Deathwatch - profits fall to naan at all for Cobra Beer

31 May 2009

Cobra Beer may well be ingenious because less gaseous, but it's also less genius because less good at making money. The company has been bought by a joint venture between corporate booze empire Molson Coors and founder Lord Karan Bilimora after sliding smoothly down the gullet of administration. Molson Coors already have their fingers in plenty of pints, including Carling, Grolsch and Coors Light.

The sale was agreed just before PricewaterhouseCoopers were appointed as administrators to the business, meaning the company was never offered on sale in public. Despite sales of nearly £200 million in the past year, the company has yet to make a profit in the past 20 years; the last set of accounts for the business to 2007 show an annual loss of £13 million.

Analysts believe the recession has seen a downturn in demand for premium lagers as drinkers stick to the domestic cooking lager, yet reports suggest Cobra Beer has grown sales by a fifth in the last twelve months. It's quite a business that grows by 20 per cent in a recession, brings in £200 million in a year and is still on its arse. We can only put it down to some of the most godawful advertising every to flicker across our unsuspecting retinas:

TOPICS:   Economy


  • Mike H.
    Let's get supping then lads!
  • Joff
    Where the hell did that advert come from and hasn't Tony the Tiger let himself go, swapping the Frosties for several bottles of wife beater.
  • The B.
    I like a nice bottle of Cobra, I fail to see how they're not turning a profit though, sounds like they couldn't run a P up in a brewery.
  • g.
    That's not a real Cobra ad - I think it's from a student competition. Good post otherwise, though.
  • David
    Lord Karan Bilimoria of Chelsea is a smooth talking incompetent who ran what is one of the world’s most fascinating Ponzi schemes. Recall that a financial Ponzi scheme is where in essence the third person entering the scheme has his capital used to pay interest to the second person, and so on. The scheme continues till the nth person doesn’t enter and then collapses. Cobra beer presents an interesting case study. The business never made a profit in its 20 years of existence. Massive amounts were spent on “marketing the brand” - both above the line and below the line. As a results, sales grew, but given the high marketing spends, there wasn’t a penny in profits in its 20 year existence. Of course, if this continues over time, the business net worth erodes every year and it runs out of cash. When this happens, it takes on more debt or sells equity. It continues the marketing spends with the cash it receives from the debt/equity issuances, and builds profitless sales. Finally this source of funding dries up. It then resorts to riskier financing like factoring and payment in kind notes. This too reaches its limits. As the business goes into a death spiral, and keeps burning cash, it withholds payments to suppliers – in this case Wells and Youngs the brewers who actually made Cobra beer. Finally, the company/Ponzi scheme is incapable of sustaining itself. The outside financing entering the scheme is impossible to sustain the amounts spent on marketing. The inflated profitless sales are used to entice a buyer but no one bites (obviously). This despite one of the most well oiled PR machines in the business. The business goes bankrupt. Due to the intricacies of UK bankruptcy law, secured creditors and the man himself got something out of it. Unsecured creditors – Wells among them - got shafted to the tune of 75 million pounds. What is shocking is how such a man, a smooth talking incompetent who ran his business into the ground, could write a book on entrepreneurship – a second one to be published this week - and be lauded as a role model by Labour. And now he’s trying to raise cash for his Indian operations !!! This is shamelessness.

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