It was a dream. I was going to brew my own beer one day. It would be smooth and less gassy ... Karan Bilimoria is waxing nostalgic about the roots of his business: as a 19-year-old Indian visiting the UK, he was naturally anxious to drink the legendary lagers he'd heard so much about.
But behind the marketing hype, he found reality far less palatable. Fizzy and harsh, the British brews had little taste and caused bloating, a real problem, especially if you were drinking them with Indian food. Real ale he found more palatable, but just try washing a madras down with a pint of Dogbolter; what he wanted was a beer like those back home.
Bilimoria held on to his dream and, some 20 years on, he is the owner of Cobra, a business making beer that is indeed smoother and less gassy.
Regular curry-eaters will have noticed over the past decade the appearance in Indian restaurants of a beer served in distinctive, towering 660ml bottles with bright yellow labels.
Bilimoria had to wait almost a decade before he lived out his dream, although Cobra's tale begins rather earlier. He attended the only remaining English boarding school in India, skipped A-levels and went to Hyderabad University at 16 - 'I don't think I learned very much. I was far too young.' With a degree in commerce under his belt, he came to England and qualified as an accountant. But, unwilling to wait a decade to become a partner, he went to Cambridge to study law. His aim was to be a merchant banker. There he played polo, captaining a tour to India.
The tour marked a turning point: 'I came back with some sample polo sticks and I was about to start applying to all the banks. The next thing I knew, I was selling polo sticks and I was in business. I was 27 years old and I had no experience, no commitments, and I was pounds 20,000 in debt. I'd started.'
Bilimoria took on a partner and the concern expanded, sourcing in India and selling in England. All manner of products were tried: leather goods and jackets were a success, towels and pearls were not. 'But,' he sighs, 'my big idea was always beer.'
His family were unimpressed: the Indian middle classes share with their British counterparts a distaste for commerce and entrepreneurialism. 'They said: 'What are you doing? You're educated; you should have a respectable job.' They called me an import-export wallah and thought it was something I'd grow out of.'
Then, he says, he had a lucky break. The partners had been thinking of importing seafood and an Indian company had sent over a brochure for Pals Seafood, a name that rang a bell with Bilimoria: Pals is a well-known brand of beer in the Indian army. 'Sure enough, Pals Seafood was a division of the Mysore brewery. So I said: 'Forget about seafood, let's concentrate on beer.' We researched the market and it became clear Mysore didn't have a suitable beer - they didn't have a true premium lager.'
Among beers rejected were Pals - sounds too much like dogfood - and Knockout, a super-strength lager, unsurprisingly. At this point Bilimoria's family decided he was nuts: 'They said: 'You're going into one of the most competitive beer markets in the world. Kingfisher have an eight-year head start on you. And you know nothing about the industry. And you've got no money.' I said: 'No, I'm going to produce a better product,' and they just laughed at me.'
Most of Mysore's management team sniggered too, but they were happy to take his money. Two of them believed in him, however. One was the company's brewmaster, who happened to have a PhD in brewing from the Czech Republic.
He and Bilimoria set to work and, by adding maize and rice to the usual lager mix, Bilimoria began creating the lager of his dreams.
His timing could not have been worse: Cobra launched straight into the recession of the early '90s. The first five years, he recalls, were really, really tough. Having decided to concentrate on beer, Bilimoria and his partner ran Cobra out of his living room, lugging tons of bottles up three flights of stairs. Deliveries were made from his battered 2CV - the car was so tatty that the duo would park it out of sight of the restaurants they were delivering to.
'Then there's the credibility barrier,' says Bilimoria, 'where you're an unknown individual with an unknown product that is more expensive than the rest. But the Indian restaurants were great. They said: 'Leave us a few bottles and if our regulars like it, we'll place an order. If it sells, we'll reorder.' They gave me a chance.'
Cobra spread. 'We were forced to build the brand through word of mouth, through grass-roots marketing. Looking back, even if I'd had a million pounds I'd still have built the brand that way.'
Barriers to entry were high: Carlsberg was entrenched, Kingfisher - brewed under licence at Shepherd Neame in Kent - was established, and 10 or so other Indian beers were trying to break into the UK market. But the fragmented nature of the Indian restaurant market made stealth-growth possible. Cobra approached the upmarket restaurants first, reasoning that others would follow their lead. Curry houses were chary of Cobra's huge bottles: 'They said: 'No, we only want small bottles or draught,' but we said: 'Our brewer only makes big bottles because that's the way beer is consumed in India. It's authentic and people can share.''
The restaurants went for it. Besides which, he adds, his bottles tower over their 330ml competitors, prompting the uninitiated to try them.
Since this humble start, the business has grown at an enviable rate: together with Kingfisher, Cobra now accounts for about 16% of the Indian restaurant beer market, with Carlsberg still on 40% and the rest split among sundry other brands. In five of the past six years, he says, 'we've grown between 50% and 70% compounded and we're nowhere near saturated.' Sales now stand at some pounds 35 million a year.
It hasn't all been smooth, though. In 1995 his partner quit and Bilimoria had to raise pounds 250,000 to buy him out. Venture capitalists would come up with the cash but demand a third of the business - 'That's VCs for you.' He didn't want to dilute his ownership and managed to get a pounds 190,000 government small-firms loan and pounds 50,000 from an 'angel' for just 5% of the business.
Having always wanted to retain as much ownership as possible, Bilimoria's funding has come from a surprisingly exotic variety of sources: loans, overdrafts, preference shares, factoring, invoice discounting, EIS shares - real economics textbook stuff. As a result, his stake now stands at 72%: the reduction allowed him to 'hire staff, move into proper offices and do some point-of-sale marketing'.
A year after his partner left, he faced another hurdle: there were problems with quality and availability from the Mysore brewery. Concerned about customer reaction, Cobra asked drinkers about the importance of the Indian origins. Says Bilimoria: 'I was astounded. Overwhelmingly, people said it was the least important thing.' So he decided to move brewing to the UK. The company linked up with Charles Wells, the UK's largest independent brewer. 'We chose them because they were a cut above the rest in quality, they're independent - meaning you get personal attention - and they're experts in international lager brewing: they do Jamaican Red Stripe and Japanese Kirin as well as their own ales.'
The other big move has been a diversification into wine with the General Bilimoria brand (named after Karan's father), designed to be sold as a 'quality house' wine at Indian restaurants. The range, although not great by any stretch of the imagination, is perfectly drinkable, which is more than can be said for many (curry) house wines. These, says Bilimoria, are as bad as lager was 10 years ago.
And that more or less brings us up to date. The company recently changed ad agencies, leaving Saatchi & Saatchi for McCann Ericson, which Bilimoria says is part of Cobra's strategy to break out of the curry house and into the mainstream. Then there's flotation. Cobra hopes to IPO with a market capitalisation on AIM of pounds 50 million by the end of next year; the wait is due to an impending tax law. After the flotation, the business is likely to look to boosting its international sales, which at present are only 5% of the total.
That may redress an amusing anomaly: perversely, one of the places you can't buy this 'Indian beer' is, er, India. 'The Indian beer market,' he says, 'is potentially one of the biggest in the world, but it's totally regulated. It's very bad - you can't even advertise. But one day the market will open up and we're watching. It's a big opportunity, especially after we float.'
HOW TO DO BUSINESS LIKE A SNAKE
- You need to differentiate yourself if you're going to break into a highly competitive or saturated market. Offer a superior product, great branding or both.
- Chose something you really believe in and stick to your knitting. Resist the urge to diversify, unless to do so really makes sense.
- Build your brand organically. If this means knocking on doors and delivering out of the back of your car, so be it. A solid grassroots base will stand you in good stead in years to come.
- Don't plump for cheap advisers; good advice costs more for a reason.
- Always be reluctant to dilute your stake in the business. Venture capital for equity isn't the only way forward: there are plenty of other, less obvious, ways of raising money.
- Build good relationships with customers, suppliers, investors and the community you do business in. Running a company isn't just about making stacks of cash.