Bangalore: Cafe Coffee Day (CCD) has acquired Czech cafe chain Cafe Emporio for Rs15 crore in an attempt to establish a foothold in Europe. This is the firm’s first international buy.
Cafe Emporio has 11 cafes in the Czech Republic.
“We have been looking at overseas expansion for the last 12-18 months. This acquisition in Eastern Europe could be an entry point because these are the new emerging markets and not overcrowded,” said Swetha Shetty, president (international business) at CCD.
CCD, which has 917 outlets across India, four in Vienna and two in Karachi, has been in talks with firms in Poland, Hungary, Slovakia and Russia, Shetty said, adding that CCD would grow “organically” and through acquisitions, but it would prefer the latter.
CCD’s holding company, Coffee Day Resorts Pvt. Ltd recently raised Rs960 crore from three private equity investors—Kohlberg Kravis Roberts India Advisors Pvt. Ltd, Standard Chartered Private Equity Ltd and New Silk Route—and said it planned to use some of that to double the strength of its coffee shop chain to 2,000 outlets apart from looking at acquisitions in China, West Asia and eastern Europe. CCD hopes to generate 10-15% of its revenue from international markets.
An expert said it is unusual for retail firms to make overseas acquisitions when their own market is not saturated. “I would worry about the risk to return and investment in a foreign market for a Rs15 crore investment. They could have gone to the tier IV (very small) cities for generating such revenue,” said Ashish Dhir, associate vice-president at retail consultancy KSA Technopak Advisors Pvt. Ltd. Only a big acquisition would make sense from the growth perspective, he added.