Cafe Coffee Day (CCD), an iconic Indian coffee chain, captured the hearts of coffee lovers and became a symbol of youthful exuberance. However, the story of Café Coffee Day is not just about the aroma of freshly brewed coffee; it is a tale of entrepreneurial passion, triumphs, and an unfortunate downfall.
Cafe Coffee Day (CCD) has grown to be a popular hangout place for Indians since it opened about 25 years ago. It helped to define the café culture in India. CCD stores may be found all across the nation in corporate parks, colleges, and on major highways. The company's amazing success was fueled by the ambitious and strategic vision of its creator, V.G. Siddhartha.
V.G Siddhartha: A Bittersweet Journey
V.G. Siddhartha hailed from an affluent family of coffee planters in Chikmagalur, Karnataka.In Chikmagalur, Karnataka, V.G. Siddhartha came from a wealthy family of coffee growers. He made the choice not to work for the business of his family after completing his master's in economics. He chose to leave his comfort zone and launch a business on his own. He relocated to Mumbai in the early 1980s, where he began working as a trainee/intern with JM Financial Services. He learnt about the stock market there and learned how to manage the accounts of various big businesses. In 1984 he came back to Banglore and bought Sivan Securities, a stockbroking and investment banking firm which is well known as Way2Wealth Securities.
Amalgamated Bean firm (ABC), a coffee trading firm founded by V.G. Siddhartha, was created in 1993. It is a fully integrated coffee company that buys, processes, and roasts coffee beans. They also began selling coffee products and beans in stores and exporting them. ABC grew to be India's top coffee exporter between 1993 and 1995. Siddhartha came up with the concept of fusing technology with the experience of drinking coffee after researching the trends in coffee hubs during his travels abroad.
In 1996, he opened the first Cafe Coffee Day (CCD) at Brigade Road, Bangalore, with an initial investment of Rs 1.5 crore. It provided internet access in addition to selling coffee at Rs 25 per cup. The concept immediately worked, and the café started to draw in young people from the city (mostly IT professionals).CCD began selling espressos and lattes in a nation where filter coffee was the most popular type of coffee. It came to represent the urban culture of India.
Other Indian cities were quickly added to the Cafe Coffee Day network. With more than 1,700 stores, CCD during the following two decades grew to become India's largest coffee vendor. Additionally, it adjusted its pricing strategy to reflect Indian consumers' purchasing power. Instead of setting higher prices for the coffee-based products, CCD concentrated largely on increasing footfall to its stores.
CCD Over Ambition and its After-Effects
Coffee Day Enterprises Ltd (CDEL) is the parent company of the Coffee Day Group, which houses CCD outlets.The parent firm of the Coffee Day Group, which includes CCD shops, is called Coffee Day Enterprises Ltd (CDEL). In 2015, CDEL went public. V.G. Siddhartha became a significant participant in the Indian coffee chain market due to its creative ideas and business spirit. To increase sales, they employed innovative marketing and promotion techniques. Profit for CCD was Rs 8.03 crore in FY17, Rs 48.94 crore in FY18, and Rs 60.27 crore in FY19. In addition to selling coffee internationally and operating cafes, CDEL was also active in the financing, hospitality, and logistics service sectors.
However, from an operational standpoint, things weren't always easy. In 2015, CDEL has accrued debt of Rs 6,328 crore as a result of its ambitious growth desires. By March 31, 2019, this amount increased to Rs 6,574 crore (FY19). Siddhartha and CDEL promoter group's four private holding entities pledged shares worth Rs 3,522 crore as collateral to raise these significant loans between 2014 and 2019. Additionally, the Income Tax (IT) division once conducted a search on CDEL's premises and discovered almost Rs 650 crore in concealed income.
In addition, CCD had to deal with fierce rivalry from Starbucks, Barista, and recently opened regional brands like Chaayos and Chai Pe Charcha.
The suicide of V.G. Siddhartha, the managing director of CDEL, was disclosed on July 30, 2019, by CDEL. Siddhartha purportedly left a note addressed to CDEL's board describing the circumstances behind his passing and his failure as an entrepreneur.
The company's downfall was caused by faulty debt management and a lack of control over funding decisions, as revealed by the founder of CCD's suicide. According to data, V.G. Siddhartha's debt pile may have once exceeded Rs 11,000 crore.
The Legacy Left Behind
In December 2020, Malavika Hegde succeeded her husband as CEO of Coffee Day Enterprises Ltd. She served as a non-executive member of the company's board of directors alone. Since 2008, she has been in charge of CCD's daily operations. When Malavika took control, CDEL owed a total of Rs 7,200 crore. She needed to keep the company afloat since thousands of jobs were on the line. Currently, CCD has 333 CCD Value Express kiosks and 572 cafés throughout 165 cities.
By March 2021, Coffee Day had reduced their debt to Rs 1,731 crore because of her leadership.She ultimately stood up to the challenge and was able to bring down the company’s debt by 75%. According to sources, CDEL gave their lenders Rs 1,644 crore. The business also sold a share in Mindtree Ltd. and received an undisclosed sum from US private equity firm Blackstone, both of which assisted in debt reduction.
Investors are encouraged by Cafe Coffee Day's tenacity and the new CEO's ability to preserve V.G. Siddhartha's legacy. The business is now trying to recover and is anticipated to perform well in the upcoming years.