenager to real ale, and he was hooked. Yet this smooth bitter was too heavy to accompany food. From this conundrum, Karan decided the answer was to make a beer to his specifications; envisaging "all the refreshing qualities of a lager" but smoother and less gassy.

His great grandfather had started a liquor business in India from scratch, so Karan would be following in his footsteps.

At first Karan put his idea to one side while he read Law at Cambridge and went on to become a chartered accountant at Ernst & Young. After completing his accounting studies in 1988, aged 27, he decided to obtain some business experience by importing goods from India.

Karan was from a wealthy family, but left university £20,000 in debt and did not use family money to finance his venture.

A lotta bottle: Cobra has become a much-loved brand

He wanted his authentic brew to be produced in India and exported to Britain, but investment in India was rare in 1988.

With beer production as the ultimate goal, Karan and family friend Arjun Reddy formed A&K International Ltd and hooked-up with a manufacturer in India to import polo sticks.

The pair then managed to get Harrods to place an order and eventually sold 300 to the store. Although this business had proved successful, it was not very lucrative, so the partners dabbled in other commodities including pearls, towels and silk jackets.

They stumbled upon an Indian brewery in Bangalore. Mysore breweries, a former Coca-Cola bottling plant, was the biggest privately owned brewer in India, producing a popular Indian brand.

The brewery did not, however, export its beer. The Indian brand already in production did not meet Karan's explicit criteria, so he convinced the brewery to make a new lager to his specifications and to use his chosen branding.

Even at this stage, Karan envisaged a global business, despite being in debt with no money to his name, and wanted to keep ownership and control of the brand name rather than simply distribute someone else's product to the UK.

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Karan and Arjun were fortunate to have an experienced mentor to guide them through the starting up process. Arjun's uncle introduced them to his local bank, and from an old-style, trusting bank manager, the business partners got an overdraft facility of £7,000.

Karan puts this down to the bank manager's trust that as a chartered accountant, he would be careful with money. Ever since this first loan, he has ensured finances are prioritised.

Having found a brewery to supply the beer he wanted, Karan and his partner hurriedly set about finding a way to sell it in the UK, signing a deal with some experienced people from established breweries in Britain.

"Panther" was their original name for the brew, but it didn't go down very well with customers in the UK so they switched to their second choice, "Cobra", before the labels were printed.

The change cost time and money, but was a valuable lesson in testing concepts out on the customer before launching.

Punching above your weight
The first five years of Cobra's life were the most difficult. In June 1990, as their first load of beer arrived in the UK, the worst recession since World War II began.

Karan describes the slow start as: "A jet aircraft, fully laden with fuel, on the runway. You know your plane should take off but it just doesn't lift off the ground. You have to persevere and stick with it until it finally takes off."

In Britain, beer is big business and long-established, wealthy brands dominate pubs and bars. Unable to compete with their marketing budgets, Cobra's only chance was to promote itself as different, focussing on its smoother, less gassy character.

Even with this distinction, Karan knew that to succeed they would need to punch above their weight, and with a clear strategy. Cobra's was simple - they had identified a niche market, the Indian restaurant trade.

With more than six thousand Indian restaurants around the UK, all potential clients, this was a significant market, and one the bigger brands weren't focussed on.

From a standing start, Karan's sales approach was to visit as many Indian restaurants as possible and convince them to buy a crate of Cobra.

Sometimes visiting as many as a dozen restaurants in one lunchtime, this was gruelling work. Karan carried the beer crates in his battered green Citroën 2CV, which they had to push start most days.

The founders used to park a little way away from the restaurant they were selling to, so that the owners couldn't see the sorry state of their premium beer's delivery vehicle!

An early problem the partners faced came in the form of glass beer bottles. In India, beer is sold in larger, 660ml bottles that are recycled and used again.

To start with, the Indian brewery producing Cobra would only use these bottles, while British restaurants only sold small bottles or draught beer. The brewery promised to consider producing smaller bottles once Cobra became successful.

Turning this potential obstacle into a strength, Karan started selling this as a sign of the authenticity of the beer, and persuaded restaurants that it would help them sell more beer by encouraging sharing.

Cobra's larger bottles are a major part of its brand identity, and have now become so established that nearly all major beer brands are now available in the larger size bottle.

To new heights
At the start of 1991, Cobra was being stocked in around 100 restaurants, already exceeding Karan's early estimates. The partners approached Ghandi Oriental Foods, the biggest distributor to Indian restaurants in London, and secured a lucrative deal for them to distribute Cobra to their restaurant customers.

A little financial juggling enabled them to double their sales, and by 1993 the company's continued growth meant that it needed to raise £250,000.

With the help of his accountant, Karan used the government Small Firms' Loan guarantee scheme to borrow £50,000- and literally the day before his wedding he found a business angel who invested the other £200,000.

Cobra's first year turnover was approaching £300,000, but this steadily grew so that by the fifth year, revenue hit the £1 million figure that many businesses view as a sign of success.

Arjun left the business and Karan assembled a management team to assist him. Demand for the product was so high that in 1997 they had to move the brewing process to the UK to ensure quality and availability.

Although a huge task, Karan says that this was "the best move I ever made". It took six attempts for the UK brewery to perfect the Cobra recipe, and the same one continues to brew the beer today.

Karan's best advice is "if you can, build a brand". Begun from grass roots, Cobra has a very strong foundation that it could capitalise on when it had the money to invest in branding.

Where are they now?
Today, while still running the now substantial Cobra business, Karan Bilimoria also lectures in the UK and abroad, covering entrepreneurship, business, education and the Indo-British relationship.

He is one of two Visiting Entrepreneurs appointed at Cambridge University. Cobra has also started to sell wine, targeting the 35% of Indian restaurant clients who choose wine with their curry. The selection of wines have been named after Karan's father, General Bilimoria and not surprisingly have been developed to go well with spicy food.

Cobra beer is becoming increasingly mainstream, and is stocked in an increasing number of pubs and bars. The company recently added an alcohol-free Cobra, Cobra Lower Cal and King Cobra, the world's first double-fermented lager, to its range, and has won many awards for its brand as well as its beers.

David Lester is a successful entrepreneur, the founder of the small business website startups.co.uk and the co-author of How They Started (Crimson Publishing, £12.95)