Cafe Coffee Day (CCD) was not just a cafe or a coffee chain, but an emotion. Hours-long conversations with a cup of cappuccino, latte or mocha may not be something out of the ordinary today, but during the era of CCD, its mere presence brought in a revolution in the coffee drinking culture.
The death of the founder and chairman of the parent company, Coffee Day Enterprises Ltd, VG Siddhartha, spelt the end to its purple patch. At present, CCD Day operates 572 outlets in 165 cities across the country, apart from 36,000 coffee vending machines.
Storyboard18 takes you through the good old days of CCD, the changes it brought in and the bankruptcy case it is dealing with.
Slow and steady ascent
A double economics holder from St Aloysius College and Mangalore University, Siddhartha, as per an article, was impressed by the philosophies of Karl Marx. Would anyone have ever predicted that a failed National Defence Academy entrance exam would pave the way to revolutionising cafe and coffee drinking culture in India?
July 11, 1996, marked the start of an era when Siddhartha established the first outlet of Cafe Coffee Day in Bengaluru, or Bangalore as it was then. The slogan read, ‘A big deal can occur over some espresso’.
He was inspired by the German coffee chain Tchibo, which led to the birth of CCD or the cafe that presented a perfect hangout place for GenZ and millennials.
Within a year of CCD’s initial public offering in 2015, 2,000 bistros had spread across the country, from the 1,000 bistros reported in 2011.
In 2016, CCD started Cafe Concerts which attracted a younger crowd. The concerts specifically looked into live gigs in cities like Mumbai, Pune, Delhi and Bengaluru. In the same year, CCD partnered with Freecharge, a financial services company, to encourage cashless exchanges at the outlets.
Death of Siddhartha, and the slow descent
In 2010, a group of private equity (PE) firms led by Kohlberg Kravis Roberts (KKR), an American investment company, invested over $200 million or Rs 1,000 crore in Coffee Day Resorts, a company owned by Siddhartha, for a 34 percent stake.
Around the same time, CCD went in for a change of logo and adopted the new tagline, ‘A lot can happen over coffee’, which is what we see today.
Coffee Day Resorts performed the role of a holding company and ran resorts and IT parks. CCD was the subsidiary of Coffee Day Resorts.
As per a report, PE firms like New Silk Route and Standard Chartered Private Equity apart from KKR were likely to end with an ownership of more than 20 percent in Coffee Day Resorts.
Within a span of four years, sales doubled, and the 1,513 cafes in 219 cities were buzzing. However, the books had a different tale to tell. In 2011, the total liabilities and debt amounted to $189 million, and by 2018, it ballooned to $ 758 million.
In the international market, the price coffee hit a 13-year low, which resulted in Indian coffee exports falling 10 percent. Siddhartha sold a 20.32 percent stake in the Bengaluru based IT firm Mindtree to Larsen & Toubro for Rs 3,200 crores to bolster CCD’s finances. This was in the year 2019, two months before Siddhartha’s demise.
To ease the mounting weight on his shoulders, Siddhartha tried to initiate talks with the The Coca-Cola Company to purchase a stake in Cafe Coffee Day. The former chairman also looked at other avenues to widen his cash stream.
But April 2019 was when 500 outlets had to permanently down shutters. On July 29, 2019, Siddhartha died by suicide, jumping into Netravati river in Karnataka. In a note, he mentioned the pressure he was experiencing from PE partners and other lenders, and the income tax department. The note revealed his “failing to build the correct business model.”
Malavika Hegde: The saviour
Malavika Hegde, daughter of former Karnataka chief minister SM Krishna, graduated in engineering from Bengaluru University and tied the knot with the late Siddhartha in 1991.
In March 2019, news emerged that CCD had amassed debt of Rs 7,200 crore. After Siddhartha’s death, Hegde took the reins of the enterprise and worked towards repaying the loans.
In December 2020, she took up the position of chief executive officer. Till then, she was serving as a non-executive director, and had been involved in the operations since 2008.
She implemented strategies like cost cutting, the winding up of non-performing outlets, building new partnerships and concentrating on profitable growth. CDEL’s collaboration with Blackstone, the US PE behemoth, helped significantly in reducing the company’s debt. CDEL also partnered with finance service company Shriram Credit Company to help decrease expenses and increase revenues.
By March 2020, the debt on the books was reduced to Rs 3,100 crore. And by March 2021, the net debt stood at Rs 1,731 crore. Currently, the debt stands at Rs 465 crore.
Ongoing case of bankruptcy
On September 8, 2023, IDBI Trusteeship filed a case against CDEL, which through its CCD outlets has a presence in Egypt, Austria, Nepal, Malaysia and the Czech Republic. This was to recover a debt of Rs 228 crore the company owed IDBI Trusteeship. However, news has surfaced that CCD’s holding company would initiate a settlement to prevent the bankruptcy proceedings.