Tag Archives for Cobra Beer

A pre-pack lightens the load for Cobra

It is a long walk up the Tourist Path to the summit of Ben Nevis.  If you are a lucky entrepreneur with time to spare, you keep an eye on the weather, dash up to Fort William, and start walking.  You can drive, fly or take the overnight train from London and use the luggage lockers and showers at the station.  First cross the road to the supermarket for “snap”(picnic) and take a taxi to the easiest start of the walk at the Ben Nevis Hotel; try to give the bar a miss on the way up!

The path goes up, up and up.  100,000 people make the yomp each so you are never alone.  One group from Belgium changed into kilts on the top to celebrate their success!

It is a pity that you cannot “pre-pack” the walk, and start fresh half way up.  Today’s entrepreneurs who struggle on their journey call in a sherpa or guide like McTear Williams & Wood and cast off their unwanted load of unsecured creditors along the way and start afresh.

Lord Karim Bilimora of Chelsea – inspirational speaker, Entrepreneur in Residence at the Judge Business School and founder of Cobra Beer – has just taken the pre-pack route and swapped a controlling interest in Cobra Beer for a minority stake in a new company owned 50.1% by Molson Coors.  Up to £70million of creditors may have been left behind.  The pre-pack deal looks like a rights issue with the added advantage of a culling of the creditors.  Secured creditors, and I guess all the shareholders, move into the new company with a new business plan.

In Cobra’s case, the shareholders might be a little disappointed as they have been investors for ten years and last year were looking forward to a sale of Cobra for around £200million.  But back to square one with a lightened load and new management, good times could be just round the corner.  But that is one of the many joys of being an investor in an Active Equity Company – another twist in the journey.

So with business booming, the sherpas of McTear Williams & Wood are celebrating the opening of new offices in Cambridge.  If they had landed the task of liquidating the bankrupt Lehman Brothers, they would have had over 3,000 legal entities globally to sort out – just dream about the fees and never forget the 25,000 people whose lives were turned upside down – and need an even bigger office!  In MW-W’s latest newletter, Andrew McTear says “Whether you like them or not pre-packs are a feature of the modern business rescue and insolvency world.  If used inappropriately they can cause greater loss to creditors and damage reputations.  Used in the right circumstances they can be a force for good.”

As the New Cobra sets out to reach the summit and reward all the new stakeholders, the walker can look forward to a well-earned beer back at The Ben Nevis Inn.  Unless, of course, you are an unsecured creditor or ex-employee when perhaps you can only afford to look at the webcam of Ben Nevis whilst you contemplate your losses.  Anyone for a beer? A Cobra?

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What tune do you play to charm a cobra?

LeeImage by Garrettc via FlickrThe Daily Telegraph reports LordBilimoria has put the company he founded up for sale at an estimated £200million.  Cobra Beer would prefer to sell a share in the business despite raising capital of some £15million earlier this year.  The report says that the “good Indian Lord” to borrow a phrase still controls some two thirds of the business.  But he did last year so I wonder on what terms he was able to raise the £15million; no equity?

Sales seem to be always quoted at retail value, now £178million.  The restaurants must mark up by some 3x as the turnover of the company is around £50million.

It will be interesting to know which business plan resource Cobra uses for it’s planning. If Cobra goes for the asking price it will be a just reward to Lord Bilimoria but his original business partner who owned a half-share at the start must rue the day he sold out and moved on.  It reminds me of one of the founders of Apple who moved on thinking the business would come to nothing and gave up his 10% holding.

20:20 vision is what we all need.

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Neck a Cobra!

A bottle of Cobra beerImage via WikipediaLast week, Lord Karan Billimora, inspirational speaker and founder of Cobra Beer, was encouraging the government to support SMEs.  So many companies are struggling and so many people will suffer.  As my son says, even those in work will suffer as so many of their friends will be seeking new careers or just trying to keep the bailiffs away.Last year Cobra Beer had a bad year with reported losses of £13million on sales of £53million.  Being a premium product, Cobra could suffer as the punters stay at home or turn to SUBWAY(r) which is growing rapidly. Is there an alcohol free Cobra Beer which could be sold at Subway?

Is it better to have a business plan for a premium product or one which offers simple fare as the consumers tighten their belts?  Anyway, go neck a Cobra to keep the beer flowing!

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Cobra Beer loses £13.1m whilst angels wait

The Palace of Westminster at night seen from the south bank of the River Thames. Victoria Tower and the House of Lords is on the left. The Clock Tower of Big Ben and the House of Commons is on the right. The spire left of centre is the 300ft ventilation chimney above the central lobby. The twin towers with flagless pole just visible in the background is Westminster Abbey. A 2 x 6 segment panoramic image taken by myself with a Canon 5D and 85mm f/1.8 lens.Image via WikipediaA previous post commented on the long wait for the angels in Cobra Beer and the employees who were told that if the company was sold there might not be a job for them – not bad for the person who gives great motivational talks. I am left to wonder why people who have raised funds from others to invest in their business have time to join the House of Lords, go on trade missions, appear on TV shows whilst back at the ranch, losses have been made for a second year running. This time up from £4.4million to £13.1million on sales of just £43.2million.

How do you lose £13.1million on sales of £43.2million – I guess by taking your eye off the ball and enjoying trips and jollies although I am sure that supping with the mighty will bring in sales next year.  Heard that before?  Expansion to the USA has been aborted and a cautious note for the future is sounded: “The group sells a premium product at a premium prices and its business is therefore especially liable to be affected” in an economic downturn.

As an angel I have suffered losses whilst founders massage their egos on the global stage. It is better to back a dull founder who has a simple mission to increase the value of the business for the founders, investors and employees. When that has been achieved, then the global stage is deserved.  But dull founders make poor speakers but they are so powerful in small groups.  I have always been puzzled how people have the nerve to talk about their success when up to the knees in other people’s money.

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When a Cobra strikes

The papers are full of Lord Karim Bilimora of Chelsea, founder of Cobra Beer, about his plans to raise £13million to fund expansion in India. LKB gives one of the most inspiring talk on entrepreneurship and the crowd always leaves with a buzz. He talks about the importance of teams but we never hear any names.

Cobra is like Innocent Drinks but without the margins although they are both run by Cambridge graduates. Cobra is in the very competitive beer market whilst Innocent has carved out a new market and able to charge a premium. Both operate as marketing companies with production sub-contracted and the product probably sent direct to the customers. Innocent also talk about teams but in recent accounts there is no sign of any options for the team they rate so highly.

As LKB says, he has managed to retain a controlling interest in the company which has been funded by angels who seem to have no exit in sight; it is always in the next couple of years. LKB’s major pre-occupation must be how to raise the £13million without losing control. If he does he might find that his long suffering investors to sell out. To quote from the article “Cobra has previously outlined exit plans to shareholders. A flotation was pencilled in for 2006 but was mothballed after Cobra raised £27.5m from Och-Ziff Capital Management, the US hedge fund. It raised further funds from Och-Ziff in 2007 and at the start of this year.”

In his talks, he is always quoting his sales after adding in a quick aside, retail, which roughly doubles his turnover. The newspaper reports give the proper figures. His accounts are interesting as the first accounts show a large revaluation for the value of the Cobra brand which is not allowed in audited accounts. So at the back of the accounts, you find the proper audited accounts which show the problem of building a business on fine margins.

Cobra is currently brewed in the UK by independent Charles Wells brewery.

And as for the so important team at Cobra, if the business is sold, Bilimoria, who retains a controlling stake in Cobra, said “this did not necessarily mean staff would lose their jobs. “I would do my best to protect all the people,” he said”. Perhaps they would prefer some options for their years of service, 20%.

I hope that this is not another example of someone saying the team is so important but not so important to share in the value they have created.

That is why it is so much better to be in the Cambridge Cluster and Silicon Valley where companies include options in their Equity Fingerprint, the business plan resource. Teams want to share in the glory and in the value – we all do! It is a pity that neither Cobra nor Innocent Drink will benefit the Cambridge Cluster directly.

Come on Cobra – shares for all!

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Even Babylicious needs an Equity Fingerprint!

Boots GroupImage via WikipediaBabylicious provides healthy food for babies and kids all in special size containers. It saves the parents all the cooking and preparation time which used to bring the family together – now just microwave!

Production is outsourced with the only problem being to make sure the recipes scale from the home to 200 kilo batch production. Routes to market are via Waitrose and Boots.
Sally Preston started the business with family funds of £75,000 and two years later she raised new money from private investor. She says that she took no pay for the first three years and says that she is comfortable with her shareholding.

It is similar to Innocent drinks but they started with a team of three Cambridge graduates and a £250k investment which left four equal shareholders. Innocent also sub-contracts all the manufacture and concentrates on the marketing and selling but the Innocent drinks appeal to a much larger market and not cash-strapped young families.

Babylicious seems to have the same problem as Cobra Beer – working on fine margins in competitive markets.

Equity Fingerprint, the business plan resource, shows that multiple founders with multiple rounds of resources (people and cash) is an easier way to start a business than the lone founder.

One intriguing part of the Babylicious story is that Preston had to spend £34,000 to enforce her trademark as someone tried the equivalent of cybersquatting. It is not only the cash but so much time from a lone founder. Is Babylicious such a good name?

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