Entrepreneurial Journey of Mr. V.G. Siddhartha - CCD Chairman

1. Journey of Mr. V.G. Siddhartha
Chairman of Coffee Day Company

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I. EXECUTIVE SUMMARY
In 1996, young entrepreneur V.G. Siddhartha raised the coffee from a brew to an experience. V.G.
Siddhartha is the chairman of the Bangalore-based Amalgamated Bean Coffee Trading Co. (ABC)
and the man behind India’s largest café chain, Café Coffee Day (CCD). Coffee Day has been a
pioneer. It has brought about a paradigm shift in the cafe space in India. CCD has redefined the
coffee experience; it has been a trendsetter in the cafe space with the mission “to be the best
Cafe chain by offering a world class coffee experience at affordable prices”. CCD, amongst several
multi-national coffee-chains, has a very strong competitive advantage against other businesses.
A competitive advantage Siddhartha has had from the beginning is the ability to cut costs
significantly, by sourcing his coffee from his own plantations. From farm to the cup, there are no
middlemen. Sticking to Vertical Integration Model and Clustering mode of retail expansion has
allowed him to continue to expand and diversify: today, almost everything that Café Coffee Day
needs is sourced in-house.
This report addresses to how CCD has reached this position, how Siddhartha extended his family’s
coffee plantation into a retail coffee chain which has become a leading player in an industry he
virtually created and how it sustains its competitive advantage worldwide.

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II. INTRODUCTION
A. INTRODUCTION OF THE COMPANY AND THE ENTREPRENEUR
Amalgamated Bean Coffee Trading Company Ltd., better known as ABCTCL, is the largest and the
only fully integrated Coffee retailer involved right from plantation to retailing to exports. The
'Coffee Day Group' pioneered the concept of cafés through 'Café Coffee Day', a chain of youth
hangout coffee parlors.
The heritage concept of coffee, dating from over 140 years has been nurtured with care by V.G.
Siddhartha, Chairman of Coffee Day Company. Launched in 1994, the Group is now a Rs. 500
crore, ISO 9002 certified company, making its mark across the coffee value chain. The offshoots
include over 1000 Café Coffee Day joints, around 400 Fresh & Ground stores, over 1000 Coffee
Day Xpress kiosks, and a sizeable 10,000 vending machines from Coffee Day Beverages. Cafe
Coffee Day has also recently expanded outside India with its outlets in Austria (Vienna), Czech
Republic, Dubai & Karachi.
Indian entrepreneur V.G. Siddhartha extended his family’s coffee plantation into a retail coffee
chain which has become a leading player in an industry he virtually created. Siddhartha is that
rare individual who effortlessly wears hats —as both a smart investor as well as a die-hard
entrepreneur and this is what probably makes him a winner in both arenas. He is both an
operations guy as well as a finance.
While working as a financial analyst, Siddhartha discovered that Indian coffee farmers were being
paid far less for their product than their overseas counterparts due to a government monopoly
on pricing. His family had owned and worked a coffee plantation for three generations and he
began buying other plantations and lobbying successfully for market liberalisation.
Cafe Coffee Day's divisions include:
 Coffee Day Fresh 'n' Ground, which owns 450 coffee bean and powder retail outlets
 Coffee Day Square, a high level coffee bar in Bangalore
 Coffee Day Xpress, which runs 900 plus Coffee Day kiosks
 Coffee Day Beverages, which runs over 14,000 vending machines
 Coffee Day Exports, its exporting wing
 Coffee Day Perfect, its fast-moving consumer goods packaged coffee division
 Coffee Day B2C Plant, Coffee vending machine manufacturing division

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B. PROFILE AND BACKGROUND OF THE ENTREPRENEUR
V.G. Siddhartha saw coffee as a ‘Lifestyle’ drink, while drinking coffee in homes was coming down.
With the act “Big-Picture Thinking” Siddhartha turned the brew into the enterprise.
V.G. Siddhartha is an Indian businessman born in Chikkamagaluru, Karnataka, India. Siddhartha
obtained his Masters of Science in Economics from Mangalore University, Karnataka. After his
Masters he went to Mumbai and joined J M Financial Services as a management intern on the
Indian Stock Market, leaving out his family business of growing coffee. After two years he
returned to Bangalore to look after family business. But he was not happy with the size of their
ambition. He wanted to make it really big. Eventually, the cultivation grew from few hundred
acres to few thousand acres because of his desire to increase the cultivation. But because of the
fickle coffee prices the traditional growers got fed up and started selling out their business to
Siddhartha. At the same time, Siddhartha was feeling helpless about how to carry out with a
business of inconstant pricing.
The Bulb moment:
Then he looked at the basics of coffee business, the numbers threw him off. The world grows
around 120 million bags of coffee bean every year which costs around $7 billion approximately.
But when the same bean is retailed as a cup of coffee the value becomes $100 billion. Siddhartha
thought himself that he wanted to chase the $100 billion mark, not $7 billion. So, he called his
advertising agency and discussed them about his idea of retailing a cup of coffee. They cautioned
him about the reducing intake of coffee in south Indian homes.

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Siddhartha wanted young boys and girls to taste his brew during their hangout, parties, get-
together etc. He wanted them to taste their choice of coffee, cakes and sandwiches, watch music
videos, check their emails etc. The first Cafe Coffee Day outlet was set up on July 11, 1996, at
Bangalore, Karnataka with the tagline ‘A lot can happen over a cup of coffee’. Today Cafe Coffee
Day chain has thousands of outlets in all States of India. Café Coffee Day also has international
outlets in Karachi, Vienna, Dubai and Prague.
C. AN OVERVIEW OF THE IDEA GENERATED
Just as the origin of Coffee in India started with seven magical beans from Yemen, the entire
ABCTCL’s empire was inspired from a single plantation, the Shankara Kudege Coffee estate in
Chikmagalur, bought in 1871 by the ancestors of VG Siddhartha. Although in the pre-1990s Coffee
trading was a government monopoly, Siddhartha’s strong intuitive optimism motivated him to
buy coffee plantations in the hope of liberalization to come by. This preemptive strategy paid off
when the country underwent Liberalization, Privatization and Globalization in 1991 and the
Government eased FDI regulations. In 1993 the Amalgamated Bean Coffee Trading Company Ltd.
was formed which focused solely on coffee exports. In 1995, within just two years of inception,
ABCTCL became the second largest coffee exporter from India.
In 1996, realising the limited growth opportunities in the B2B exports business, ABCTCL decided
to enter the business-to- consumer (B2C) market in two major ways. It opened Fresh ‘n Ground
- the first ‘neighbourhood coffee store’ in 1996 with the promise of selling freshly ground coffee,
which today has a footfall of about 1 Lakh customers a day. Inspired by the Singaporean internet
cafes that served beer, ABCTCL launched the first Cafe Coffee Day (CCD) in Brigade Road,
Bangalore, in 1996. Bundling coffee with internet surfing proved to be a runaway success and
gave CCD the first mover advantage into a segment that promised endless growth.
Until the year 2000, the growth in Cafe segment was rather slow (only 14 CCDs), as ABCTCL faced
many technical glitches in scaling up this bundled offering. In late 2000, it took a bold move of
disassociating itself from the internet service and focused on launching full-fledged cafe targeted
at the youth (15 to 30 year olds) cleverly positioning itself as ‘a place, between home and work,
to hang out with friends.’ This considerably increased the expansion pace and by the year 2001,
ABCTCL had 35 CCDs operational, predominantly in the four southern states.
However, in 2001, Barista entered the Indian market in a big way opening about 80 stores by the
end of the year. ABCTCL instantly switched to rapid expansion path, simultaneously building
capabilities to facilitate its rapid growth. CCD followed the Clustering mode of retail expansion,

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where over 10 CCD outlets populated a radius of say 2 km, closely interspersed with competitor
Cafes.
The presence of competitors such as Barista led to Co-Category Creation. The combined efforts
of both players resulted in increasing prevalence of Cafes and a growing consumer base. However,
this also led to a coercive need to expand and CCD began to explore new formats of Cafe Retailing
arising from a rigorous market research based on ‘Dwell Time’.
Thus, in 2002, the company launched a ‘quick café’ under the brand name CCD Xpress, which
now has about 922 outlets in the country. The company also started International operations in
2005, launching its first cafe in Austria – the country with the highest Coffee consumption.
ABCTCL acquired Emporio, of the Czech Republic in order to facilitate expansion in Eastern
Europe, in June 2010. These helped build economies of scale and attain cost-leadership status
both in India and overseas. In its path to exploring newer CCD formats, ABCTCL launched CCD
Square, a high-end fine dine hangout that offers a holistic coffee journey, in 2008, in Vittal
Mallaya Road, Bangalore. It also started the CCD Lounge in 2010, at Koramangala, Bangalore, a
Cafe that offers plated meals and a greater variety of Food and beverages.
D. NATURE OF BUSINESS
The parent company, Coffee Day Co. is a multi-business organisation which includes agri-business,
retail, logistics, investments, and infrastructure verticals in its portfolio. Following is a brief
description of each business vertical:
1. Agri-business
This could be considered the family heritage for Coffee Day Co. The promoter (V.G. Siddhartha)’s
family has been in the coffee business for more than 140 years (since 1870). Currently, the group
owns 11,000 acres and manages another 3000 acres. Eighty per cent of the plantations grow
Arabica coffee and the remaining 20% grow Robusta. The largest producers of Arabica coffee in
Asia, all their estates are UTZ certified for best management and traceability practices. (Coffee
Day was the first company in India to get the UTZ certification, a certification provided for
responsible professional coffee growing.) They employ more than 3000 skilled plantation
workers. Coffee Day Company’s Amalgamated Bean Coffee Trading Company Limited is the
largest integrated (growing, processing and retailing) coffee company in India.

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2. Retail business
Coffee Day Company’s retail business consists of the Cafe Coffee Day chain, Coffee Day Xpress,
Coffee Day Beverages, Coffee Day Fresh and Ground, and Coffee Day Exports.
Pioneering the coffee cafe concept in India, Cafe Coffee Day was launched in 1996 with equal
weightage on being an Internet cafe and as a specialty coffee cafe. All cafes are company owned
and operated. There are 45 Cafe Coffee Day Lounges that are targeted towards families and the
trendy affluent and offer more varieties of food (breakfast, lunch items etc.) and better ambience.
The Cafe Coffee Day Square is the high end cafe serving single origin coffees from across the
world. It is targeted towards international customers and affluent Indian customers.
The Coffee Day Xpress is the regular café with varieties of coffee, tea, cold beverages, and limited
food options. It is targeted towards the youth and the average middle class Indian consumers.
Currently there are thousands of Coffee Day Xpress and many of them are at high footfall and
captive locations such as large corporate campuses, office buildings, hospitals, metro and
railways stations, and so on. Internationally too there are CCD cafes in Vienna and in the Czech
Republic.
Coffee Day Fresh and Ground deals in retailing of fresh ground coffee powder in 22 different
blends. There are 412 outlets in South India and 4500 clients in the HoReCa (hotel, restaurant,
catering) segment.
Coffee Day Beverages also sells indigenously manufactured coffee vending machines. They have
about 6500 corporate accounts and 18,000 vending machines have been placed across India
serving freshly brewed coffee. About 50 million cups of coffee and tea are dispensed monthly
from these vending machines. They also retail single-serve solutions in coffee in the form of
capsules and sachets and the company has plans for more variants as well as aggressive
expansion plans.
3. Logistics business
The CCD group owns Sical Logistics which is a single window multi modal logistics solution
company. Sical handles more than 26 million tons of bulk cargo and 600,000 TEUs per annum
across all major Indian ports. It is also the market leader in surface logistics with a pan-India
presence. It also has cold chain operations for the captive needs of CCD and container train
operations between Chennai and Bangalore.

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4. Investments business
With his investment banking experience, stock market operations have been one of Mr.
Siddhartha’s major strengths. Apart from his own investment firm, he has significant investments
in multiple IT and technology based business ventures (viz., Mindtree, DSP Technologies, Way 2
Wealth, etc.).
5. Infrastructure business
Coffee Day Co. owns Tanglin Development Ltd. that develops world-class infrastructural facilities
for technology enterprises. They have a 120 acre campus in Bangalore with SEZ approval that
houses companies like Mindtree, Accenture, EDS, Kyocera, Texas, Textron, Sonata, Keane etc.
They also own the Tech Bay at Mangalore and the Integrated Township at Mumbai. Apart from
these, there is the Coffee Day Hotels and Resorts Chain (the Serai Resorts) at multiple places in
the country (Karnataka, Kerala, Rajasthan, Andaman and Nicobar Islands) targeted towards the
affluent class.

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III. Business Model
A competitive advantage Siddhartha has had from the beginning is the ability to cut costs
significantly, by sourcing his coffee from his own plantations. From farm to the cup, there are no
middlemen. Sticking to this Vertical Integration Model has allowed him to continue to expand
and diversify: today, almost everything that Café Coffee Day needs is sourced in-house.
His estates not only provide coffee beans for his retail chain and for export purposes, they also
supply the timber for the company that makes furniture for all his Coffee Day outlets. A recently-
acquired logistics company handles the supply chain.
In terms of business strategy, Café Coffee Day maintains a keen focus on the consumer and his
wants, needs, desires, and aspirations at the front end, and a corresponding focus on delivery of
quality and brand experience at the back end. Every month Siddhartha visits around fifty of his
outlets and regularly points out areas where his managers could improve. That’s the reason
investors put money on him, not for sitting in air-conditioned offices.
At the cafe, they sell coffee, food, merchandise and a certain amount of music. A large chunk of
revenue that the parent company generates comes from exports, followed by profit margins
from the cafes as well as coffee powder retail followed by vending division and kiosk division
Express coffee.
Target audience
A typical Cafe Coffee Day consumer, demographically, would be male or female between 15-29
years of age, belonging to middle or upper middle class. About 40 per cent or more are female.
The typical consumers at cafe is young or young at heart. Anybody who is youthful, be it in terms
of age or outlook, would like to hang out at a Café Coffee Day because of kind of ambiance offered.
Customer value proposition
The customer value proposition for Cafe Coffee Day (retail business) is given in the Table.

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Key resources
Key resources play the most significant part in the delivery of the customer value proposition.
The key resources for the CCD chain are given in Table. Cafe Coffee Day has strong assets to
support a sustainable business model.
Strategies/Approaches:
 Reinforcing brand image with the cluster approach strategy
 Company-owned stores instead of franchises to not dilute brand value
 Lower pricing and ‘no-segmentation’ approach

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Marketing Mix
Product:
CCD product mix constitutes a wide range of products that appeal primarily to Indian coffee and
snack lovers. Products have a decided Indian taste to it be it food or coffee. Most of the eatables
have been adopted to meet the Indian taste buds like samosa, masala sandwich, tikka sandwich
etc. Thus they have been trying to capture the Indian taste along with classic coffee. The best-
selling item in summer is frappe, which is coffee and ice cream blended together. The young
people favour it. In winter it is cappuccino. Their merchandising includes funky stuff like t-shirts,
caps etc.
Price:
Considering that CCD knows its major customer lies in the bracket of 15- 29 years, it has tried to
derive a policy whereby it can satisfy all its customers. The price for a cup of coffee ranges from
Rs.45 to Rs 80. From the time it first started its operations, there has been only minor changes in
the pricing policy of CCD. The changes have been more due to the government taxes than
anything else
Place:
The strategy CCD has adapted is to place a cafe in every possible location where some business
can be generated. This is a prime factor in determining the success of a retail chain. CCD looks to
cater to their target market with strategically located outlets.
Their outlets are generally located in High Street/ Family Entertainment Centres, gas stations,
near Colleges etc.
Promotion:
CCD is involved in all the areas of serious consumer passion like:
Television: CCD held a contest around a very popular programme on Zee English called Friends.
All the six lead characters are shown often visiting a coffee shop. They have tied up with Channel
[V]s Get Gorgeous contest.
Tie-ups: Besides that CCD also tie up lot of the youth brands. So they have a contest going on
with Levis, another one with Scooty, Liril, latest one with Airtel Friends.
Association with movies: CCD can be seen in movies like Khakhee and Mai Hoon Na

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Sales Promotion: CCD uses special ‘Cafe Citizen Card’ for rewarding Cafe Coffee Day’s customers.
It is a loyalty program to gain new customers and retain the existing ones.
Process:
The ordering and delivery process in CCD was earlier based on self- service. But now in most its
coffee shops the waiter comes and takes away the order and delivers the order on table.
Physical evidence:
Logo, image, and brand: CCD has used bright red and green colors in its older logo. RED stands
for leadership, vitality, passion for coffee. The GREEN stroke harks back the coffee plantations
that they own. Cafe is noticeably larger in the logo to denote that CCD pioneered the cafe concept
in India way back in 1996.The font looks as though the letters have congealed out of a liquid The
word ‘Cafe’ was made to appear dominant to indicate Cafe Coffee Day’s introduction of ‘Cafe
culture’ in India.
After recognizing the buzz of conversations that invariably accompanied the coffee being served
at their tables. CCD introduced a new logo with a ‘Dialogue box’ in it. This was to highlight the
strong connection between ‘Coffee’ and ‘Conversations’. Another indication of the dialogue is
the two-way conversation between CCD and its customers
Architecture and Decor: Largely wood and granite based interior with young colors of today, like
lime green, yellow, orange, and purple predominate.
Literature: The literature provided by CCD is indicative of its youthful image. The menus, posters,
pamphlets are all designed to attract young and young at heart
The Tag Line: "A lot can happen over coffee" became a popular line among youngsters. In a bid
to take their coffee chain national in 2000, the management decided to strengthen their brand
pull with an appealing tag line. Factors like ambience, food, music, and atmosphere and meeting
people were identified as the aspects that were drawing people to their Cafes. Encompassing all
these factors in a single line, the sentence "A lot can happen over Coffee,” was phrased.

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IV. Industry/Sector Analysis
The Indian coffee retail market has been buzzing over the last 12 months with two key players
Cafe Coffee Day and Starbucks on expansion drive. The market size of retail coffee in India is
estimated at Rs 1700 crore plus and expected to grow at a fast pace of over 20% in the recent
times.
Consistent growth of consuming class and increasing time-pressured consumer is giving way to
convenience-based option, primarily driving the growth of cafes. Organised market contributes
near 15% to the total food service market in India. Of the $14 billion market in 2012, unorganised
sector contributes $12 billion. Quick Service Restaurants will continue to absorb maximum share
in organised market in the next 5-7 years with sustained 50% share in the next 5-7 years.
While Cafe Coffee Day (CCD) is the market leader in terms of retail footprint, international chains
like Gloria Jean's, Costa Coffee and Coffee Bean & Tea Leaf have a limited footprints in metro and
mini metro cities.

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V. Market share of the company
Cafe Coffee Day is the leader in India’s specialist coffee shop sector with a 64% market share,
according to Euromonitor data.
VI. Financial Performance
Revenue: US$ 450 million
VII. Life Cycle of the Enterprise
The Life Cycle Stages in Cafe Industry:
Introduction
Features in low sales with high retail prices for goods, high advertising costs and selective
distribution channel across limited markets. In cafe industry, this is a period of low to negative
profits due to the high costs of advertising and growing of a customer base.
Growth
Features in rapid increases in earnings. Price can stay at its high level if demand for the product
remains high, or it can drop to capture more consumer attention. The growth stage occurred
during the late 1990s through the early 2000s, when chain coffee shops offering specialty coffee
beverages appeared on every street corner across the country.

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Maturity
Features high brand awareness, wide distribution, lower prices to remain competitive and new
product modifications to create brand distinctiveness. The rise of competing in specialty coffee
chain, all with distinctive brand features to cater to specific demographics within target market
segments.
Decline
Threat of substitution is the symptoms of decline in the industry. Modern coffee makers enabling
consumers to make single cups of coffee in just a few minutes provide new convenience while
removing the need to wait in line for purchase. Fast food chains also have entered the coffee cafe
market, seeking to snatch consumers from established coffee companies by offering comparable
specialty coffee beverages at lower fast food prices.

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VIII. Challenges
1. Coping with competition from domestic players and entry of Foreign Players
In order to cope with increasing domestic competition, ABCTCL shall have to motivate and retain
its best baristas and brew masters. This would require continuous heavy investment in building
and supporting the company’s, existing supply chain capabilities. Advertising the brand through
various online communities and an additional effort to ramp up the company’s real estate
capabilities to scout for premium locations in the developing regions of tier-2 and tier-3 cities
would be essential to stave away competition.
2. Internationalization into newer markets
The coloured lines in Figure shows the different strategies that firms can adopt for going
international. The bold blue lines highlight ABCTCL’s internationalization strategy. Point ‘A’ shows
where ABCTCL started when it launched its first Cafe. ABCTCL concentrated entirely on category
creation. Over the next few years as it developed more capabilities and strengthened its
operations ABCTCL looked to develop a full line of products to cater to every segment (point ‘B’).
It was after this that ABCTCL looked to go global (point ‘C’).
The approach that ABCTCL has employed for internationalization has served the company well,
but they shall have to monitor a few important issues in order to sustain the growth.
 Some amount of customization, based on the operating region, can help the company
gain more acceptance
 With Starbucks at the doorsteps and other chains like Costa Coffee rapidly expanding in
the Indian market, ABCTCL must take adequate steps to defend their market share in Indi

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 Given the huge domestic market for its product range and a presence across the entire
value chain will ensure that the company remains cash rich
 ABCTCL should examine factors such as coffee consumption patterns, scope for growth
and the intensity of competition in the destination country (e.g. expansion in Vienna,
Austria which has the highest per capita consumption and the recent acquisition of
Emporio4 in Czech Republic to expand in the eastern European market which is expected
to grow rapidly but faces very little competition)
3. Sustaining Rapid growth in a dynamic industry
The reinforcing feedback loop also fuels the growth for ABCTCL, as shown in Figure. Production
of Coffee leads to export and selling, which gives way to new category creation, i.e. introduction
of café segment, which opened the market to new set of customers and in turn increased the
demand for Coffee production. This pattern of reinforcing loops, called ‘Growth Cycles’, converge
on a customer base driving the growth of businesses pursuing “new games” strategies.
4. Balancing Standardization vs. Localization
Creating a more customized menu for its customers in terms of identifying slight differences in
taste preferences across the country will help the company effectively compete with local brands,
and differentiate itself from global/national majors. For example, coffee drinkers in South India
prefer a stronger flavour in their coffee when compared to those in the rest of India. ABCTCL
could incorporate this by offering their traditional coffee (e.g. a Cappuccino) in the form of three

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variants – light, regular and strong. It could also introduce different size of serving for its coffee
(e.g. small, regular and large). By doing this ABCTCL signals to its customers that it understands
its coffee drinkers and their preferences.
5. Adapting to changing consumer needs
A study by the Coffee Board of India indicates that there exists an Opportunity area – Offices and
Colleges segment – that have a low penetration yet high frequency of consumption. Thus, Coffee
Day can focus on further increasing its presence in corporate premises and university campuses.
Besides this, ABCTCL should also look to maximize its growth in newer segments like highway
cafés and health resorts. Investments in technologies (such as blast freezing food products,
temperature controlled vehicles etc.) to support such formats have already been undertaken and
the company should look to leverage its advancements to feed these formats. Experimenting
with flavored coffee or medicated tea is another way of increasing variety offered to the
customers.
6. Identifying white spaces in the industry
In order to sustain profits and rapid growth in the years to come, ABCTCL should efficiently
explore White space opportunities, identify Profit Pools and formulate Growth Platforms, as
described by the Sustainability Model. Identifying White Space opportunities requires constant
scanning of market along three dimensions – context, customer and competition – in order to
identify the prospective growth opportunity. Identifying pockets of growth and profit in the
company’s portfolio and harvesting or investing in the chosen ones that display promise of
greater returns. Profit Pools for ABCTCL are currently the Cafe Division and Xpress division. The
identification, selection and prioritization of growth platforms based on existing capabilities are
important. Existing growth platforms for ABCTCL are its rapidly growing Vending Division and
Xpress division.

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IX. Opportunities
1. Introduction of cheaper versions of coffee
2. Tapping the smaller towns/cities
3. Merchandising
4. Tie ups with other companies for promotion
5. Over 40% of the population is under the age of 20, hence untapped market share and
potential for growth.
6. The use of clever collaborations, for example with bookstore, etc.
X. References
 www.cafecoffeeday.com
 www.casestudyinc.com
 brandbrews.coffeeday.com
 www.slideshare.net
 www.corporatevalley.com
 www.moneycontrol.com
 articles.economictimes.indiatimes.com
 www.studymode.com
 The Coffee Day Journey, Cup by Cup - tejas.iimb.ac.in
 www.sciencedirect.com