VG Siddhartha: The coffee king of India

The death of VG Siddhartha, the founder, and owner of Café Coffee Day has sent shockwaves across the business community in India.

His body was found in the early hours of Wednesday morning near a river on the outskirts of the southern Indian city of Mangalore.

Despite running India’s largest coffee chain, Mr. Siddhartha was a media-shy and aloof entrepreneur who kept away from the spotlight.

Even though he maintained a very low profile, the brand he created went on to symbolize the rise of India’s economic stature on the global map.

  • Indian coffee tycoon’s body found

Mr. Siddhartha was born to a family of coffee plantation owners in Chikmagalur, a lush hill station located in the southern state of Karnataka.

He started his career as an investment banker in the 1980s but soon started to invest in the stock markets himself.

His first big break came post-1991 when the Indian economy was liberalized, lifting restrictions on the coffee trade.

This paved the way for him to start a coffee beans business in 1993. Within two years, his company became one of the largest exporters of coffee from India.

Rapid growth

Inspired by the cafe culture in the West, he started toying with the idea of starting a coffee chain in India. Initially, he was discouraged by his colleagues, who thought cappuccino would not find many takers in what was primarily a tea-drinking nation.

But Mr. Siddhartha didn’t abandon the plan. Then a chat with the owners of Tchibo, a German coffee chain, encouraged him to put the plan into action.

In 1996, he opened the first Café Coffee Day outlet at an upscale locality in Bangalore with the slogan: “A lot can happen over a cup of coffee.”

The cafe became an instant hit among young people, with students and corporate executives under the age of 30 spending hours there sipping coffee.

The popularity fuelled rapid growth for the company in the late 1990s and 2000s. Café Coffee Day opened its first international outlet in Vienna in 2005. By 2011, it had opened more than 1,000 stores.

Bangalore-based brand consultant Harish Bijoor describes Mr. Siddhartha as the Howard Schultz of India. Mr. Schultz, the former long-serving chief executive of Starbucks, was instrumental in transforming the US-based coffee company into an iconic international brand.

“Siddhartha revolutionized the coffee culture in India. He was the undisputed coffee king,” Mr. Bijoor told.

Different formats

The business model of Café Coffee Day was based on three principles: affordable coffee, good ambiance, and quality service.

Throughout this period, Mr. Siddhartha kept evolving the business by coming up with different store formats to meet the demands of multiple customer groups.

While Café Coffee Day was targeted towards young people who wouldn’t want to pay more than $1 to $1.50 for a coffee, he also opened a few lounge-style outlets focused on premium customers, who didn’t mind spending more money for added services.

These cafes had more food options on the menu, while wi-fi was often provided for nothing, a rarity in those days.

“Coffee along with internet was a deadly combination at that time,” adds Mr. Bijoor.

Today the company has more than 1,700 stores in more than 200 cities, including Prague, Vienna and Kuala Lumpur.

New rivals

After sailing through for more than a decade without any serious competition, Café Coffee Day started to feel the heat in 2012, with the arrival of international chains in India including Starbucks and Costa Coffee. The company had to slow its expansion because of cut-throat competition.

In 2015, to raise more money, Mr. Siddhartha took the company public by listing it on the Indian stock exchange. But it got a tepid response from investors, with the company’s share price falling 18% on the first day of trading.

Shubhranshu Pani of JLL, a real estate firm that advises Café Coffee Day, says that after that, the company started to shut down non-profitable stores to trim its losses.

“They realized that they had to change their strategy to fight competition,” Mr. Pani told.

The move worked. Café Coffee Day has made profits consecutively for the last three financial years.

But one major obstacle, rising debt, has continued to hurt growth. The company’s overall debt was just under $1bn for the financial year ending on March 2019.

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