- Coca-Cola recently acquired Costa for $5.1 billion
- CCD reported loss in the last financial year.
Coca-Cola enters in talks with south India based chain Cafe Coffee Day (CCD) for a significant stake in the chain. With this the soft drinks giant plans to gain a foothold in the rapidly growing space of the coffee themed cafes.
Although the talks are in the early stage and the move might not capitalize. One of the coca-cola executives said, “ THis move will give Coca-Cola a significant scale in the fast-growing cafe business, compared to aerated soft drinks, which have been slowing down.
Cafe Coffe Day is owned by Coffee Day Enterprises and is promoted by VG Siddhartha. With a number of 1,752 cafes as of March 2019, CCD is the market leader in the cafe space. It competes with smaller chains in India such as Barista and Costa Coffee and bigger players such as Starbucks which ventures with Tata and has 146 stores.
“Blessing in Disguise” for CCD
Expansion of Cafe Coffee Day (CCD) has slowed down due to rising debts in the past two years. On the other hand, CCD faces competition from growing tea cafe chains such as Chaayos, Chai Point and more. In financial year 18, it shut 90 small format stores.
Their losses widened to Rs. 22.28 crore from Rs. 16.52 crores. It has been reporting same-store sales growth for almost a decade now.
There has been plenty of innovation in cafe space in recent years and somewhere CCD fells short of it. With coca-cola coming into the picture, it can inject fresh air to the stagnant business of CCD.
Siddhartha already sold his 20 percent stake in Mindtree to Larsen & Toubro in for Rs. 3,200 crore to lower down the debts.
Coca-Cola’s Future Plans
Coca-Cola recently acquired Costa Coffee from its parent company Whitebread for $5.1 billion. Although this deal holds less significance in India because of Costa’s low presence in the Indian market with 50 chains.
This acquisition marks foothold of Coca-Cola in the global coffee market since Costa has close to 4,000 stores across the globe. This move is an attempt to move into the Indian coffee market which is currently dominated by CCD.
Chikkamagluru-based Coffee Day Enterprises in Asia is the largest producer of Arabica coffee beans.
It grows coffee on 20,000 acres of self-owned estates and set up the first cafe in 1996 in Bengaluru. It is internationally present in Vienna, the Czech Republic, Malaysia, Nepal, and Egypt.
With soft drink market slowing down and packaged coffee market growing with a rapid pace, Coca-Cola plans to make another smart investment.
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