Retaining the Start-up Spirit

Despite being almost 20 years old, Cobra Beer still very much retains an entrepreneurial attitude in the United Kingdom. Dynshaw Italia, for instance, is not only the firm's finance director but also heads up its HR and IT departments. Italia speaks to AccountingWEB’s Matt Henkes about how Cobra has kept hold of the start-up spirit.


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The word that seems to pervade every bit of the ethos of Cobra Beer is "innovation." Many conventional finance executives would balk at the myriad of extra undertakings that come part and parcel with Cobra's FD role, but Italia is no ordinary FD, shouldering the responsibilities of operations, IT and HR directorships in addition to his busy finance role.

His previous experience included working for the successful Internet travel firm ebookers, which he left in 2001 to join Cobra. He had joined that company as its fifth employee and was instrumental in steering it to the meteoric success it achieved, listing on three stock exchanges and becoming one of Europe's premier online travel agents.

The differences and similarities between the two firms are profound. While the pace of growth that Cobra is currently enjoying would blow the eyebrows off of most executives in the brewing industry, Italia says it was his years with ebookers that were "a real roller coaster ride".

"The whole model of ebookers was to get into a space that never existed," he says. "We looked at the U.S. where we saw a lot of well established travel agencies with a lot of content going online and becoming successful.

We saw that there was no agency that had an online European presence and it was literally a rush to get there first. That was our main business model. You go there, into every country, and buy up the best independent travel agencies."

He says it was the "first mover" advantage that enabled the company to achieve the success it did. "You had all these fabulous travel agencies all over Europe, and what we did was go over there, buy them out, convert it to online and create the largest Internet travel agency," he says. "That was the time when everyone was converting to online, and we rightly picked that travel would be the one that converted better than any other product.

Prioritization: Hasty vs. Quick
"With Cobra, it's a much more competitive environment," he says. "I think the UK is by far the most competitive beer market in the world. There is no brand that owns more than 12 percent to 13 percent of the market. In the US, Budweiser is 40 percent. In India kingfisher is 20 percent, but here it's a very even playing field."

"You learn to prioritize what the important things are," he adds. "That's a skill I've taken into Cobra from ebookers. Cobra is not growing as fast, but it is still growing 40 percent year on year."

The reaction he gets from people when they hear he works for Cobra is always positive, and the opportunities open to the company are numerous. "You want to take every single one because they all look so positive," he says. "But it's just a matter of trying to choose as many as you can but also trying to prioritize them.

In doing this, he says, it's important to understand the difference between a quick and a hasty decision. "A hasty decision is making a decision without the relevant information," he explains.

"A quick decision is where you make a decision quickly, but on the basis of the available information, enough information for you to make that decision." The ability to do this time and time again gives you a distinct advantage, he says.

"It's my role to provide the management team with the information on that opportunity. What are the benefits you're going to get from it? What are the cost implications and pitfalls? Then we can decide whether we're happy to take that risk knowing what the repercussions would be if it doesn't work out.

"Any major decision we would never make singly, we would always do it as a management team. The reason is that for any major decision, if you run it by your equivalent management team, they always come up with things you haven’t thought of.

"When you start making decisions quickly just to show flexibility, but it's not informed, that's where you start to run into problems," he warns.

Innovative Financing
In terms of finance he says that innovation is a key value in his decision making. "If you think about it, with a company like Cobra, when it's growing, not only is it growing 40 percent year on year. It's also going from the Indian restaurant sector, to a supermarket mainstream and these sectors are starting to broaden out," he says. "All these things are happening simultaneously which means more resource in terms of manpower, more resource in terms of time and more resource in terms of money."

He says that something, which is true of every entrepreneur is that they don't want to give up their equity. "You've got to be innovative," he says. "We have looked at every single type of finance. From small loan guarantee schemes to bills of exchange, to factoring, to trade finance and a whole list of other things."

Last year the firm raised £27.5m through a Payment in Kind (PIK) instrument. "It's sort of like an unsecured loan, but the loan is only repayable at the end of a particular term," explains Italia. "Okay, you do accrue up quite a substantial amount on compound interest and have a big amount to pay at the end of it. But you are confident that any money you raise now plus the interest, you are going to increase the value of your brand to much, much more than that.

"There is always an element of risk," he adds. "What is the definition of an entrepreneur? They do take a fair amount of risks. So it's like I say, your decisions have to be based on the information available, and it's a calculated risk.

"Saying it can't be done is not an option. There must be ways of getting things done," he says. "If we had that attitude, we may have raised the money we did, but we would have diluted down the founder to 30 percent or even 20 percent. Today we still have raised the money, but he still owns 60% of the company. It's that innovation that you have to keep looking out for."

CEO and FD: Mutual Respect
When Italia took over the finance function in 2001, Cobra's founder and CEO Karan Bilimoria had been running the department. "I've seen processes in the past where you come in, and the person who's been handling your particular function is very reluctant to leave it. They keep interfering and checking things for a few months," he says. "When I joined, [Bilimoria] was very quick to delegate the entire finance responsibility to me. That was a sign of confidence and I think that was a starting point of the mutual respect that we have for one another. Within the first couple of weeks he felt confident that I was able to handle the process and he just left it up to me."

"I came into this company that I think was growing faster than it could cope with," he adds. "So my idea was to come in and put in place systems to help us handle the growth. They were mainly using a manual stock system. So I tried to get that automated. Then for example they were relying only on one brewery in the UK. So we had to think about how we were going to diversify our supply risk. We had to source another brewery in Europe."

There is an obviously respectful and productive relationship between the FD and CEO. "I could go into an investor meeting and talk to them about an issue, then he will come in later and be reiterating the same points, and that gives you the confidence that you’re thinking along the same lines," says Italia.

"We have something that we always follow. Something that Karan always pushes, which is doing things differently and better," he adds. "In doing that you tend to change the market forever."

A good example of this is the Cobra Vision TV movie sponsorship, which encourages UK film makers to shoot short clips and send them to Cobra for use in its TV adverts. "We let consumers with video cameras send in their clips and we pay the best ones," says Italia. "In that way what we're doing is encouraging UK film makers to send in their stuff. We're getting fabulous creative adverts that we can show in that time slot which we brand as 'sponsored by Cobra', and we don't have to spend anything on production costs. It's a win, win, win situation."

Many Hats: Team-Building
On the subject of his many roles, he says that, while wearing so many different directorial hats is "very demanding", the key to success is surrounding yourself with a team of people you can trust to take the load at a moment's notice. "I've got a fabulous financial controller who can really take off most of the day-to-day stuff from me," he says. "It's all about people. If you have a great team around you, things just fall into place. If something comes up that you need to give time to, you have the confidence to know that there is somebody else who can fit into your shoes."

As HR director, Italia takes some credit for the firm's team building success, but says it's also down to the company's recruiting policies. "We're very careful who we recruit," he says. "When we recruit someone we always make sure there are two or three directors present, whatever level we are recruiting, someone looking for attitude and motivation, and someone else looking for relevant skills and experience.

"If I ever hear the phrase, 'that's not my role I can't do it', then they don't belong in the company. It's as simple as that."

"I love coming to work every day," he says. "I think that's why I can deal with the pressure, because I love it. My wife complains. But what I'll try and do is get home enough to see my kids, but will probably do two or three hours work at night when everyone is asleep. I only need six hours of sleep."

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