Coffee Day Enterprises Limited (CDEL) which is the parent company of Coffee Day Group will now focus on expansion of its outlets on the highways. Currently, Cafe Coffee Day (CCD) is the largest retail brand with 1,538 outlets across 219 cities. The plan is to have 5,000 stores over the next five years.
A revenue of Rs 325 crore comes in from 20 international CCDs across Austria, Czech Republic, Egypt and Malaysia. The company has set its eyes on increasing its presence in South-East Asia too.
“We envisage major growth on the highways going by the Union government’s efforts to invest in road infrastructure. In addition, we see potential growth opportunities in 30 cities. The use of Internet and 4G technology would further fuel our retail growth prospects,” said V G Siddhartha, chairman, Café Day Enterprises, at the Initial Public Offer road show in Bengaluru.
“From the proceeds of this IPO where we are raising Rs 1,150 crore, Rs 500 crore will be used to wipe out our total debt of Rs 1,000 crore in the holding companies. Besides a liability of 125 crore will be paid off in the coffee business. The remaining debt will be paid by dividend yield of the investment. The balance of Rs 550 crore would be used to expand our coffee business,” he added.
“We need to identify suitable new café outlet locations and ensure entry into existing geographical locations. There is a visible demand for small food bites on the highways at convenient outlets and Coffee Day joints seemed to be preferred stopover points. Our success depends on the ability to enhance the CCD brand value. Further, there is also an increase of two and four wheelers in the country which would give a fillip to the growth prospects of our cafes on the highways,” stated the CDEL chairman.
According to Venu Madhav, CEO, Café Coffee Day, the India consumption story is driven by the middle-class which increased from 210 million in 2008 to 267 million in 2015. The educated young population and the changing dynamics of employment are the factors for the emergence of an affordable luxury segment. When GDP and per-capita increase, it drives up the coffee consumption. “Therefore our growth depends on our ability to maintain the customer connection to this brand. Besides it will also hinge on their preferences to visit our café network outlets: CCD (1,489 outlets), The Lounge(42) and The Square(7).
The quick service retail business through Café Day Vending machines has a lion’s share of the market through 30,916 installations in corporate and institutions pan-India. There are 561 Cafe Day Xpress kiosks located at high density traffic locations. In addition, there are 412 Coffee Day Fresh & Ground stores across Karnataka, Tamil Nadu and Andhra Pradesh.
“Despite a tough market environment, we have been able to garner 59 per cent of revenues from beverages, 36 per cent from food and 5 per cent from merchandise,” trailed off Madhav.
