Viveat Susan Pinto, Financial Express
August 28, 2023
Coffee Day Global, which operates the Cafe Coffee Day (CCD) chain, has been given a temporary relief against bankruptcy proceedings initiated by lender IndusInd Bank last month. The Chennai bench of the National Company Law Tribunal (NCLAT) last week halted admission of IndusInd Bank’s plea against Coffee Day Global, a subsidiary of the listed Coffee Day Enterprises (CDEL), by the NCLT Bengaluru, till September 20.
What this means for CCD is that it get some more time at a time when it has swung into the black after struggling for the last few years, since the tragic demise of its founder VG Siddhartha in 2019. Coffee Day Global posted a net profit of Rs 24.57 crore for the June quarter of 2023-24 (FY24) versus a net loss of Rs 11.73 crore reported in the same period last year.
Revenue from operations stood at Rs 223.20 crore in the quarter under review, a growth of nearly 18% versus the year-ago period, CDEL results for Coffee Day Global showed.
More importantly, CCD outlets are down to 467 in the June quarter of FY24 from a peak of 1,752 stores in FY19, indicating that the company is shutting down unprofitable operations as it looks to manage its debt and other expenses. Group debt is down to Rs 1,711 crore, according to its latest annual report for FY23, versus Rs 7,214 crore reported in FY19.
“While the coffee retail market in India is growing, in CCD‘s case the need to downsize has to do with internal issues. Sometimes a smaller footprint just helps to manage operations better especially when you are dealing with larger problems such as a debt overhang,” says Devangshu Dutta, chief executive officer of retail consultancy Third Eyesight.
CCD’s financial health is critical for CDEL, which derives close to 94% of its group turnover from the coffee retail business, according to its FY23 annual report. In FY22, the contribution of the coffee retail business to group turnover was 85%. Losses of Coffee Day Global in FY23 narrowed to Rs 69.62 crore from Rs 112.48 crore in FY22. In FY19, the company had a net profit of Rs 10 crore.
Apart from cafes, CCD also has kiosks and vending machines installed in corporate offices, institutions and business hubs. While the number of kiosks has fallen over the last few years and is at around 265 now from a peak of 537 in FY19, the number of vending machines have been growing after briefly slowing down over the last few years. From a peak of 58,697 crore in FY20, it is now at 50,870 in number, the company’s latest results show.
CCD is also expected to fight the insolvency proceedings against it aggressively, according to industry sources. IndusInd Bank has claimed that Coffee Day Global defaulted on a loan of Rs 94 crore, which occurred on February 28, 2020. The company has disputed this in court.
(Published in Financial Express)
Raghavendra Kamath, Financial Express
June 29, 2023
Zara, touted as “Fast Fashion Queen”, has achieved a unique feat in India. The Spanish brand has been growing its revenues without opening any new stores.
The fashion brand, run by a joint venture between Tata-owned Trent and Spain’s retail group Inditex, posted a 40.7% growth in its revenues to Rs 2553.8 crore in FY23. The catch is that while many retailers/brands garner sales from opening new stores, Zara did not open any store but closed one during FY23.
In FY21 and FY22, its store count remained constant at 21 but its revenue grew 61.2% in FY22. Zara’s revenues grew at a 15.5 % CAGR in the last five years.
“Zara did not foray into any new city and closed one store. That said, it saw an exceptional performance on store productivity (83% higher than FY19). The increase in revenues lead to highest ever Ebitda margins at 16.3%,” said Nuvama Institutional Equities in a recent report.
The contribution in productivity includes contribution from online and also increase in store sizes, the brokerage said.
A mail sent to Inditex did not elicit any response. Trent executives could not be contacted.
Experts attribute Zara’s success to increase in customer spends and improved offerings by the brand.
“The customer base they are targeting has grown and their merchandise mix has become sharper,” said Devangshu Dutta, chief executive officer at Third Eyesight, a retail consultant.
Dutta said when a retailer opens stores, it would immediately boost sales, but to maintain sales momentum, one has to have “right merchandise at right price and have stores at right locations”.
Zara is known to churn its designs and styles very fast, and target young customers. In its Indian venture also, its parent Inditex controls merchandise mix and so on.
“The said entities (Zara and Massimo Dutti) are obliged to source merchandise only from the Inditex Group. Also, the choice of product & related specifications are at the latter’s discretion. Further, the entities are dependent on Inditex for permissions to use the said brands in India subject to its terms & specifications,” Trent said in its FY23 annual report.
Zara is also focusing on opening in select locations, a reason it could not open more stores in the country, experts said.
“The incremental store openings for Zara continue to be calibrated with focus on presence only in very high-quality retail spaces,” Trent said.
Susil Dungarwal, founder at Beyond Squarefeet, a mall management firm, said that propensity to spend has gone up among Indian shoppers after the pandemic and Zara being a renowned global brand with its stylish merchandise seems to be have been the beneficiary of the trend.
“They understand customers very well and brought products which are liked by Indian shoppers in terms of looks, styles and so on,” Dungarwal said.
Zara is a case study for Indian brands as to how to run a retail business successfully, he said.
(Published in Financial Express)
In this piece I’ll just focus on one aspect of technology – artificial intelligence or AI – that is likely to shape many aspects of the retail business and the consumer’s experience over the coming years.
To be able to see the scope of its potential all-pervasive impact we need to go beyond our expectations of humanoid robots. We also need to understand that artificial intelligence works on a cycle of several mutually supportive elements that enable learning and adaptation. The terms “big data” and “analytics” have been bandied about a lot, but have had limited impact so far in the retail business because it usually only touches the first two, at most three, of the necessary elements.
“Big data” models still depend on individuals in the business taking decisions and acting based on what is recommended or suggested by the analytics outputs, and these tend to be weak links which break the learning-adaptation chain. Of course, each of these elements can also have AI built in, for refinement over time.
Certainly retailers with a digital (web or mobile) presence are in a better position to use and benefit from AI, but that is no excuse for others to “roll over and die”. I’ll list just a few aspects of the business already being impacted and others that are likely to be in the future.
On the consumer-side, AI can deliver a far higher degree of personalisation of the experience than has been feasible in the last few decades. While I’ve described different aspects, now see them as layers one built on the other, and imagine the shopping experience you might have as a consumer. If the scenario seems as if it might be from a sci-fi movie, just give it a few years. After all, moving staircases and remote viewing were also fantasy once.
On the business end it potentially offers both flexibility and efficiency, rather than one at the cost of the other. But we’ll have to tackle that area in a separate piece.
(Also published in the Business Standard.)
Bali, Financial Express
Mumbai, 21 February 2016
Having created quite a stir at the time of their launch, hyperlocal companies are now witnessing a dampened mood. While several have folded up operations in some cities, others have downsized staff, tweaked the services they offer and even made alterations to their business models. A recent example is Grofers shutting down operations in Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam.
TinyOwl last year was in the news for a poorly-handled downsizing
operation in Pune, with a dramatic hostage situation involving
its co-founder Gaurav Choudhary. PepperTap also recently shut
down operations in six cities.
Ironically, giants like Amazon have not only aggressively entered
the hyperlocal space, they are building on it. Amazon is currently
offering the service in Bengaluru, Amazon Now, after running a
pilot project, Kirana Now, in 2015.
The investor sentiment in India is also on a decline, as was
reported earlier this year. Investments by venture capitalists
have dropped from $2.12 billion (October-December 2014) to $1.15
billion (October-December 2015), according to a report by CB Insights
and KPMG International. This leaves an even shorter window of
opportunity for players to retain investor interest.
Albinder Dhindsa, co-founder, Grofers, states that differing
levels of technology literacy among the majority of merchants
and consumer adaptation to the online platform are concern areas
for the company. In 2016, the company is looking to bring over
one lakh merchants aboard and ensure that turnaround time stays
under an hour. Grofers delivers more than 35,000 orders per day
on average. In Q4 2015, the firm acquired teams of SpoonJoy and
Townrush to bring dynamic learning to the table.
For Swiggy’s co-founder Nandan Reddy, the focus is currently
to grow the market, while catering to a wide demographic of consumers.
He admits that in the early stages, the brand had trouble educating
even its partners. Furthermore, operating a delivery fleet in
an on-demand service offering sub-40 minute deliveries is a challenging
task, given that there are at least 15 points of failure in an
average order. Swiggy currently owns a delivery fleet of 3,800
delivery executives. The brand’s repeat consumers contribute
to over 80% of orders.
Debadutta Upadhyaya, co-founder, Timesaverz, says some of the
major challenges in a hyperlocal market are optimum resource utilisation
and matching locations, price points, and other specific requirements
to customer needs. Timesaverz currently has a service range spread
across 40 categories, aided by a network of over 2,500 service
partners across five metros. Its revenue model is commission based,
where 80% of earnings from consumers are shared with service partners.
Vinod Murali, MD, Innoven Capital, points out that as the hyperlocal
industry is in its nascent stages, it needs a fair amount of time
to grow. “One aspect to keep in mind is that a large sized
equity cheque does not imply that a company has achieved operational
maturity or robust business metrics, especially in this segment,”
Given the recent consolidation in this category, the survivors
have the opportunity and time to focus on improving unit economics
and demonstrate that their businesses are viable and valuable.
Devangshu Dutta, CEO, Third Eyesight, is of the opinion that
hyperlocals make the mistake of borrowing business models and
terminologies from Silicon Valley, without adequately understanding
the real context of the Indian market. “Is there an existing
or even potential demand for the service claimed to be provided?
Or are you just going to introduce an intermediary and an additional
link in the chain, with additional costs and unnecessary administration
involved?” he asks.
(Published in Financial Express)
Joshi, Financial Express
Mumbai, 8 September 2015
Recently, there was news of restaurant reservation site EazyDiner expanding operations to Mumbai from the National Capital Region, having secured Series A funding worth $3 million led by existing investor DSG Consumer Partners, and Saamna Capital.
As per a PwC analyst, investors have pumped more than $150 million
into companies like Grofers, TinyOwl, Swiggy, LocalOye, Spoonjoy,
Zimmber and HolaChef, among others. Judging by the patronage showered
upon them by customers and investors alike, it would appear that
hyperlocal start-ups are all set to create the next big boom in
the Indian retail sector. But is it really all that rosy? Probably
not, as can be amply witnessed by acquisitions taking place in
the nascent yet already overcrowded market.
Between November 2014 and February 2015, the Rocket Internet-backed
Foodpanda acquired rivals TastyKhana and JustEat.in, and is rumoured
to be in acquisition mode with TinyOwl. Restaurant search app
Zomato, which recently got into the food ordering space, is also
reportedly looking to acquire minority stakes in food-ordering
While investors are attracted to hyperlocal start-ups, controlling
logistics well is key to sustained growth for these businesses
— all of these will definitely go through a constraint in
the supply of delivery boys, for example. In India, organising
fragmented labour is a challenge and, hence, a services-based
hyperlocal needs to figure out the mechanics of human capital
even more than a traditional, product-based e-commerce firm.
For services, another challenge is customer stickiness. If a
user uses an app to obtain the services of a plumber, for example,
he may not go through the app to contact the plumber next time
if his services are found satisfactory. Discounting can induce
trials, but just like in any other business, prove fatal in the
long run. Like what led to the end of HomeJoy in the US —
excessive discounts to dissuade direct contact between servicemen
Even for product-based start-ups, maintaining data quality is
a big hurdle as stock and prices may not be updated by retailers
in real time, making it difficult to track offline sales.
Since the game is hyperlocal, you need to be physically present
in the city to bring retailers aboard. For that, you need a city
team. Other challenges include retailer verification and assessment,
given that hyperlocals deal with small city retailers.
Stickiness is needed on both sides, and each locality will certainly evolve into having a market leader and a follower, with other players falling far behind. “So the critical success factor for a hyperlocal is being able to rapidly create a viable model in each location it targets, and then—to build overall scale and continued attractiveness for investors—quickly move on to replicate the model in another location, and then another,” says retail consultant Devangshu Dutta of Third Eyesight. As they do that, they will become potential acquisition targets for larger ecommerce companies, which could use acquisition to not only take out potential competition but also to imbibe the learning and capabilities needed to deal with microcosms of consumer demand.
(Published in Financial Express.)