Cobra Beer: A Critical Strategic Analysis

Cobra Beer Case Study Questions and Answers

Cobra Beer: A Critical Strategic Analysis

  • INTRODUCTION

Cobra Beer, a UK-based beer brewery, is at midst of a booming beer culture not only in UK but also globally. Against a backdrop of business failure, Cobra Beer has recovered repeatedly showing resilience against a beer industry growing not only competitive but also showing unprecedented diversity in practices. To better understand Cobra Beer’s marketing positioning and evaluate her strategic options, a critical analysis is required of company’s external and internal operation environments. Both analyses, at macro and micro levels respectively, are aimed to identify specific patterns in Cobra Beer’s business practice and strategy. Then, a PR crisis is analyzed informed by brand equity management practice.  Informed by external and internal environment and PR crisis analyses, a strategic analysis is performed at business and corporate levels in order to identify company’s strategic direction and decision-making process. The strategic analysis is a basis, moreover, to propose strategic implementation modes for Cobra Beer in order to emphasize strengths and minimize weaknesses. The paper ends by a conclusion.

  • EXTERNAL ENVIRONMENT ANALYSIS

This section scans Cobra Beer’s operation environment at macro and micro levels. Specifically, Cobra Beer’s environment is examined at a macro level by offering a broad analysis of company’s surrounding, market environment based on PESTEL model. Moreover, Cobra Beer’s environment is examined at a micro level by analyzing company’s more immediate operation environment based on Porter’s Five Forces model.

  • EXTERNAL ENVIRONMENT ANALYSIS

This section scans Cobra Beer’s operation environment at macro and micro levels. Specifically, Cobra Beer’s environment is examined at a micro level by offering a broad analysis of company’s surrounding, market environment based on PESTEL model. Moreover, Cobra Beer’s environment is examined at a micro level by analyzing company’s more immediate operation environment based on Porter’s Five Forces model.

Based on PESTEL model, Cobra Beer’s macro environment can be analyzed as follows:

  • Political

Brexit. If anything, Brexit remains a sweeping macro political (and economic) variable which does not only have immediate implications for beer industry in short range bur also over long span. Given current national (UK) and international (EU) context, Brexit appears to be a highly unpredictable event to which companies, big and small, across industries, including beer industry, are attempting to work out viable business frameworks, particularly in light of current unclear exit negotiations undergoing between UK Government and EU. In a more immediate context, Brexit appears to have a differential impact on beer industry based on size of operations. More specifically, while “local”, emerging brands (predominantly known as “craft breweries”) have UK as main market, bigger breweries have regional (EU) and global markets as operation markets, consistent reports show UK-based breweries to be least influenced by Brexit compared to a more likely negative impact on bigger breweries (Mortimer, 2016). The development of current Brexit negotiations at different levels, particularly a political one, will only show whether current favourable conditions for smaller breweries compared to unfavourable ones to bigger ones are likely to persist or not.

  • Economic

UK Brewing Industry. The brewing industry has exploded over recent years in UK. This growth in informed by changes in excise duty and changing preferences for beer (which are discussed in further detail in next section under “Social”). Although UK still has one of highest excise duty rates (which represent, in fact, a substantial portion of country’s revenue), recent cuts in excise duties and event-driven sales including, most notably, Diamond Jubilee, Euro 2012 and Olympic Games (The Brewers of Europe, 2016) have helped increase number of breweries, particularly what are so called microbreweries owned by independent entrepreneurs. The recent growth of beer industry in UK has, according to several official reports, helped UK regain a premium, global spot as a brewing powerhouse (Department for Communities and Local Government, & Jones, 2015). This is evident in growing numbers of breweries in UK which, according to British Beer and Pub Association, are now over 1,400 breweries.

Global Brewing Industry. The beer industry, at national (UK) and international levels, is marked by a set of characteristic patterns. Notably, beer industry is a highly concentrated one in which few global players – including, primarily, Belgium based Anheuser-Busch InBev (AB-InBev) London based SABMiller, the Dutch brewer Heineken, and Denmark’s Carlsbergcontrol beer production and distribution across markets (The Brewing Industry, n.d.). This control of global beer market has been largely a result of mergers and acquisitions not for organic growth. Moreover, global beer market shows differential growth patterns across different markets. More specifically, while growth in Western Europe remains largely slow in bracket of 0.4%, growth in Asian market, particularly China, hits a mark of 11% (The Brewing Industry). The concentration of beer industry, at national and international levels, combined by differential growth across markets, has created what can be said to be a monopolistic practice by which major players do not only control global supply chain but also, more importantly, access to distribution outlets, particularly pubs in UK. By controlling access to beer market, global players have, moreover, created a global beer market in which price differentials are notable even in same markets, including EU. For example, if a pint of beer in Porto, Portugal could be estimated at £1.25, a similar pint could be at £7 Bergen Norway (The Brewing Industry). Thus, by splitting up major markets into sub-markets of differential price marks, global players manage to generate profits based on a combination of cost leadership and product differentiation based on each sub-market’s price elasticities of demand.

Craft Beer. The recent explosion of beer industry can be, largely, accounted for by a notable growth of what are commonly referred to as microbreweries. As is discussed in further detail in next section, microbreweries represent not only a national (UK) and international phenomenon reflecting changes in preferences but also, probably more importantly, deeper changes in beer industry. More specifically, if microbreweries have grown in number at local and national levels, bigger, established ones have grown even bigger in size due, largely, to mergers and acquisitions (Daneshkhu & Whipp, 2016).

  • Social

Premium Beer. The consumption of beer is changing. Given current consumption patterns and, for that matter, marketing and promotion campaigns by big brewers, beer appears to be shifting to a premium end as opposed to cost reduction. This is most evident in how beer is increasingly marketed and promoted not independently but paired to specific meals, much like wine (“Beer in the United Kingdom,” n.d.).

Craft Beer. This is, if anything, an area where global patterns of beer consumption appear to be shifting to more swiftly. Supported by a surge in recent years of independent breweries in UK and internationally (Press Association, 2016; Anderson, 2015), particularly in US, craft beer – but also more differentially flavored beers including, for example, gluten-free and sweet-flavoured beers, let alone home-brewing (Taylor, 2015) – has come to be a defining signature of beer scene. One probable justification of why craft beer has gained increasing popularity over recent years is customer segment makeup. More specifically, as younger generations of pub goers become increasingly aware of health implications of beer consumption and are more inclined to prefer entrepreneurship as opposed to established big brand name, craft beer appears to satisfy a need for beer consumption for pub goers of younger age brackets.

  • Technological

Beer Apps. There is a growing pattern to make beer experience in and out of pubs / bars more personalized. This is evident in an emergence of applications which help both brewers and consumers to make beer experience more rewarding for both parties. For example, Monks Toolbox, a San Antonio, Texas-based company, has developed two applications: one, called Batch It, and is aimed at brewers to help manage brewing processes and a second, called OnTap.Me, which help consumers know which beers are on tap by recoding consumer preferences (Strauss, 2013).

Beer Systems. In a yet another step further into value differentiating beer production and distribution, new systems are emerging to optimize keg measurement and distribution processes. For example, SteadyServ, an Indiana-based beer management system, has managed to develop over years an iKeg system by which breweries can better control keg measurement and distribution processes as opposed to ad-hoc practices by brewery owners and operators (Hershberger, 2014). This pattern reflects, if anything, an increasing shift to data-based approaches as part of a global switch to better understanding of consumer behavior and consumption patterns based on more accurate metrics.

  • Environmental

Carbon Footprint. Beer is shown to have differential environmental impact, particularly as far as packaging is concerned. Notably, beer in steel cans is shown to have lowest impact for five out of 12 impact categories: primary energy demand, depletion of abiotic resources, acidification, marine and freshwater toxicity (Amienyo & Azapagic, 2016). In contrast, bottled beer is shown to have worst impact for nine impact categories including global warming and primary energy demand but with lowest human toxicity potential. In between, beer in aluminum cans is considered best option for ozone layer depletion and photochemical smog but is of highest human and marine toxicity potentials. These findings are of interesting implications for Cobra Beer which has developed as discussed later a limited edition glass for a more differentiated beer consumption experience.

  • Legislative

Taxing System. In spite of a 2002 regulation by Gordon Brown’s Government offering tax incentives for breweries producing less than 3m litres of beer per year (Cumming, 2015), UK’s taxes on beers remains particularly high. This is evidenced, for example, in a tax structure which levies £1 for every liter of 5-percent alcohol beer, a tax bracket which increases to £1 for every liter over 60,000 hectoliters beyond 5,000 liters of production (Hindy, 2016). This taxation structure hurts, if anything, microbreweries which are backbone of not only beer industry but also more progressive economic structures promoting entrepreneurship.

II.II. MICRO ENVIRONMENT ANALYSIS – PORTER’S 5 FORCES MODEL

Based on Porter’s Five Forces model, Cobra Beer’s micro (i.e. more immediate operation) environment can be analyzed as follows:

  • Supplier Power

Given current available information on corporate website and external sources, Cobra Beer appears to rely extensively on Indian growers for barley malt and yeast, with maize, hops, and rice components used in producing different beer varieties (“About,” n.d.). This heavy reliance on Indian (international) suppliers has both upsides and downsides. On upside, Indian labor is more or less cheap which drives prices of beer components down and hence make Cobra beer brands more competitive. Moreover, India is historically recognized as a fertile land and hence offering unique agricultural products which make final beer products more value differentiated. On downside, however, extensive reliance on suppliers from one single supply source, i.e. India, could put Cobra Beer at risk. The risks arising from unsteady supply chain management practices across markets, fluctuating climate conditions in Indian market and, not least, political developments (particularly in light of historical British-Indian relations) could influence production and distribution processes, if not bringing production to a complete halt under extreme conditions. Thus, Supplier Power can be ranked as Moderate for Cobra Beer.

  • Buyer Power

Customers are becoming increasingly kings. This status, combined by macroeconomic patterns indicating declining purchasing power of cash (Oxlade, 2013) as well as differential purchasing power of customers across markets (Arnett, 2015), as noted above, ranks Buyer Power as High.

  • Competitive Rivalry:

The growing completion from microbreweries (Cumming), emphasizing value differentiation, and bigger ones (Rutishauser, Rickert & Sänger, 2015), emphasizing cost leadership, makes Competitive Rivalry High.

  • Threat of Substitution:

Evidently, with so many breweries, small and big, offering a broad range of beer offerings, Threat of Substitution is High for Cobra Beer.

  • Threat of New Entry:

If anything, growing numbers of microbreweries, offering a broad range of richly flavored beers attending to local tastes and preferences (Daneshkhu, 2014; Department for Communities and Local Government & Jones) make Threat of New Entry High for Cobra Beer. (See Appendix for a list of number of breweries across different UK regions in July 2013 and July 2015.)

On a general note, beer industry can be said to have reached a maturity stage (Woolfson, 2016) in which new entrants are required increasingly to offer innovative beer offerings to maintain competitiveness in an industry which, at least in UK, dates back to hundreds of years.

III. INTERNAL ENVIRONMENT ANALYSIS

To compete in current highly crowded beer industry, Cobra Beer needs to have core, competitive competencies. To better understand company’s competitive positioning, a deeper, internal analysis is required of Cobra Beer’s operation environment. The analysis, in next sub-section, is a resource-based one.

III.I. RESOURCE BASED VIEW

Given current available information on company’s internal corporate structure and resources (which is limited), Cobra Beer Ltd. is, primarily, a beer maker which also sells bicycles, sunglasses, lamps and brassiere (“Company Overview of Cobra Beer Ltd,” 2017). Founded by charismatic leader, Indian-born Lord Bilimoria in 1989, Cobra Beer has experienced a series of, primarily, financial (liquidity, in particular) crises which led in 2009 to an acquisition arrangement by Molson Coors Brewing Company (UK) Limited, making Cobra Beer a subsidiary of US-based giant (“Company Overview of Cobra Beer Ltd”). In 2013, Cobra Beer reported £144m of retail sales in UK (Graham, 2013).

This brief background is particularly important to understand company’s lifecycle in later phases. More specifically, Copra Beer has increasingly grown from a one-man brand (which still remains largely applicable in current practice) into a more customer-centered brand combing a successful legacy and a more diversified management style under Molson Coors. Then again, Cobra Beer’s current (re)positioning in, at least, UK market, should be informed by early crises, particularly of 2009, which should be more qualified instead of being characterized as mere crises.

Primarily, Cobra Beer faced financial difficulties in as early as 2008 amid global financial crisis. Indeed, company’s fortunes could have been better should global economic crisis had hit in a different growth phase. More specifically, prior to 2008 Cobra Beer was growing at a 40% rate which, by business standards, is striking. Guided by high growth alone, Cobra Beer continued to expand and to run out of cash (Sibun, 2009). To set records straight, company’s charismatic founder had to form a joint venture with Molson Coors in order to pay off debts. Thus, since 2009 Cobra Beer continued to grow, albeit at a slower pace, and, more importantly, to further enhance company’s brand positioning all along. This can be evidenced in different core competencies Cobra Beer appears to have managed to enhance after company’s acquisition by Molson Coors.

On leadership dimension, Cobra Beer has clearly a charismatic and iconic leader namely, Lord Bilimoria. Informed by early experiences of passion for beer, Lord Bilimoria founded Cobra Beer following a partnership with India’s largest independent brewery (Smale, 2014). This early Indian “recipe” informs largely how Cobra Beer has come to be associated by customers in UK as a distinctive and value differentiated beer brand, as is discussed in further details shortly. The foundation, development and later re-branding of Cobra Beer can, accordingly, be said to be attributable to company’s founder who has managed over years to bring a new beer brand offering inexperienced before in UK. Then again, Lord Bilimoria’s leadership style, as one core competency of Cobra Beer, can also be highlighted in how he managed to navigate Cobra Beer over years from financial and non-financial headwinds.

On product differentiation dimension, a second core competence, Cobra Beer has clearly emphasized a premium character to different beer offerings. By sourcing ingredient components from suppliers in India and emphasizing a “smoothness” character to different brand offerings informed by unique recipes (“Products,” n.d.), Cobra Beer manages to lead not by cost but by a premium quality to products. True, Cobra Beer is not alone in emphasizing uniqueness of beer blends and, for that matter, a combination of beer and culinary experience, as is discussed in further detail shortly, particularly compared to highly popular microbreweries nationwide. However, Cobra Beer has managed to accentuate a particularly local flavor to different brand offerings as is evident in company’s recent marketing campaign (referred to in more detail later). Thus, to value differentiate her brand offerings, Cobra Beer emphasizes exclusivity of beer drinking experience and adding flavor to beer by including culinary ingredients.

In emphasizing exclusivity, Cobra Beer combines beer offerings and glass products. More specifically, Cobra Beer is primarily known as a beer brand. However, Copra Beer has a diverse brand portfolio, including glass. By offering a Limited Edition Glass –featuring company’s different development phases over years – Cobra Beer makes a routine act of drinking beer one which is increasingly immersed in culture, branding and, of course, revenue generating (“Limited Edition Glass,” n.d.). Thus, by associating beer and company’s glass products, Cobra Beer is, in fact, reinventing beer experience which value differentiates company’s brand offerings, characterized more by experience, compared to beers offered by competitors, however innovative in flavor blends, remain anchored in a conventional drinking experience. There is also, of course, company’s successful branding effort by showcasing “limitedness” of offered glasses. By offering limited editions only, Cobra Beer is, in fact, launching a pilot experience which can be further expanded in different, possible future offerings beyond beer. Moreover, by using visual imagery instead of conventional text-based branding on offered glasses, Cobra Beer is adapting to a broader consumption culture speaking and consuming in visuals.

In combining beer and culinary experiences, Cobra Beer is, again, well aligned to an emerging pattern in beer consumption and experience namely, drinking beer while consuming food. This pattern is not, indeed, new and finds a very common practice in drinking wine during food consumption. Moreover, company’s iconic leader has shown to be a pioneer in combining different food recipes and beer offerings by Cobra Beer. This is evident in a broad range of beer offerings accompanied by rich culinary recipes from diverse world kitchens including lamb tagine, tandoori chicken, spicy chicken & pork pot stickers, and falafel (“Cobra with Food,” n.d.). In a similar fashion to Limited Edition Glass, a combination of beer and food reinvents beer experience. Still, by pairing food and beer, Cobra Beer is expanding beer experience and appreciated beyond conventional “hardcore” pub goers.

In balance, Cobra Beer can be said to have core competencies of iconic leadership and product differentiation. The core competency of brand differentiation is one which has not been developed largely initially – at least compared to company’s iconic leadership – but is one which can be said to have been crafted, or “brewed”, over years in response to changing market conditions and consumer preferences. Given current, available public information about Cobra Beer, little can be found in fact about company’s internal organizational structure as well as financial and non-financial information, information which is critical to include further analysis of company’s core competencies.

  • PR CRISIS ANALYSIS

As noted above, Cobra Beer is defined not only by company’s competencies but also by crises. Of all PR crises Cobra Beer has experienced, company’s 2008 crisis, initiated and aggravated by global financial crisis in 2008, is one most interesting one to discuss from a crisis management perspective. The following subsections discuss, accordingly, how Cobra Beer’s crisis of 2008, which led to company’s acquisition by Molson Coors in 2009, helps highlight company’s approach to crisis development and management.

IV.I. THE BOTTOM LINE CHALLENGE

The bottom line for Cobra Beer, according to company’s iconic founder and leader, back in 2008, was growth (Smale). At a growth rate of 40%, Cobra Beer was in an aggressive growth phase in company’s lifecycle. The growth at a fast pace was primary to company as opposed to a slower growth, a strategic decision which proved critical to company’s fortunes few months later, when global economic crisis hit.

Timing is, if anything, critical to strategic planning and decision-making processes. By making a company-wide decision to grow right before actual impact of economic global crisis was felt, company’s management, including founder and chair, started a spiral down crisis bring company’s fortunes to an almost demise. Ironically enough, Cobra Beer’s crisis in 2008 was largely due to lack of liquidity (Smale), when, in fact, company’s iconic founder and chair is an accountant. To make matters worse, all potential profits of Cobra Beer were reinvested in growth efforts, a move which did not only balance out different strategic priorities at a critical point of company’s evolution and lifecycle but also reflects, in part, inappropriate catering to stakeholder needs, particularly shareholders.

The bottom line for Cobra Beer’s crisis of 2008, leading to company’s acquisition by Molson Coors in 2009, can be said to be a reputation crisis for one of UK’s leading beer brands. To set records straight, Cobra Beer has made a series of steps to bring company’s brand to desired favorability for different stakeholders, particularly shareholders.

IV.II. THE RE-BRANDING RESPONSE

In response to company’s crisis in 2008, Cobra Beer has reversed strategic direction. More specifically, by accepting slower growth in favor of more focus on market repositioning and rebranding, Cobra Beer has managed to identify a niche market for beer consumption (Heilpern, 2016), a market which is catered for by emphasizing experience and exclusivity of local (Indian) heritage. Indeed, by emphasizing differentiation – which, if anything, requires, longer period at an expense of faster growth – Cobra Beer has made a case for balanced strategic priorities in face of an all-enticing exponential growth.

IV.III. THE VALUES & INTEGRITY RESPONSE

In addition to strategic re-orientation by emphasizing brand differentiation, Cobra Beer adopted an open approach to company’s 2008 crisis. Instead of keeping a low profile during crisis – which is, unfortunately, a common practice by most companies under fire from different stakeholders – Cobra Beer’s founder chose to adopt a values-and-integrity approach amidst company’s crisis and chose to speak openly about company’s situation (Heilpern). Integrity can be said to be central to more progressive business practice. Although much hyped about and mentioned explicitly on corporate websites, few companies act in an integral manner. Therefore, Cobra Beer’s survival after 2008 crisis can be partly attributed to company’s open approach, an approach which is evident in yet another example. More specifically, although Cobra Beer’s acquisition by Molson Coors enabled Cobra Beer to eliminate debts, Lord Bilimoria chose to pay back any remaining debts, albeit under no legal commitment to do so (Smale). Taking an extra mile at highest corporate level is a rarity in corporate world. This approach emphasizes, however, how significant ethical conduct at highest level could have a spillover effect to different stakeholders including, most primarily, staff (internal stakeholders) and consumers (external stakeholders).

  • STRATEGIC ANALYSIS

Based on above analysis, current section builds on findings and offers a further strategic analysis of Cobra Beer’s overall strategy. To better understand company’s strategic decisions in light of above macro and micro conditions as well as discussed PR crisis, Cobra Beer’s strategy is discussed at two levels: business and corporate. The business level strategy analysis discusses company’s strategic decisions at a macro level influencing company’s overall market positioning and competitiveness. The corporate level strategy analysis discusses company’s strategic decisions at a micro level influencing company’s immediate operational environment. The remaining sub-sections, “Strategies Suggested for Future/Evaluation” and “Implementation Modes/Techniques & Final Suggestions,” build on previous subsections and offer practical recommendations and implementation methods by which Cobra Beer can help enhance core strengths and minimize weaknesses.

V.I. BUSINESS LEVEL STRATEGY

At a business level, Cobra Beer has clearly made significant steps in product differentiation. Emphasizing “premium” as a central component of company’s brand portfolio, Cobra Beer has, according to Porter’s market competitiveness model, ensured differentiation is a strategic priority as opposed to cost leadership. There are, of course, decided benefits to a brand-differentiation strategy (as opposed to a cost leadership one) including, most primarily, established cognitive and emotional connections in consumer minds, more profit margins (since different brands are sold at premium price) and more distinctive brand character compared to competitor brands. To emphasize value differentiation, Cobra Beer has made specific steps in marketing and brand image management areas.

In marketing area, Cobra Beer has, as noted above, shifted focus from faster growth to more focused branding efforts. To do so, Cobra Beer has, for example, launched a series of marketing and promotion campaigns including, most notably, a “Splendid Indian” campaign (Clode, 2012). The campaign’s central emphasis is on an Indian appeal to company’s brand portfolio. By engaging customers, using cultural artifacts of very Indian character, Cobra Beer value differentiates company’s product offerings against competitors. Indeed, culture, above anything else, has proven repeatedly to be a characteristically unique vale differentiator compared to more conventional value differentiators including, for example, product development and channel of distribution. If anything, culture is about experience which is as diverse as consumers are. To market beer offerings of Indian appeal (but also of more international flavors as discussed above and is discussed in further detail shortly) in UK market is, accordingly, to make a strong case of brand value differentiation and, more importantly, to lead by quality, not by cost.

In brand image management, Cobra Beer promotes a healthier brand image, in addition to international cuisine appeal as discussed above. For example, in adapting to changing consumer preferences and a growing global pattern favoring healthier diets (and lifestyles), Cobra Beer offers Cobra Zero which, according to corporate website, “[b]rewed to an award-winning recipe, and using only the best natural ingredients, it’s a premium, great tasting, alcohol free variant, with the same smooth, rounded characteristics of our regular Cobra” (“Cobra Zero,” n.d.). This emphasis on “natural,” alcohol-free and “smooth” components address deeper needs of a growing base of beer consumers for healthy beverages. Thus, Cobra Zero, à la Coke Zero, combined by Cobra Beer’s beer-and-food offerings, represents a clear example of company’s efforts to emphasize brand differentiation, an emphasis which is well aligned to company’s strategic re-orientation after acquisition in 2009.

V.II. CORPORATE STRATEGY

At a corporate level, Cobra Beer has made strategic moves which aim to enhance company’s market positioning at a micro level. Two strategic moves, one exceptional and a second routine, respectively, are notable: joint venturing and licensing.

The joint venture strategic move was made by Cobra Beer in 2009 by an acquisition arrangement by which US-based Molson Coors controls stakes in Cobra Beer in return for paying off company’s mounting debts. As noted frequently above, company’s acquisition by Molson Coors has been a monumental milestone in Cobra Beer’s history leading, most notably, to a strategic re-orientation toward more value differentiation. Then again, Cobra Beer’s acquisition deal was not only about paying off debts but has been, interestingly, part of revamping company’s brand by partnering with an established global beer player (Cave, 2014). True, mergers and acquisitions (M&A) remain a staple in beer industry. However, in Cobra Beer’s case, acquisition has been largely an answer to numerous challenges Cobra Beer continued to face in run up to financial crisis of 2008. If anything, Cobra Beer’s acquisition has been frequently framed, including by company’s founder and chair, as an answer to company’s liquidity challenge, when, in fact, Cobra Beer, a major UK-based beer brand, continued to face brand equity image in UK market, a challenge much less emphasized by company’s management and media alike. Through acquisition, Cobra Beer has managed, however, to exploit vast corporate resources of Molson Coors controls, particularly to refurbish company’s brand image, while maintaining company’s distinctive character, a commendable achievement since most acquisitions dilute corporate identity and image of acquired companies.

In a comparatively more routine move, Cobra Beer has continued to expand on licensing agreements to Indian restaurants across UK (Cave). This move is, in fact, well aligned to company’s expansion of her beer brand portfolio from one exclusive to beer drinking (mostly in pubs, at least in UK) to one including a broader base of beer consumers in ethnic (Indian) restaurants. Moreover, by expanding on licensing agreements, Cobra Beer minimizes risks of exclusively relying on pubs in UK (company’s primary market) as a channel of distribution. Indeed, pubs remain central to British culture so much so that beer – and, for that matter, wine – is mostly associated with pubs. Thus, in a reciprocal relationship between marketing efforts (by which companies change habits and behaviors) and consumer preferences (by which consumers “dictate” to companies which products are most preferred and hence most lucrative), Cobra Beer experiments with a customer-oriented approach to licensing by which company’s product offerings are offered in diverse channels of distribution reflecting increasing diversity in preferences and tastes.

V.III. STRATEGIES SUGGESTED FOR FUTURE/EVALUATION

Based on above analysis, Cobra Beer appears to be in a critical phase of company’s lifecycle. Having survived numerous crises, shifted strategic orientation and emphasized value differentiation, all against a constantly changing consumer habits and industry patterns, Cobra Beer has a number of interesting strategic options which she can adopt in order to enhance her market competitiveness by emphasizing strengths and minimizing weaknesses. These include:

  • Brand Positioning. Given current practice, Cobra Beer has been emphasizing value differentiation, particularly since company’s acquisition in 2009. This strategic orientation is commendable but needs to be further for more enhanced market positioning. More specifically, by expanding on company’s brand offerings which cater for more diverse needs across different consumer segments – particularly brands promoting healthiness and/or a combination of culinary and beer flavours – Cobra Beer can re-position her brand as UK’s premiere beer hub for more diversified consumer base.
  • Internationalization. So far, UK remains Cobra Beer’s primary market. Understandably, internationalization is one viable, strategic option companies usually adopt to not only increase revenue but also to minimize risks in home / primary markets in case of (un)predictable shocks. Therefore, one most recommended strategic option for Cobra Beer is to internationalize.
  • Strategic Partnerships (Licensing). In line to company’s current licensing efforts, Cobra Beer has an interesting strategic option of expanding on licensing agreements beyond ethnic (Indian) restaurants. In light of company’s growing emphasis on combining beer and food – as is evidenced in licensing agreements with restaurants and beer and international food offerings – Cobra Beer has a viable strategic option of expanding on current licensing agreements by offering current beer offerings (or rolling out new brands) in “regular” restaurants which are not classified as ethnic. That way, Cobra Beer cannot only expand her brand portfolio (and hence generate more revenue) but also redefine beer experience in even more differentiated manner.
  • Liquidity Management. Needless to emphasize, Cobra Beer’s 2008 crisis is a hard lesson in liquidity management. Although Cobra Beer has continued to perform well since acquisition, no clear liquidity management approach appears to be in place in order to buffer against similar, future events. Therefore, a fourth strategic option Cobra Beer might need to contemplate is to craft an integrated liquidity management strategy.

Two strategic options of all four above are more likely, in author’s opinion, to help enhance Cobra Beer’s overall competitiveness: Internationalization and Liquidity Management. The following is a brief evaluation of each option.

For internationalization, Cobra Beer has a clearly viable opportunity to enhance company’s competitiveness. One benefit of internationalization is, of course, penetrating more markets and hence expanding consumer base and, ultimately, increasing revenue. A second benefit is minimizing risks at home / primary (UK) market. Given how crowded UK market is, particularly in light of emerging, highly popular microbreweries, Cobra Beer can minimize risks of flagging demand in UK by expanding internationally. On downside, however, internationalization involves major risks including, most notably, high investments in market research, regulatory barriers and, not least, cultural repulsion by consumers.

For liquidity management, Cobra beer had, as noted frequently, a hard lesson on liquidity (or rather, lack thereof) in company’s 2008 crisis. Therefore, an integrated liquidity management program or strategy is strongly recommended. On upside, a liquidity management program or strategy would enable Cobra Beer to better manage company’s liquidity for different purposes including, most primarily, R&D (for new brand development), more business expansion, M&A deals and, of course, debit payoff. On downside, a liquidity program or strategy might require external expertise (which can be interpreted into more costs), distraction from core business and possible conflict with parent company’s liquidity management’s priorities.

V.IV. IMPLEMENTATION MODES/TECHNIQUES & FINAL SUGGESTIONS

To implement strategic options of internationalization and liquidity management, Cobra Beer is recommended to:

Internationalization

Develop international franchises in select markets

Expand on supplier network in order to enhance chain value and buffer against fluctuations in local markets

Invest in specific malt species in different select regions in order to ensure brand offerings are differentiated from current malt offerings

Liquidity Management

Set up an integrated liquidity management unit / program, which could be under Cobra Beer’s direct management or independently managed

Invite external auditors, whenever required, to review company’s up-to-date liquidity position

  • CONCLUSIONS

In balance, current beer business is experiencing deep changes at different levels. In contrast to a more conventional model dominated by big players, current beer industry is showing notable characteristics including, most primarily, further consolidation of bigger breweries and growing emergence of what is so called microbreweries. This dynamic beer scene has a major impact on Cobra Beer.

Cobra Beer is a well recognized UK-based beer brand. The brand, experiencing major setbacks particularly in 2008, has recovered into a more robust brand emphasizing value differentiation over cost leadership. Given current business situation and market conditions, Cobra Beer is at crossroads, of which she can make advantage of by adopting specific strategies in certain areas, particularly internationalization and liquidity management.

 

APPENDIX

South East

Region Number of breweries July 2013 Number of breweries July 2015
East of England 107 135
East Midlands 118 149
London 45 76
North East 44 52
North West 136 189
Northern Ireland 7 16
Scotland 69 91
133 192
South West 142 182
Wales 59 80
West Midlands 105 126
Yorkshire and the Humber 127 143
Total 1,092 1,431

Breweries in UK. (Department for Communities and Local Government & Jones)

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