VG Siddhartha, The CCD Guy On Adapting to Market, and Creativity.
In India, 3 things are easier to find than God herself- a Bus stop, a nukkad pan shop, and a CCD outlet. Café Coffee Day a.k.a CCD has brought the hip Café and Coffee culture of the west to the common man of India who was hooked to the brewing hot Chai of the tapris. Established by VG Siddhartha, CCD has been the first retail coffee store chain to have expanded in India so rapidly. It’s massive Expansion and Branding strategies are being studied as a case study in B-schools across the world.
VG Siddhartha’s journey highlights the importance of reading and adapting to the market, applying creativity in business, and having a little extra faith in your idea when it seems to collapse.
It isn’t surprising that VG Siddhartha had a disposition towards coffee business since his family was involved in the business of coffee plantations since generations. However, after completing his Master of Science in Economics from Mangalore University, Karnataka, he decided to create his own identity by working independently against his father’s wish of joining the already established family business. His father understood his ambition, and gave him Rs. 5 lakhs to try his luck. If he failed, he could come back to him and join his business. He invested Rs. 3 lakhs in a plot of land, and kept the rest in the bank for his expenses and emergencies.
Just 21, without any concrete plan in mind, he landed in Mumbai and rented a room with a shared toilet for Rs. 120 per day at Fort. Coming from a small village, he was overwhelmed by the pace of this city. The very next day he walked into the office of JM Financials to meet Mr Mahendra Kampani without any prior appointment. For the first time in his life, he had seen elevators and such a huge office complex. Initially, his request to meet Mr Kampani was declined but seeing his persistence, he was allowed to meet. After a discussion, he walked out with a once in a lifetime opportunity to join Mr Naveen Bhai Kampani of J M Financial Services (now J M Morgan Stanley) as a management trainee to learn to trade in the Indian Stock Market. Briskly he not only learnt the tricks of the trade but also earned the trust of the Kampanis who trusted him with major client portfolios.
He was personally trained by the Kampanis, and one of the most valuable lessons he learnt from them in business was to understand the importance of those tiny pieces of gold on the surface and to grab them first, before diving head first in the stream.
He applied it in real life and started investing in Coffee estates, and upward trending stocks. As he rose in ranks, his job became mundane. After working with the Kampanis for almost two years, he felt the urge to start something of his own. Hence, he moved to Bangalore with Rs. 2 lakhs to start his own Financial Securities firm. The timing could not be better as the Stock market had just crashed, and he was looking for alternative investments that would yield fair returns. Thus, he took-over a loss-making firm- Sivan Enterprises, and by 2000 transformed it into a highly successful investment and stock broking company. He kept investing in coffee estates alongside.
A decade later, the business owner of the German Coffee brand, Tchibo got in touch with VG Siddhartha to buy coffee from his estates for his company. Tchibo had started with a frugal investment in a small 10 ft shop in Hamburg, Germany, and within a span of 40 years became the second largest Coffee roaster business in Europe. This story inspired VG Siddhartha to set up his own Coffee export business- “Amalgamated Bean Coffee” wherein he cut down all middlemen and directly exported to the companies globally. In a span of 2 years, it became the largest Coffee exporting company of India. This rapid success began to scare him, and rightly so, as he felt that if he could achieve this feat, then any international player could do it once the economy opens up to them. This forced him to think of a unique business model that would dominate the industry and cement his position. This was a time when coffee was only regionally popular down South in India; even there being considered as the drink of the elite. He thought that if he could make his coffee reach to the mass, that would deepen the roots of his business.
Another hassle was the heavy tariff and export duties levied on Coffee exports that invariably increased its price, thus making it incompetent for Indian exporters to sell profitably in the international market. To end this Govt. monopoly, he headed to Delhi to speak to the Union minister to convince him about the golden opportunity for Indian-grown coffee globally. To his pleasure, the govt obliged and cut down the highly-inflated taxes on the coffee trade. Meanwhile, he asked one of his junior employees to conduct one-week market research to gauge the potential of setting up stores to sell branded coffee powder. The results indicated that it was a flop idea! It was upsetting to Siddhartha as he had already eyed a 500 ton of internal sales target and did not expect the market to indicate otherwise.
Nonetheless, he believed that if he could not fit in the market, he’d create a new market. Risking everything he had, he set-up 20-25 stores across Bangalore and 20 stores across Chennai that sold branded coffee powder. The business was giving profits but the margins were low. Around this time the café culture across the world was picking up with the youth. He saw this as a perfect opportunity to re-brand his business and introduce coffee as a lifestyle to the Indian youth. He took advantage of the booming Internet phenomena and opened up Cyber-cafés across India. He laid down Rs.1.5 cr budget, instructing his team to come up with a store design that would attract the youth who would be willing to pay Rs.25 for a cup of coffee, at a time when it was being sold at merely Rs.5 in local stalls. He believed that people would pay a premium price for a luxury lifestyle experience. The idea was reliable as the internet and coffee were both considered a thing meant for a certain posh class. Thus, in 1996 Café Coffee Day was born.
Having a cool youthful atmosphere along with the internet, it became an instant favourite hangout place among the youth. This reaffirmed his belief, and Siddhartha went global with CCD. Today, all the CCD stores across the world serve coffee made from the beans grown by “Amalgamated Bean Coffee”. It is also the largest exporter of Arabica coffee beans in Asia, and exports all over the world.
VG Siddhartha is also a serial investor, and mentor to various Indian entrepreneurs. He has constantly re-invented and adapted himself as per the market opportunities. He is involved in multiple businesses, but CCD remains his most visible success story. His abilities to ask unhesitantly, read the market ahead of its time, make swift decisions and creativity in business models is meritorious. His resolute faith in his ideas is exemplary, and a lesson for all of us.
Next time you visit a CCD, do remember that a lot has happened over that cup of coffee.