From selling coffee powder to setting up the first Café Coffee Day outlet in Bengaluru, VG Siddhartha went on to build a reputed brand.

How VG Siddhartha built Coffee Day into a global brand cup by cup
news VG Siddhartha Thursday, August 01, 2019 - 07:56

For anyone in India on a highway or in a spot that wasn’t a town or a city looking for a cup of coffee, WiFi and a place to sit, one knows that sooner or later, there will be an outlet of Cafe Coffee Day ahead. Such was the reach of CCD — that became synonymous with different age groups for different reasons. 

This was what VG Siddhartha built — a brand that is truly Indian, introduced Indians to different types of coffee, and could take on Starbucks and Lavazza. The entrepreneur, who has been called India’s coffee king, who built a large coffee chain which currently has 1,750 stores across the country, did things differently — and the largest among them was focussing on the coffee beans itself. 

Siddhartha came from a family who owned coffee plantations, and had been in the business since the 1870s. At the time of his death, Siddhartha owned over 12,000 acres of coffee plantations in Chikkamagaluru, and is where the stores get their coffee beans from. 

After a stint as an investment banker who went on to own a security firm and later pivoted to coffee, real estate, retail and other areas. He started selling coffee powder in 1995 and in 1996, Siddhartha sets up the first CCD on Bengaluru’s Brigade Road, pricing a cappuccino at Rs 20, which, at the time, was a high premium. However, he was replicating the experience of a Singapore store where people were drinking beer and had internet connectivity. Siddhartha kept things the same, and ushered in an era of people stepping out for a cup of coffee and hanging out, an experience that was complete with the offering of internet connectivity as well. 

The idea struck Siddhartha after he became aware of a German coffee chain that started its first store in 1949. “I was inspired by that and started with 20 stores in south India selling coffee powder. In 1995, we decided to take the café route, since there was a bigger opportunity for value addition there. In the coffee powder business, the mark-up is 100%, while in the café business it is as much as 800-900%,” he told Outlook Business.

Focussing on the beans turned out to be their strong suit, as all of Coffee Day’s coffee comes from its plantations, which offered it greater control over the quality of the beans. Most coffee chains get the beans from elsewhere or outsource it.

The company rapidly expanded its footprint and soon went on to have multiple offerings — CCD Value Express, a premium CCD Lounge and the Square. In 2005, it went international and opened its first outlet in Vienna. They currently have stores in the Czech Republic, Malaysia, Nepal and Egypt.

Till 2011, the company was the sixth-largest retail chain in the world with regard to outlets — and the only Indian one.  

In 2015, Coffee Day went public, where it raised Rs 1,150 crore. It was one of the largest Initial Public Offerings (IPO) at the time. Rs 625 crore from the IPO proceeds was spent on refinancing debt, while the remaining went towards expanding outlets. 

Coffee Day had plans for aggressive expansion — at one point, the company planned to open 200 cafes every year, and wanted to have 2500 cafe and express outlets by 2017. Siddhartha once said that they aimed to be one of the top three coffee brands in the world. 

However, it was not all smiles with the company, and they had to realign goals. With brands such as Starbucks, the Coffee Bean and Tea Leaf and Chaayos entering the market, CCD’s growth began to dip. According to Livemint, from the final quarter of 2018 and the first quarter of 2019, CCD’s same-store sales growth fell from 8.2% to 5.4%, and only added 30 outlets in the same time period.

The company was posting profits, but was also increasing debt. In fact, Siddhartha reportedly sold his stake in Mindtree to finance the debt of Coffee Day. 

For the financial year ending 2019, Coffee Day Enterprises actually showed a net profit of Rs 128 crore.

According to the last available annual report of the company, the company’s net debt as on March 31, 2018 stood at Rs 33,238 million. 

While the company may not have been growing at the pace it once intended or have a smooth run, it was seeing good years. Last month, it was reported that Coca-Cola was in talks to pick up a majority stake in Coffee Day enterprises for as much as $1.45 billion.

For a generation, CCD became synonymous with hanging out, first dates, business meetings and many an idea for a start-up. If there was one thing that CCD perhaps got right, it was knowing that a lot could happen over coffee. ​

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