A coffee growing business turned into India’s largest coffee retailer

By Abdul Najah, Harish Chandran, Abhishek Mishra • Nov 12, 2018

In 1996, Cafe Coffee Day (CCD) opened its first retail outlet in Bangalore, Karnataka for its customers to come, sit and surf the internet while enjoying their coffee. Hence, the name “Cafe Coffee Day”. The game plan of providing the customers with the novelty of internet kicked off and CCD became the largest coffee retailer in India with more than 1500 outlets across India. Today, the Chikkamagaluru based business grows its own coffee over 20,000 acres of land and is the largest producer of Arabica coffee beans in entire Asia. With revenue of more than $180 million and 5000+ employees, CCD has become the biggest player of the Indian coffee market.

But in a country where people begin and end their days with a cup of garma garam adrak wali chai, it's worth asking how a coffee-based business turned itself into a multi-billion dollar food and beverages conglomerate?

Making of the Conglomerate

“Our dream is to be among the top three retail coffee brands in the world” says V.G. Siddhartha, CEO, Cafe Coffee Day. With such big ambitions, the knick and knacks of turning a coffee outlet in Brigade street to a billion dollar business comes down to one thing- Strategy. And to devise its strategy, CCD seems to play big on data.

Affluence Index Versus Cafe Coffee Day Outlets

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The above map shows all the CCD outlets currently operating in India along with the percentage of the affluent population (% of Rich + Middle Class population) in all districts of India using EFHS and Mint's data. Most of the CCD outlets are placed where there is high concentration of rich and middle-class population. For any food retail chains, especially one like CCD that sells overpriced coffee and expensive food, the placement of its stores plays a more important role to tap the right customer- the one who finds the concept of modern, luxurious cafes appealing with certain disposable income in their pockets- the upper middle class youth.

“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 [relatively less expensive] areas frequented by the youth.”says Reteesh Shukla, associate director, food and agriculture, with Technopak, a business consultancy.

Venturing New Markets

As CCD has successfully established its outlets at almost all the posh localities of the country, they have come up with even bigger expansion plans. CCD recently announced its partnership with Uber’s food delivery arm, UberEats. As the data shows, the strategically placed CCD outlets will help tap customers residing in an area with lower wealth index. Partnership with UberEats will reduce the risk greatly on the side of CCD by eliminating the investment in outlet infrastructure. It will also provide CCD with access to all the surrounding area around the posh localities where CCD outlets are located.

Keeping Competitors Of Gaurd

In the present situation, CCD has successfully dwarfed all its competitors in India. CCD has more outlets compared to all of its competitors combined. The outlets of CCD are spread across 240 cities in India. CCD has 1,480 outlets as of November 2018. At the second spot was Barista, with 190 outlets, a distant second. Behemoth of the global coffee industry, Starbucks has just 101 outlets in India, 50% of which (49) are in Maharashtra. CCD Plans to add 700+ outlets across India by next 7-8 years.

From Coffee to Cafe

“Domestic consumption of coffee, which was almost stagnant in the 1980s and 1990s, picked up an impressive pace in the past 7-8 years,” says Jawaid Akhtar, chairman, Coffee Board. “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.”