It pays to wake up and smell the coffee

VG Siddhartha, Founder, Coffee Day Group

How VG Siddhartha grew Café Coffee Day into a phenomenon

Bengaluru, October 12

“A born optimist” is how VG Siddhartha describes himself.

The Chairman of Coffee Day Enterprises Ltd got into the coffee retail business on a hunch backed by a huge risk appetite. Born into a family that has been growing coffee since 1870, Siddhartha was not exactly a stranger to the field, and spent most of the money he made in the stock market buying coffee estates. Today, his family owns 12,500 acres in Chikmagalur and Hassan districts of Karnataka.

Siddhartha has spawned a coffee culture amongst the youth with a chain of 1,538 Café Coffee Day (CCD) outlets, which is four times that of all the competitors’ outlets put together. 

Today, he’s keeping his fingers crossed for the company’s IPO, which opens on October 14 to raise ₹1,150 crore to fund expansion plans.

The beginning

“The idea started in 1985, when I was constantly analysing international coffee trends. International coffee prices were at $1.2 per pound and Indian growers were getting just 35 cents per pound,” recalls Siddhartha, who, along with a few colleagues, met then Finance Minister Manmohan Singh in 1991 with these statistics.

Within six months the Finance Minister ended the Coffee Board’s monopoly in marketing coffee, and thus was Café Coffee Day born, says Siddhartha, who is also the son-in-law of former Karnataka Chief Minister SM Krishna.

 Between 1993 and 1995, the company became the largest exporter of coffee. “It was a virgin market and we were lucky to be the first movers. I realised then that if we could become so big in just two-three years, we would surely be overthrown by global competition some day. When we started the first CCD store in Bengaluru in 1996, overall consumption of coffee in India was just 50,000 tonnes per annum. Today it is 1,10,000 tonnes and we can largely take credit for that increase,” Siddhartha says.

The company decided to tap the IIMs for talent and with that came 20 coffee powder stores. “Today, we have 412 coffee powder stores. After selling coffee powder for six-eight months, we realised this business will be restricted to the South Indian market. If we wanted to build a pan-India brand, we had to have another product.”  

Siddhartha decided to put up a café on Brigade Road here. But the idea was quickly vetoed by a colleague. “He asked me at what price I wanted to sell coffee and I said at ₹25 a cup.  He said — at a three-minute walk from that location coffee was available at ₹5 a cup. Why would anyone buy coffee from us,” recalls Siddhartha, who then reluctantly dropped the idea.  

Net package

However, he hadn’t entirely given up on it. After four-five months, he was taking a post-dinner stroll at the Boat Quay area in Singapore, when he saw people surfing the net and drinking beer.

Back home, he asked his colleague whether they could  add an internet offering in their high-end coffee shop along with a 17-inch colour monitor. Back then, just about 10,000-15,000 IT professionals in the city were using the net.

The idea clicked and theirs was the first café with a 64 KVA line offering internet.  Plans are now afoot to offer 4G services to draw more traffic at CCD outlets.

Siddhartha’s success story is that of business acumen backed by optimism, but even he had not imagined the potential of coffee retailing.

“If you had then asked me how many stores I planned to open, I would have said 15 — three in Bengaluru, five in Mumbai, five in Delhi and none in Ahmedabad or smaller towns.

“Today, in Ahmedabad alone we have 22 stores and the city can easily take another 22.”

Published on October 12, 2015

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