As Cafe Coffee Day is in talks with Coca-Cola to sell a stake, CCD founder VG Siddhartha is reportedly seeking a valuation of between Rs 8,000 crore and Rs 10,000 crore from the FMCG major for his coffee chain. This is reportedly a valuation of between 4-5 times the sales of CCD’s coffee business. According to an Economic Times report, Siddhartha also wants to retain a controlling stake in the business.
ET reported on Wednesday that Coca-Cola’s global team is in talks to pick up a significant stake in CCD, largely to hedge risks that may come about with its core carbonated drinks business, which is slowing down, while also giving it a foothold in the fast-growing café business.
With healthy lifestyles being adopted by consumers across the globe, there is a growing awareness against consumption of beverages with high sugar content. This, according to experts, could be the reason why Coca-Cola is looking to diversify into stable beverages.
Siddhartha founded CCD over a decade ago in Bengaluru and has grown it to currently become the largest coffee chain in India. According to an ET report, as of March 2019, CCD has 1,752 cafes and 60,000 vending machines across India and competes directly with Starbucks, Barista and Costa Coffee. It also has a presence in Europe, Malaysia, Nepal and Egypt.
However, CCD has slowed down its expansion over the past two years on the back of rising debt.
ET reports that CCD expects to close FY20 with sales of about Rs 2,250 crore, according to a senior company executive.
However, the deal is still in early stages, which means that there is no guarantee that it will go through.