Dear Shareholders,
Towards the close of our third year as a public listed company, I am delighted to share
with you our journey on the trajectory of growth during FY18.
What once began as an idea to bring coffee culture into mainstream India at a price
that was affordable yet competitive, led to the starting of the first Caf Coffee Day way
back in 1996. Today in 2018, we are India's largest caf chain with close to 2,700 retail
coffee points across the country and 47,500+ vending machines across corporate India.
None of this would have been even remotely possible without the support of our valuable
customers and other esteemed stakeholders who have reposed their faith in us as we
traversed this journey. Thank you once again.
FY2018: AN UPBEAT YEAR IN A NUTSHELL
With our strong brand presence and singular focus on customer delight, the coffee
retail business has been promising in spite of intense competition and regulatory changes
in the country. Over the last 25 quarters, we have seen consistently positive same store
sales growth.
We intend to continue on this growth path unabated, with our strong business
fundamentals and brand customer loyalty leading the way.
Thanks to significant steps towards introducing new and exciting meal and snack options
in our cafs, we have been able to expand the food menus on offer to our customers. These
include an enticing array of eats, along with your favourite beverages throughout the day.
Milkshakes as a new category have garnered a very positive response and helped increase
our overall sales. Constant food innovation allows us to be seen, perhaps for the first
time, as a place not only for conversations over coffee, but also a rendezvous over a
quick bite.
The response to our innovative food launches in the wellness range has been
encouraging, and in a country that is fast becoming health conscious, we will continue to
focus on healthy menu offerings. Overall, at the caf level this year, we have employed
the two-pronged approach of widening our product portfolio, while also offering value
options to our customers.
Over and above our cafs, we continue to rapidly make inroads into the corporate
sector. With the addition of over 8,000 coffee vending machines targeting key channels
such as auto and jewellery showrooms, our coffee drinker footprint continues to expand.
It merits a mention here that Indus Plus, our new age video-enabled coffee machine with
its IoT-enabled interface and intuitive screen, is fast catching people's attention. What
is more, the launch of Tetra Pak cow's milk across the country has met with a heartening
response for health-conscious customers, while at the same time living up to our high
quality standards.
COFFEE INDUSTRY: THE FRAGRANT AROMA OF SUCCESS
On account of caf culture becoming popular among the youth in India, the coffee
industry is set to grow at a CAGR of over 11% in the next 3 years. The Company reported a
Coffee Retail Gross Revenue growth of 12% in FY17-18, and this is only poised to rise.
While still at a nascent stage, the demand for coffee beverages will slowly grow,
increasing our caffeine footprint from metro cities to Tier II and Tier III cities across
the country. Fueled by the government's plan to develop various ‘smart cities'
coupled with increasing disposable incomes and a dynamic work-life balance, we at Coffee
Day have much to be optimistic about in the near future.
In addition to cafs, the availability of vending machines in corporate spaces has
driven up the demand for hot beverages, and this contributes to an increasing demand for
tea and coffee among the workforce in India. Your Company controls more than 70% of the
vending business in fresh milk coffee in India Inc., and for this, you should only be
proud.
With online food delivery platforms evolving with disruptive technologies everyday, we
anticipate 10-15% of our caf sales from delivery as a new revenue stream – one that
will show rapid organic growth in the years to come.
SICAL: MINING FOR NEWER POSSIBILITIES
The supply chain and logistics industry has been a big gainer on the rolling out of
GST. With most forward-looking organisations reevaluating their supply chain and logistics
strategies, we believe this sector is headed towards significant growth.
The Company reported a robust growth in FY17-18 with 31% increase in revenues. New
initiatives around supply chain solutions for FMCG and retail industries, coupled with
contract wins in the existing business verticals, contributed to this growth.
A consortium led by our Company (with a 51% equity stake), has been awarded a Mine
Development and Operations (MDO) contract by the Damodar Valley Corporation. To be
executed over the next 20 years, the cumulative revenue from this operation will yield us
over Rs 10,000 crore. Furthermore, SICAL has secured two contracts from subsidiaries of
Coal India Limited, with a total contract value of Rs 1,624 crore. These contracts will be
executed over the next 4 years and will help us boost our revenue significantly.
We are also proud to inform you that SICAL Iron Ore
Terminals Limited, a subsidiary of SICAL Logistics Limited, has received all clearances
and financial approvals for the modification of the existing Iron Ore Terminal to handle
common user grade coal at the Kamarajar Port, TN. The Company is in the process of
executing this project and will start becoming revenue positive in 12-18 months.
TANGLIN & THE BRIGHT PATH AHEAD
Office space absorption is a domain that is expected to grow, owing to robust demand
from IT/ITeS companies in key markets such as Bengaluru.
Tanglin offers customised office spaces for various multi-national technology
enterprises in Bengaluru and Mangaluru. A steady and sustained demand from technology
companies during the year resulted in Tanglin recording a gross revenue of Rs 150 crore in
FY18. And it only gets better.
Over the next 8-12 months, an upcoming metro station is expected close to the Global
Village property in Bengaluru. This will boost the demand for our location and provide
faster connectivity to the city center. Revenues from Tanglin are expected to cross Rs 200
crore in the next 12-15 months.
WAY2WEALTH: THE ROAD TO PROSPERITY
The revenue from our financial services business stood at Rs 574 crore in FY18, an
increase of a significant 21% over FY17. These contributions can be attributed to growth
in revenues from institutional, treasury and market operations through quantitative
techniques and our futuristic approach.
In the year ahead, we expect our financial markets to be range-bound and our businesses
dependent on them to maintain the status quo; particularly the equity, derivatives,
commodities, debt markets and related businesses that might show slow growth.
However, the present government's policy focus and regulatory clarities are bound to
encourage the FDI and FII inflows into the country, thereby assisting the markets to move
higher and correspondingly help us leverage our business strengths to our advantage.
MINDTREE MINDS : AN APPETITE FOR TOMORROW
We are thankful to Mindtree Minds for their extraordinary performance and we are
confident that they will continue to add to our profitability and performance.
GLOBALEDGE : EARNING FROM LEARNING
During the year, we successfully exited a majority stake of equity held in Global Edge,
giving us a very healthy return on our initial investment made in 2001. We are expecting
an additional consideration from the remaining stake in Global Edge during FY18-19.
GIVING BACK MORE THAN WE TAKE SINCE 1996
Being a socially and environmentally responsible Company is not just a mandate; it is
an ongoing commitment to our society and surroundings. Being the first Indian company to
receive the UTZ certification, our shade-grown coffee is consciously cultivated on estates
that support a varied flora and fauna endemic to the region.
People are our greatest asset, and we have a deep commitment towards bolstering the
fortunes of the communities and talent we work with. We firmly believe that the strategies
and values highlighted below will help us stay on course:
Talent Management: Great talent will shape the future of our businesses, each of
which is committed to providing a platform and opportunity to help our people bring out
their talent and potential at work. Our people initiatives are designed to continually
reinvigorate and organise our human capital in order for our work force to step up to
changing demands of our businesses while accelerating personal growth.
Technology: In these times of a rapidly digitising business environment, we
continue to develop nuanced strategies that enable us to remain in touch with our customer
base. As technological trends evolve, we intend to stay on course by recognising and
reacting to our customers' needs without delay. Our emphasis on keeping up with these
trends will ensure that Coffee Day continues to hold a place in people's hearts as one of
the most loved and future-positive caf chains in the country.
Quest for Excellence: Our motto is to constantly challenge ourselves to explore
newer, better and quicker ways of doing things. Looking at everything with a sense of
curiosity while never settling for anything but the best is the way we attain excellence.
Never hesitating to question the norm, we are always looking for new ideas and innovations
that help us to transform businesses and power us to serve our customers better.
COFFEE DAY GROUP: A FUTURE REIMAGINED
At the group level, we are excited about the possibilities that lie ahead of us. As
India is poised towards accelerating GDP growth, we believe we are entering an exciting
phase of possibilities; who knows, but this could be the start of India's upswing boom,
much akin to what the last 20 years have been for China.
We have tremendous conviction in our abilities to pursue the growth trajectory we have
charted for ourselves, and significantly benefit from being part of this vibrant economy.
With cites growing at a rapid pace and rural populations migrating to towns, our
businesses are poised to soar rapidly. Our objective remains to continue growing at a
double-digit rate while maintaining the financial strength of our Company.
We are pleased to have you as our shareholders, and I take this opportunity to thank
you for your continued trust and support on this journey. We are deeply passionate about
building a great company; a passion that is reflected in every cup of coffee we serve.
We would also like to thank the Board, management, employees and all other stakeholders
for their significant contribution over the years for making us one of India's biggest and
most iconic brands.
Finally, as always, I would like to reiterate our commitment towards delivering
consistent results and enhancing shareholder value.
After all, who would have guessed that so much can indeed happen over coffee-
Warm reards,
V.G. Siddhartha Chairman and Managing Director