Where Service is No Small Beer

 

For many people, it’s probably difficult to remember a time when their local Indian restaurant didn’t sell Cobra, the smooth, much less fizzy lager that in just a blink of eye in beer terms (just twenty-five years), has become one of the must-drink brands with curry. But for its founder Karan (now Lord) Bilimoria, it’s precisely the memory of what was there before that ensures this very service-driven entrepreneur refuses to take any success for granted.

‘The origins of Cobra are well known now,’ says the son of the General Officer Commanding-In-Chief of the Central Indian Army, who first had the idea for a different sort of beer after studying at Cambridge University in the 1980s. He found what was on offer at curry house, too gassy and bloating. ‘The lager made eating unpleasant. I liked ales, but they were too far the other way – heavy and sweet,’ he recalls.

‘That’s when the idea for a less carbonated lager came about.’ The concept, he argues was resolutely his own dissatisfaction as a customer, and nine months later, in 1989, the first container-load from India arrived in the UK, with Bilimoria himself touting it to local restaurants on his push bike.

But while we can say ‘and the rest is history,’ the Cobra story is much more nuanced than this, and again, it’s service that has played a key part. ‘I was very confident that my own sense of taste was what customers would want, but the first batch was too sweet, too heavy and it wasn’t just me saying this,’ says Bilimoria. ‘Right from the start I was asking for feedback from customers and my first buyers, and it was because of this that I went through five iterations before I finally felt we’d got it right. The acid test was whether we got re-orders, and when 99% came back for more, we knew we had a good product on our hands.’

Even the name came from feedback. ‘Originally we called the beer Panther,” Bilimoria reveals, ‘But it just didn’t seem to resonate with people. Cobra was the second option, but it seemed to be what stuck with people.’

Clever tricks to make the beer stand out (including being sold in giant 660ml bottles,) all helped see Cobra achieve massive sales growth of around 40% per year between 1989-2008, but near collapse at the end of 2008 (after building up expansion debts it was unable to service) saw the business go into, and then out of liquidation, so that it could be re-bought by Bilimoria with American brewing giant, Molson Coors.

It was a period, he says, that reinforced in him already strong values that to succeed, the customers are who he is really working for. ‘The experience taught me a great deal, and it means that even today we don’t take success for granted,’ he says. ‘We still have sales teams permanently on the road, educating restaurants about our beers, our new products (like Cobra Premium, King Cobra, and Cobra Zero), and even how to ensure the consumer receives our product in perfect condition.’

A feature of selling via restaurants, is that the product (and therefore the service associated with it), has a middle-man, so even details like refrigerating Cobra at the right temperature (it has to be eight degrees- Celsius, says Bilimoria), matter. ‘Sometimes Cobra is stored with all the other soft drinks in a restaurant, which tend to be chilled much cooler,’ he says. ‘This means the taste of Cobra won’t be perfect. It’s these sorts of messages that we have to continually educate our sellers about, and even how to pour it correctly, so that it has the correct head.”

Today Bilimoria uses net promoter scores, which he says are ‘excellent for the sector’, to turn these service standards into measurable metrics. But for him though, this is simply an evolution in using feedback that dates back to when Cobra first launched. At that time Bilimoria personally manned stands at the BBC Good Food show to ask consumers how the beer tasted.

In fact it was his biggest so-called gamble – bringing brewing of the beer to the UK – that was based entirely doom-mongering protestations of the importers – who all said moving production to Britain would be a disaster.

‘At this point [1996] our Indian suppliers couldn’t keep up with demand, and all sorts of distribution delays and quality issues were stacking up,’ he remembers. ‘I had to do something, so I very deliberately slipped in new questions to our customers, which asked what was important to them – whether it was the smooth  taste, less gas, or where the beer came from. We jumbled the questions up so that we couldn’t be seen to influence the result, but every time we looked at the results, the place of manufacturer came last in importance.’ Bilimoria adds:

‘This was the very clear message I needed that customers didn’t rate location as a deal-breaker. Based on this, we switched. Consumers will give you the answer. There is logic there.  We were upfront about it, and looking back on it, if I hadn’t placed my faith in the customer, I wouldn’t be talking to you now.’

That ‘faith’, as he puts it, is why he says he has no problems reporting on service metrics, and why he thinks other businesses should have no issue with them either. “There’s not a single report we file with the Booker Group (the UK’s largest cash and carry operator, and of which he is a director,) that doesn’t carry our service metrics,’ he says.

In his other role as cross-bencher in the House of Lords, Lord Bilimoria believes a lot more ‘could and should be done by government,’ to really publicise how improving service and being open about  it can dramatically grow GDP. ‘This government is at least listening to business more,’ he concedes, ‘but more could be done to promote how all factors in customer service create a growing and healthy economy,” he says. ‘Service is a key part of growth, but I don’t think the government talks about it enough.’

But despite  supporting  customer  reporting,  a step Lord Bilimoria won’t take is enforcing,  or pushing companies to publicise forward-planning targets  for service – a criticism of service reporting  is that  it only has an eye on the past. ‘Those that run companies should always set themselves targets for service for continual improvement and growth purposes,’ he says.

‘Companies must always be somewhat discontented with their service, because that way they’ll never get complacent about it,’ he adds. ‘But I’m not sure they should be forced to publish their targets.  I’d much rather companies just be more talkative about service in general.

Bilimoria feels he’s been fortunate that government hasn’t, in his mind, pursued legislation that has forced service to take a back seat. ‘Today, whatever business we’re in, it’s a race; we have to always improve on what we do. The more time you spend with your customers, the better.’

Part of the job of his sales team is simply to meet buyers face-to-face, but also remind them about Cobra. ‘We realise that  running a restaurant is a tough  job, and that sometimes  managers don’t re-order because  they’re sorting out food deliveries, linen, cutlery, marketing, bookkeeping, and all the other things associated  with running a business,’ he says. ‘That’s why, if we notice they haven’t re-ordered, we’ll call them and sort it out for them.  Our job is to think about what our customers and their customers need, almost before they do.’

Perhaps what helps this is the fact that despite the more corporate Molson Coors ownership, Bilimoria is still very much the man behind the brand, and it’s his leadership that carries weight.  ‘I’m the founder, and it’s important I’m the champion for the brand still,’ he says, aware that he remains the personification of Cobra. A recent advertising campaign included a suave fictional ‘Meet the Boss’ – who some people have remarked as possibly being the younger Bilimoria. But personal credibility is even more important now, as Cobra is sold in supermarkets and pubs as well as from curry houses. ‘It’s the integrity and behaviour of the brand that really matters,’ he continues.  ‘We have our own charitable foundation too, that has given to more than 170 charities. Nowadays this is a part of what good business is all about.’

Today, the business couldn’t be healthier. Three months after the ‘Meet the Boss’ campaign first aired in 2014, off-trade  sales (supermarkets and off-licences) grew by 23%  and there was a 77%  growth  in bars too.

‘Nowadays, I’m always highly aware of good service, and I still think America has this almost as an art-form,’ says Bilimoria. ‘What I’m pleased about with us is that while we like metrics, we’re not slaves to them.  You can have all the metrics in the world, but I still don’t think it’s a substitute for going out there,  and talking to customers for real – as all our sales teams continue to do.’

It might well be 25 years since Bilimoria was manually taking customer feedback on stands at a food show, but clearly, the importance and significance of this process has not been diluted.

To Get India on Tap

 

It is an anomaly that, all over the world, beer accounts for over 65 per cent of alcohol sales, yet in India it is still under 10 per cent. India has one of the smallest per capita beer consumption rates in the world, at just two litres per person per year. In comparison, people in the Czech Republic, which has the highest rate of beer consumption in the world, drink approximately 145 litres per person per year. Now consider a country like Kenya—beer is consumed there at six times the rate of India, at 12 litres per person per year.

India has the potential to be a beer market second only in size to China, which is the biggest beer market in the world today by a long shot. However, China has a rate of beer consumption of around 40 litres per person per year.  In order to catch up with China, India’s beer consumption rate would have to grow over 20 times—and China is not standing still.

In Britain, on those magical hot British summer days, beer sales go through the roof. India, with its constant warm climate, is the perfect country for beer. It should be the nation’s refreshment of choice. Instead, we have a country with a culture that sees people in rural areas drink country liquor, which is cheap and potent—causing huge health and social problems which have led it to be outlawed in a number of states.

Following the liberalisation of the Indian economy 24 years ago, beer drinking has increased in popularity with growth rates hitting double digits year on year. India’s younger population is more in tune with their global counterparts in drinking hab­its and prefers the refreshment of beer to the potency of spirits.

However, while there has been an increase in beer production, beer is still hampered by high taxes. This inflates the price with a 650ml bottle of beer in India costing, on average, 100 rupees —prohibitively costly for many. The cause of hefty beer taxes is that beer is lumped in with spirits for tax purposes and given the same restrictions, despite the fact that strong beer consists of seven per cent alcohol by volume, while Indian-made foreign liquor and country liquor have an alcohol content of 40 per cent and up to 60 per cent respectively!

As a result, advertising beer is prohibited and the number of licensed outlets—wine shops, bars and restaurants—is very small when compared to other cou­ntries with established beer markets. In China, there is one outlet for every 395 people; in India, there is one outlet for every 17,000!

As the two beverages are combined under the same legislation and the tolls fall equally heavily on both, consumers are given no incentive to choose beer over Indian-made foreign liquor, which delivers three times the alcohol for the same price.

Limiting the availability of spirits would also change alcohol consumpt­ion patterns in the country. Indian spirits are currently available in small volumes like 180 ml and 90 ml, volumes designated for individual consumption which would never be sold in the western market. If only beer in India could be more affordable and more available, the popularity of drinking strong spirits would fall, creating enormous health and social benefits.

I started manufacturing Cobra in Bangalore 25 years ago as an export-only product and within seven years Cobra became the biggest ever export beer out of India. Cobra is now by far the biggest Indian beer brand outside India. It is a matter of great pride to me that we have won 83 Monde Gold Medals, making Cobra beer one of the most awarded beers in the world, showing that a beer of Indian origin can be amongst the best on earth!

 The Full article is available here

My Lords, when the United States was formed in 1776, it took 19 people on a farm to produce enough food for 20 people, so most people had to spend their time and effort in growing food. Today, it is down to 1% or 2% to produce the food. So let us consider the vast amount of supposed unemployment produced by that. There was not really any unemployment produced; what happened was that people who had formerly been tied up working in agriculture were freed up by technological developments and improvements to do something else, which enabled us to have a better standard of living and a more extensive range of products. That is Friedman—arguing against the race to the bottom. The noble Lord, Lord Giddens, talked about robots, but I have gone back to 1776. Nothing has changed in that sense.

I thank the noble Lord, Lord Freud, for initiating this debate. I have just a few points to make. First, the rise in the overall employment rate is real and is at record levels and, correspondingly, there has been a fall in unemployment. With the economic dominance of the south-east, there is a need to rebalance the economy by supporting manufacturing, particularly in the regions. Continued tax reform is also needed. The Office of Tax Simplification is an oxymoron; our tax system is getting more and more complicated.

UK unemployment has fallen by 63,000 to 2.33 million. The unemployment rate now stands at 7.2% of the population. As the noble Lord, Lord Holmes of Richmond, said in his excellent speech, employment has risen to a record of more than 30 million. The bad news is that the NEETS are still close to the 1 million mark; although the figure is falling, it is still above 900,000. The number of people claiming jobseeker’s allowance has fallen to 1.175 million. Over the year that number has dropped by 363,200, which is terrific. That is all really good news.

The new Governor of the Bank of England, Mark Carney—I say new, but he has been in post for almost a year—made a fundamental mistake in saying that he was going to give us forward guidance and that when unemployment fell to 7% the Bank would think of raising interest rates. That figure has been reached more quickly than thought, and he has had to back-track on the forward guidance almost straightaway. Interest rates are still at a record low of 0.5%. Just think: what got us into this financial crisis was what was then perceived as being the longest period of low interest rates for a long time—and they were then at 5%. Interest rates are 10 times lower than that, but still we cannot increase them, although the unemployment figures are near, or at, what the Governor of the Bank of England wanted them to be. They have been kept unchanged at 0.5%.

The real issue is public expenditure. Public expenditure used to be around the 40% mark. It was 42% of GDP in the early 1970s. Then under the previous Government it went up to almost 50% of GDP. By the late 1980s it was below 40%. We need to get that public expenditure down to 40%, because our tax-collecting ability historically has been around 38% to 39%. If we can get our public expenditure down to 40% we will have a balanced economy and will eliminate the deficit.

UK manufacturing is not dead, by any means. We are excelling in manufacturing. Our aerospace industry is the second largest in the world. Our automotive industry, of which I speak regularly, is flying. When Tata Motors bought Jaguar Land Rover in 2008 I spent a whole day at the Land Rover factory. Wow—it was impressive. I am due another visit, because my last one is already outdated. The company is now making more in profits than it paid for a business that nobody was interested in buying in 2008: that is how well it is doing. It is also exporting and creating employment.

We have heard the great news that Bentley is moving its 12-cylinder engine manufacturing from Volkswagen in Germany to Crewe in the UK. How wonderful is that? Rolls-Royce is manufacturing at Goodwood. Therefore, we have the best of the best quality—the best cars in the world—being manufactured here in Britain.

Our chemical industry is huge; our defence industry is huge; our electronics industry is huge; and so is our food and drink industry. I speak from my own experience. I mentioned yesterday that we were manufacturing a great deal in Europe. In fact, the majority of our production was in Europe some years ago and we decided to reshore to the UK because here we can produce world-class beer. We now produce in Burton upon Trent; we are winning award after award and exporting around the world. I am proud of that.

We have a plastics industry and a steel industry; we also have a textile industry, which we thought was dead but which is not dead at all. There are still almost 80,000 businesses employing 340,000 people and generating £11.5 billion of turnover.

What about the regions and the whole focus on London? We have a country where one big city is the capital and the financial capital and is much bigger than the second biggest city, Birmingham—let alone Manchester or anywhere else. If we look at a large country such as the United States, New York is big but you have Los Angeles, Chicago and lots of other big cities. If we look at another large country, India, there is Mumbai but also Chennai, Bangalore, Hyderabad, Calcutta and Delhi, which are huge cities in their own right. We have this one big city. I am very proud of London; it is the greatest of the world’s great cities. But how can we encourage business and employment in the regions? The answer is simple: we must encourage manufacturing. We cannot manufacture in London; we have to manufacture in the regions. That can create the jobs.

The Financial Times analysis tells a story in which the percentage of people on jobseeker’s allowance benefits dropped by more than 30% last year in places as varied as Oldham in the north, Stafford in the Midlands and the Suffolk coastal region. This is great news. If we can carry on in that vein, we will have growth and employment outside London.

Again, worries about lopsided economic growth are not new. The noble Lord, Lord Giddens, talked about developments 50 years ago, at a time when the economy was also recovering after a period of stagnation.

The then Labour leader, Harold Wilson, complained in Parliament of a two-nations economy and said that,

“the Chancellor has to try to restrain the overheating which he sees in the South at a time when large areas in the North are still in the chill grip of his predecessor’s freeze”.

—[Official Report, Commons, 14/04/1964; col. 285.]

Those were the comments of Harold Wilson on Reginald Maudling’s 1964 Budget speech.

We should look at the great signs of success. We have already heard that Hitachi is to move its rail business headquarters from Japan to the UK, and that Bentley is to move from Germany to the UK. Companies from Japan and Germany, the pinnacles of high-tech manufacturing, are moving to the UK. This is fantastic. Hitachi says its move will expand the number of rail jobs to 4,000, which is excellent. I have already mentioned Jaguar Land Rover and Bentley. The Chancellor has promised to cut the costs of manufacturing to boost growth, and he has done it. He predicts that energy costs will go down by £7 billion. Again, that is excellent.

Immigration is one area where I fundamentally disagree with the Government. Their immigration policy has sent out the wrong signals around the world to foreign students and academics. That affects not just universities such as Oxford and Cambridge, where 30% of the academics are foreign. For example, more than 30% of the academics at Birmingham University are foreign. As I say, bad signals have been sent out, and the number of Indian foreign students is now plummeting, but we should look at the contribution Indians make to our economy. On Friday, I went to the celebrations for the principal of West Nottinghamshire College, who has been made a dame. She is the first Indian-born dame in 83 years. She came to this country as a young bride unable to speak English but today heads the most successful further education college in the UK, and probably one of the most successful in the world. That is the power of immigration.

The statistics show that Indians make a huge contribution to our economy. In 2013, Indian men topped the ethnicity employment table in the UK and Indian women came second. Indian men had the second lowest rate of unemployment—and so it goes on. One in seven companies is founded by a migrant entrepreneur. Migrants make a huge contribution to our economy and create jobs. Migrant entrepreneurs have been a benefit to this country.

In looking at overall business performance, we must not neglect SMEs. The Minister talked about all the Government’s initiatives. I was on the National Employment Panel for eight years and on the New Deal task force before that. SMEs account for 59% of private sector employment and 48% of private sector turnover. Within SMEs, small businesses account for 79% of employment and 69% of turnover. We need to encourage these small businesses to grow, because the argument about big companies not paying corporation tax misses the point. Yes, we would like them to pay more corporation tax, but that tax makes up only 8% of our tax take. Most of our tax take comes from the tax that is generated by employment—more than 50% comes from PAYE and NI-paying employees and NI-paying employers. The more jobs we create, the more tax we will generate, therefore we should encourage SMEs to grow.

I have suggested to the noble Lord, Lord Young, that we should have a competition in this country to sponsor staff from 100 companies to attend the Cranfield School of Management business growth programme or the University of Cambridge Postgraduate Diploma in Entrepreneurship. It costs £10,000 to attend these programmes. The businesses that send people to attend those programmes will grow faster than other businesses because we will be training our entrepreneurs to perform better and grow their businesses.

We need to go further on national insurance breaks. Ralf Speth, the chief executive of Jaguar Land Rover, said that the secret of his company’s success was innovation. UK Trade and Investment was mentioned by the noble Lord, Lord Shipley. Exports are crucial. The further we go down the route that I am suggesting of training our entrepreneurs, encouraging manufacturing in the regions and generating jobs, the more exports will follow. I have mentioned my own experience as an example of that.

To conclude, what is the purpose of business? I think that, yes, you want to create a product that people love, but you also want to create employment for the well-being of the people whom you employ. In every survey that asks people what is most important to them, they say family. What else is important to them? They say health. What else is important to them? They say their working life. If people do not work, they are not going to be happy. A happy country is a country with, ideally, full employment. We will never get to full employment, but at least let us try.