From selling plain vanilla coffee beans and bags for years and years, VG Siddhartha ventured into the café business some 20 years ago. As India’s consumption story blossomed, Siddhartha’s Café Coffee Day became a popular meeting place for professionals and a cool hangout for teenagers. From nothing, Café Coffee Day today has 1,500 cafés across the country serving 200,000 cups of coffee every hour. That translates into ₹1,400 crore in revenues for his diversified group, which is into financial services, software and logistics. Having conquered India, Siddhartha wants to grow his enterprise into one of the top café chains in the world. That dream is worth a few billions, but before getting there, he has to deal with Starbucks and a multitude of other global players on his home turf. As Coffee Day Enterprises waits in the wings to hit the public market, chairman Siddhartha talks to Outlook Business in an exclusive interview about his strategy to deal with competition and to propel growth.
Café Coffee Day has managed to move from the commodity business to setting up a café business and you have grown quite rapidly since the time you started. While the strategy is bang on, the execution is still a work in progress.
In this process of evolution, I would be kidding myself if I said I have got it 100% right. I come from a financial services background without any knowledge of branding. Getting into the coffee business was just a fluke. We started off with exporting coffee and realised two years later that it would not take us too far.
My role model is a company called Tchibo in Germany (a chain of coffee retailers and cafes). I remember reading about them in 1994 and I was taken aback. Tchibo started in a 10x10 store in 1949. I was inspired by that and started with 20 stores in South India selling coffee powder. In 1995, we decided to take the café route since there was a bigger opportunity for value addition here. In the coffee powder business, the markup is 100%, while in the café business it is as much as 800-900%.
My colleagues in marketing did not think it was such a great idea. We looked at how other brands internationally built the business and that is how we learnt. We have got only 70% of it right, although we have done a good job with our new outlets, which are as good as any international cafe. When we came to Mum