Café Coffee Day, popularly known as CCD, isn’t only a coffee shop for the individuals of India but has become India’s favorite hangout for “coffee over conversations” in present times. Founded in 1996, the Bengaluru-based Indian multinational chain of cafés has emerged to be one of the chosen rendezvous of the millennials within a short time.
The first Café Coffee Day outlet was set up by CCD owner V. G. Siddhartha on July 11, 1996, at Brigade Road, Bangalore, Karnataka. with the slogan
‘A great deal can occur over some espresso’
Café Coffee Day quickly extended through the urban areas in India including new stores with more than 2000 bistros opened all over the nation by 2016. In a range of 20 years, CCD has blended its approach to progress, in fame and cherish it has reaped.
The inspiration for CCD was from a leading coffee brand in Germany – Tchibo
VG Siddhartha comes from a family that has a 135-year tradition of growing coffee. Before starting the CCD chain; In 1984, VG Siddhartha launched his own investment and venture capital firm – Sivan Securities, in Bangalore – and began investing the profits from his start-up in purchasing coffee farms in Karnataka’s Chikmagalur region. He sought to reach out to people and make drinking coffee a vital experience in common people’s lives. And was inspired by the founders of the “leading coffee brand in Germany – Tchibo.” It likewise gave him a heavenly idea. With that thought, cup by cup he made his Billion-dollar domain.
Siddhartha emerged as a full-time proprietary investor in the stock market by 1985. Furthermore, he also became the owner of 10,000 acres of coffee farms by then.
“When coffee trading was liberalized in the ’90s, I doubled the money I had invested in the plantations within a year,” said VG Siddhartha.
It was then that the Amalgamated Bean Coffee Trading Company Ltd (ABCTCL), a company that focused on coffee exports was born in 1993. Siddhartha’s plantations began to produce 3,000 tonnes of coffee, and with the help of ABCTCL, he traded over 20,000 tonnes. This way, in around two years, the company became the second-largest exporter from India.
The company owned around 1,700 cafes, 48,000+ vending machines, 532 kiosks, and more than 403 ground coffee selling outlets. The annual turnover of Coffee Day Enterprises was worth Rs 4,264 crore in 2019.
Marketing & Promotional Strategy Plans adopted by CCD
CCD’s complete marketing strategy is committed towards teenagers. Be it their Facebook page updates or tweets or in TV commercials, they are very immersed in whom to communicate to. CCD spends 2% of its top line on marketing, with a marketing budget of INR 8-10 crore. So far, nearly 90% was spent on in-store marketing, with effective marketing accounting for the remaining 10%.
Social Media Marketing
They are focused on endorsing Café Coffee Day as a place to have conversations. CCD reinforced by specific good clicks; they are full of image updates to throb with the zeal of teenagers. CCD has a healthy appearance on social media. CCD has witnessed more than 106k followers on Instagram, 71.6 K followers on Twitter, and an enormous 5.4 million fans on Facebook.
Café Coffee Day also ties up a lot of the famous brands. Examples: Levis, Scooty, Liril, and with Airtel Friends, etc. CCD sales progression and offers a special ‘Café Citizen Card’ for gratifying Café Coffee Day’s customers. It is a loyalty program to grow the number of new consumers and keep the existing ones as well.
Café Coffee Day – Beans to Cups
The coffee market in India has been rising due to the need for “Ready to Drink” coffee and has fitted a part of a being’s daily life drinking partner. Cafe Coffee Day (CCD) is possibly the market leader regarding retail footprint with more than 2,000+ cafes in 220+ cities across India, with various formats and 600+ kiosks called Value Express.
The data is a rough figure; to be exact: As of March 2015, the CCD group runs 1530 outlets across 29 states of India. And CCD sells 6,500-7,000 tons of branded coffee, exports approx. 28,000 tons of coffee and sells another 2,000 tons locally each year and his Cafe attracts at least 40,000-50,000 visitors per week.
Cafe Coffee Day also has an international appearance in Karachi, Vienna, Dubai, Austria, Czech Republic, and Prague. The business turned over revenue worth $210 million approx., employees 40,000+ and Siddartha has a net worth of $1.3 billion.
Cafe Coffee Day Struggle for control of India’s coffee retailing market
If Starbucks has embarked on its fastest-ever expansion globally in India, the homegrown leader Café Coffee Day (CCD) isn’t easily intimidated. India’s largest coffee retailer has launched some 150 stores in the past 12 months and plans a similar number in the next year. What’s more, it isn’t sticking to one format. In a bid to firm up its position, CCD has launched formats for malls, highways, an upscale offering called Lounge, and a single-origin coffee destination called Square. The world’s largest chain and India’s No. 1 retailer are squaring up for control of the country’s coffee retailing market.
“Our dream is to be among the top three retail coffee brands in the world,” he says. Already, CCD is present in some 200 towns across the country (it is often the first and only coffee retailer in many locations) and is aggressively expanding its footprint. “We hope to grow our retail business at about 20% in 2014-15 [and] we hope to do a revenue of Rs 1,200 crore from retail sales and another Rs 350 crore from the wholesale and export business this year.”
He said,
“We want to have around 2,500 Café and Express outlets in three years…we will set them up wherever there are opportunities, including at educational institutions, hospitals, expressways, and high streets.”
A war chest from such an IPO helped Siddhartha finance what is quickly evolving into a two-horse race for India’s coffee café mart. India’s No. 1 chain, which has spent the past two decades building up its business — and has been predominantly unchallenged — will face up to its strongest challenge yet. The $15-billion Starbucks is preparing to raid its citadel, digging its heels in for a long time.
Jawaid Akhtar, chairman, Coffee Board said,
“Domestic consumption of coffee, which was almost stagnant in the 1980s and 1990s, picked up an impressive pace in the past 7-8 years,”
“We estimate the domestic consumption at about 115,000 metric tonnes a year now which is growing at about 5% a year…driven largely by consumption through branded coffee chains.”
Risky market situations
According to industry estimates, rentals can account for 15-25% of the cost of running a café chain. Then, there’s the investment in making a store appealing to customers with its interiors, finding people to run them, and building a food and beverage menu that’s hip enough to keep 18-24-year-olds — the target market for coffee chains — coming back for more. CCD has tried to find a way around this problem by entering into a revenue-sharing deal, paying 10-20% of a unit’s proceeds as a fee.
“Store location is a prime factor to consider for these chains,”.
“Retail space is becoming very expensive, but you need to balance the ever-increasing costs of this prime real estate by being in areas frequented by the youth.”
- says Reteesh Shukla, associate director, food and agriculture, with Technopak
CCD has been successful in India because of its bean-to-cup business strategy, which gives it control over bean production and processing and greater efficiency from its back-end setup. While Starbucks does have similar strengths thanks to its Tata tie-up, industry watchers say its relative lack of size in India means it’s at a disadvantage in squeezing out similar economies of scale. Opening a new store isn’t just about finding a good location and dressing it up for a brand-conscious audience. Instead, coffee chains need to figure out a tricky supply chain — how to get food and beverage to these outlets quickly without compromising on the quality of coffee.
Swelling Debts and Controversies
Cafe Coffee Day had accumulated a total debt of around Rs 6,550 crore, as was reported in March 2019.
The coffee price hit a 13-year low in the international market, which also dragged the Indian prices when the Indian coffee exports too were down by 10 %. To combat this debt, Siddhartha had to sell his entire 20.32% stake in the Bengaluru-headquartered IT services firm, Mindtree to the engineering major, L&T for around Rs 3,200 crore. The mounting debts were simply unsettling not only for the business but for Siddhartha as well. Even with the selling of his own stakes, going ahead turned out to be really tough because the working capital requirements could not be met still.
All these led Siddhartha to strike a deal with the global beverage maker Coca-Cola for an equity sale in the flagship Cafe Coffee Day (CCD) at an enterprise valuation of around Rs 10,000 crore. Besides, Blackstone was also reportedly in talks with the company to buy a majority stake for around Rs 2,800 crore.
VG Siddhartha slowly started to come under the radar of the Income Tax Department, which first raided the premises of the Cafe Coffee Day owner in September 2017. They discovered around Rs 650 crore of concealed income from the documents seized. The income tax raids were also eventually conducted at 20+ locations, including Mumbai, Bengaluru, Chennai, and Chikmagalur.
The Struggle of CCD continues…
Siddhartha had been found missing since July 29, 2019, and this news of the missing MD was further confirmed by Coffee Day Enterprises. Siddhartha had allegedly told his driver that he would be going for a walk near the bridge and asked him to wait at a distance on the 29th of July 2019. The driver lodged a missing complaint with the police after waiting for two long hours for his return. Two days later his body was found in the Nethravathi river backwaters.
Later letter was found saying,
“I have failed to create the right profitable business model despite my best efforts. I would like to say I gave it my all. I am very sorry to let down all the people that put their trust in me. I fought for a long time but today I gave up as I could not take any more pressure…”
The last report said that the “Management of the Company is putting its best efforts to get the company back on track.” It further added that “the debt levels have reduced significantly from the beginning of the financial year March 2021.”
