19 May, 2006

Known company, Unheard story

Cafe coffee day is my favorite company in recent times. I wrote about its business model earlier in my blog. Recently read/heard a lot about its origin and spirt of entrepreneurship it nurtures. VG Siddhartha leads the CCD's dominance in coffee retailing. No wonder you never heard about him earlier, he is a media-shy person and he keeps his profile low because of inintentional political tint associated with him. He is son-in-law of SM Krishna, former congress chief minister of karnatka. Other than family relationship, Siddhartha maintains a well kept distance from politics.

His story is one more Indian rags to riches story in post-globalisation regime. Not completely a first generation entrepreneur, he had his dad to give him a huge sum of money to start business with. He got trained in management in JM Morgan Stanley, Bombay. After his management trainee tenure, started a share investment company called Sivan. He started investing every penny of profit he gets out of his share business into coffee plantations in chickmagalur in karnataka. He has been a lot of coffee plantaion then. Now his empire is India 2nd largest coffee plantation, next to Tata. Identifying the potential coffee retail market and staunchly believing in Indian economy is laudable attributes I like to speak about him. India's economy is a success story in itself and it has potential to write a lot of business success stories in history. Siddhartha believed in this buoyant economy when he started his company. His belief is earning him in tons of golds these days.

Those days, coffee plantation owners sell their products to coffee boards of Indian goverment. Post-1992, they were let off in the free market. Siddhartha started his Amalgamated Bean CoffeeTrading Limited and started trading coffee. He entered in coffee powder retail market first. The Barista evolution in India in 1990's and Star Bucks influence lead him to cafe retailing in the brand name of Cafe Coffee day. Now CCD has more than whopping 300+ retail outlets all over India. They cover a huge retail area in Bangalore itself. In Indiranagar where I am residing, there are four CCD outlets in the near vicinity and still all are brimming with crowds all through the peak hours and in weekends. Coffee days are identified as youth icons and their 23% percent of business comes from teenagers. Remanining market percentages are shared by adults in age group of 20-29 years. His aim for the company is to become "StarBucks of India". With the profits of CCD, Siddhartha has diversified to technology ventures with his new company. It had invested in best known startup companies in India like Ittiam. Way to go indeed!

Now some economics funda, their profiit model could be explained as pyramid model. Defining pyramid profit model: these companies offer different product ranges for different segments of people in society. Basic ingredient is same, but quality and frills are changed to accomodate multi level society. A classic example of this profit model is retail petrol pumps, where you could see them selling petrol/diesel in different price tags with a differentiation in oxidiser content. I could see a tint of saturation logic of Walmart model too. Saturation logic symbolises the company to open a lot of retail units in the same circle and saturate the market. Which will provide a tough challenge to its competitors to enter that retail region. Walmart is often quoted/fussed about for sticking to this saturation profit model, they started in rural america, slowly saturated the market and then went further towards urban area. By the time walmart entered urban area, they had become a giant with big market in rurals which can never been taken away from them. By the time other retailers had woken up to competition from Walmart, they had scaled new peaks in revenues.

External Links

[+] Coffee day group home

[+] Amalgamated Bean coffee trading Ltd

[+] Global Technology Ventures


Read more!

11 comments:

Ghost Particle said...

amazing story...i wish i could do something great to get money and try to save the world.

Nirek said...

@gp, thats good spirit bro! I love it

Ghost Particle said...

hey satu...thanx for the comments...updated the post again! make sure u read it...

Ranjhith said...

Hmm me too wondered (http://thrattle.weblogs.us/2005/07/11/bandhipur/) abt Coffee Day. There is lot of craze abt coffee.
How abt venturing into something called Tea Day? This idea got conceived seeing the menu at a Coffee Day outlet.

Nirek said...

@ranjith, yeah bro, coffee day really rocks. Tea day concept is also sounds plausible! indian tea is quite famous indeed!

Sethu said...

Hi Satheesh,
That was a good one. Your writing has a maturity which is heartening to see.

Nirek said...

@sethu.
Thanks buddy! I am jus learning expressing my opinions and feeling freely. Learn a lot from fellow bloggers. I own a lot to this blogworld and bloggie frens.

Rising...... said...

great one!! but am afraid of the '*bucks' which is making foray into market, and our 'west is the best', soo called cool teenagers who may ignore coffee day and go to the US outlet!!

Nirek said...

@rising...
'west is best' culture is complicated issue to generalise. when best of the world companies enter india, it is highly imerative that they will attract lot of indian youths. but for indian companies, retention becomes do-or die situation. If a company has got good values and dont fear for competitiveness, it will SUSTAIN and compete. (like Tata foray in automobiles market where only MNC's play).

Anonymous said...

v.g.siddhartha is a venture capitalist.is business not only includes stock market,coffee & tech,but also real estate granite business

Anonymous said...

Cafe Coffee Day has several problems.

1) their coffee is so unreliable that you cannot believe what you're getting at times. I mean, one time, you get a decent cup of coffee there, and the next time, it's a completely undrinkable cup of urine. This is breaking rule #1 of franchises.

2) Even when you do locate a Coffee Day employee who has a clue, the cup he makes for you will never as good as the coffee at Kalmane. I think the beans are substandard.

3) As others have mentioned, it's just way too damn loud inside the place. Makes me want to run out as soon as I can whenever I "have" to stop at a Coffee Day.