Coca Cola in talks to buy stake in VG Siddhartha-owned Café Coffee Day as American giant looks to gain foothold in café space

VG Siddhartha, who recently sold 20.32 percent stake in Mindtree to L&T, wants to retain a stake CCD and does not want to exit completely

FP Staff June 27, 2019 12:43:24 IST
Coca Cola in talks to buy stake in VG Siddhartha-owned Café Coffee Day as American giant looks to gain foothold in café space
  • The Atlanta based beverage company's top officials have already visited the VG Siddhartha-owned CCD for the discussions

  • VG Siddhartha insistence to keep a stake in the company may sit well with the American giant

  • Siddhartha has reportedly been selling assets to cut down debt and cover potential tax liabilities

Coca Cola—the world’s biggest soda company, is in talks to buy into India’s largest café chain Café Coffee Day (CCD) as the American giant wants to gain a foothold in the rapidly growing cafés space, a media report said.

According to The Economic Times, the Atlanta based beverage company's top officials have already visited the VG Siddhartha-owned CCD for discussions. The news report said that VG Siddhartha, who recently sold 20.32 percent stake in Mindtree to L&T, wants to retain a stake in CCD and does not want to exit the firm he founded completely. Sources familiar with the development told the newspaper that Siddhartha's insistence to keep a stake in the company may sit well with the American giant.

According to Business Standard, T Krishnakumar, president and chief executive officer, Coca-Cola India and South West Asia, is currently in Atlanta and is involved in the negotiation. A Coca-Cola India spokesperson, however, said the news about a possible acquisition was speculative in nature and that "the company had no comment to offer at this stage."

Coca Cola in talks to buy stake in VG Siddharthaowned Caf Coffee Day as American giant looks to gain foothold in caf space

Representational image. Reuters

Siddhartha has reportedly been selling assets to cut down debt and cover potential tax liabilities.

For the quarter ended 31 December, 2018, the company reported 3.2 percent growth in unaudited consolidated revenue to Rs 996.51 crore from Rs 965.33 crore in the comparable quarter last year. The net profit was up 162.62 percent at Rs 73.15 crore from Rs 27.99 crore in December 2017 quarter, according to Moneycontrol. The company’s net debt as on 31 March 2018, stands at Rs 3,323.8 crore.

Café Coffee Day aims to have a network of around 2,500 stores in the next 7-8 years as part of its expansion plans. Café Coffee Day, popularly known as CCD, would add around 100 stores every year focusing on the metro markets. The company, which opened its first store in 1996 in Bengaluru, is presently operating 1,800 CCD stores in over 250 cities.

The consumption of coffee in India is on the rise and several coffee chains like Starbucks, Costa Coffee are competing in the segment at different price points. Last year in October Uber Eats joined hands with CCD to launch India's largest virtual restaurant network.

Coca Cola, on the other hand, bought coffee chain Costa last year for $5.1 billion to extend its push into healthier drinks and take on the likes of Starbucks and Nestle in the booming global coffee market.

The purchase from Britain’s Whitbread of Costa’s almost 4,000 outlets thrusts the world’s biggest soda company into one of the few bright spots in the sluggish packaged food and drinks sector.

“Coffee is one of the strongest growing categories in the world, and Coca Cola needs to expand into coffee and hot drinks,” CEO James Quincey had said.

Operating a retail chain marks a new challenge for the 132-year-old Atlanta-based Coca Cola, which mostly sells soft drink concentrates to a network of franchised bottlers.

It will face a fight though as rivals are also bulking up in a fragmented market, keen to attract young people prepared to pay out for barista-made drinks and developing tastes for ever more exotic coffees.

Sales at coffee shops like Starbucks and Costa are growing even faster, as people increasingly indulge their habit on the go, rather than at home.

With agency inputs

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