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A regular tea/coffee stall in the coffee belt—Hassan, Chikmagalur and Kodagu districts—of Karnataka (Photo: Getty Images)
A regular tea/coffee stall in the coffee belt—Hassan, Chikmagalur and Kodagu districts—of Karnataka (Photo: Getty Images)

Brewing storm in coffee country

Given the huge role CCD’s V.G. Siddhartha played in India’s coffee ecosystem, there’s uncertainty in the air

Chikmagalur/Bengaluru: A memorial service on Tuesday for late V.G. Siddhartha at Mudigere, Karnataka, took a maudlin turn. This was a gathering of coffee growers at the hometown of late Café Coffee Day (CCD) founder, who allegedly ended his life due to financial stress. B.R. Balakrishna, a small planter, was in tears: “Without ‘Anna’, I’m a helpless orphan. I feel like I am better off dead." He was not an exception; almost all the coffee growers were inconsolable.

Beneath the wailing was the fear that prices and profit from growing coffee could be hit, or that they may not find a buyer like Siddhartha who was also a well-wisher and a mentor. More than the circumstances behind Siddhartha’s death, which has been discussed threadbare, it is what lies ahead that terrifies many—from coffee growers to those working at CCD, a part of Coffee Day Global Ltd.

With Siddhartha vanishing from the scene, coffee growers across the states are anxious about the churn it will bring in to the industry. “The industry will have to go through a period of turmoil until CCD gets a grip on things and it is able to reposition itself as the first company of coffee business in India," said a veteran grower from neighbouring state Kerala, which accounts for a fifth of India’s coffee production, requesting anonymity.

“But then, whoever heads CCD will have big shoes to fill. To earn the trust of growers like Siddhartha did, to consistently innovate, and, most crucially, to increase the yield and revenue in the business is easier said than done," he adds.

CCD was one of India’s top 20 leading exporters of coffee, according to the Coffee Board of India’s database. “Nobody can really fill in that space, currently. So everything about what happens ahead will depend on CCD’s survival," said a Bengaluru-based expert on coffee research, requesting anonymity.

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Importance of Siddhartha

Travelling through the coffee growing region of Karnataka—Hassan, Chikmagalur and Kodagu—one is assured of delectable coffee in the middle of nowhere, the aroma from the mug mixed with the air of the hill estates. From the bean to the cup, Siddhartha had his stamp all over the industry and his death is worrying those in the supply side of the business, from growers worried of wholesale prices to exporters concerned how long their dominance in the overseas market will last.

Siddhartha had realized the importance of systems across the value chain, from growing, research, marketing, export and value addition. Most importantly, he drove the expansion of coffee consumption in India, and branded Indian coffee in the international market, said Abhimanyu M.B., a senior member of the state-run Coffee Board of India. “It is a daunting task which can be driven only by those who have shared a dream... I wonder anybody can repeat that performance or take it to the next level."

Siddhartha also spurred export to the First World by starting overseas consumption market for Indian coffee, partly by starting CCD outlets, and by marketing the finished and value-added products to the importers of coffee. “Today, India exports 30,000 metric tonnes of coffee in all its forms, and to keep up this export volume, the CCD leadership will have to keep up with the spirit of Siddhartha," added Abhimanyu.

Downstream reforms

At just 59 years, Siddhartha had a great future not only for CCD but for the coffee industry. Over a 100,000 people are employed directly and indirectly in the coffee ecosystem he built. They are all clueless as to who can replace him, and help steward the industry like he did during the last few decades. To understand what their worries are is to essentially know how the coffee industry works and what role the CCD founder played.

“Siddhartha was a visionary for the coffee industry. Right from the plantation, picking up coffee berries, curing them, grading them, marketing them and adding value to them and bring it closer to the lips of millions of coffee lovers not just in India but in six different countries of the world. He was a visionary who saw great things for coffee. From a mere 12,000 tonnes, he took the domestic coffee consumption to 100,000 tonnes per annum," said K. Jayaram, former president of the Karnataka Coffee Growers Association.

Before Siddhartha started Amalgamated Bean Coffee Trading Co. Ltd in Chikamagalur, he had deeply studied the prospects, problems and scope of coffee cultivation. He developed his own nursery with high yielding varieties such as Kaveri and Chandragiri, which he distributed freely to all planters in three districts. His advisory was to plant them in high density, a revolution of sorts.

The Coffee Board advisory was to plant 1,752 plants per acre, but research done by Siddhartha showed that the plot could accommodate as much as 2,000 plants, which together with new plants could result in a yield increase of at least 20%. Kodagu, Chikmagalur and Hassan were the direct beneficiaries of this research. “This experiment had paid big dividends to the industry, especially to the planters. This was also replicated in smaller coffee growing areas in Tamil Nadu and Kerala. Overall, the total area under coffee cultivation soon reached 425,000 hectares in South India," said Thirtha Mallesh, president of the association.

Lakshman Gowda, a grower in Mudigere, showed a patch of Kaveri and Chandragiri varieties, and said: “Though Siddhartha and his family had thousands of acres of coffee plantation, he did not keep his knowledge for himself. He freely disseminated it among all the planters not only in Karnataka but also in Tamil Nadu and Kerala, and at a time when other coffee growing nations like Brazil, Columbia and Vietnam expressed doubts about India’s capacity to increase cultivation."

Forward trading

Many experts Mint spoke to seemed anxiously waiting for how the untimely death of Siddhartha would impact domestic market prices. Not so long ago, Indian coffee growers were burdened with dependency on the New York and London pricing mechanisms for exports and the Coffee Board for the domestic pricing. A pressure group of private growers led by Siddhartha broke this in the 1990s, and from then on, Indian coffee has developed its own price determination mechanism, with over 110,000 metric tonnes of coffee dependent on the pricing decided by CCD.

Coffee growers in Kodagu, Chikmagalur and Hassan remember that this small region was first to introduce what is known as forward trading in coffee as early as 1996. The association annals point out that Amalgamated Bean Coffee had launched the scheme for growers by benchmarking the daily rates of Arabica parchment variety with the New York and London markets.

In addition, Amalgamated Bean Coffee used to reserve a sizable quantity of coffee beans under the forward trading norms which benefitted all planters supplying raw beans to Amalgamated Bean Coffee . “As a result, there emerged a self-regulating mechanism for coffee pricing and stocking fully under the control of the growers," said a senior coffee marketing officer of the Coffee Board, requesting anonymity.

“This was done on fine forward trading norms. Siddhartha had so much liquidity in trading coffee domestically that the growers could bet their stocks under forward trading with Siddhartha. No trading house except CCD was able to match," said Nanjappa, who is a coffee activist of Kodagu. The growers benefitted out of this arrangement, he added.

“We growers could gain at least 15-20% annual profits due to forward trading. A grower having even a smallholding of 2-5 acres could make a handsome profit. With Siddhartha gone, the growers are now left at the mercy of other trading firms that are more profit-motivated for themselves than that of the growers."

Siddhartha hardly made any profit out of these reforms, according to experts, and in fact, when Coffee Day Global Ltd (formerly Amalgamated Bean Coffee Trading Co. Ltd) was floated he even went under financial stress. But this heralded the foray into value addition in the coffee business.

When the first CCD outlet was opened in Bengaluru in 1996, it was a shock to the coffee lovers of Bengaluru, known for its filter coffee culture. “It was hard to trust any coffee that came out of an espresso machine. We thought who would sit over a cup of coffee for hours, that too paying at least five times more than the filter coffee available at neighbouring Ranganatha Cafe?" reminiscences Srikanth Rao, a coffee aficionado, who is a top executive in a multinational company in the city.

CCD made sure that it captured the coffee consumer market in Bengaluru first, which according to the CCD research unit was a top coffee consumers in the country, second only to Chennai. Then, Bengaluru had become well known for its pubs. But Siddhartha bet on the young crowd spending quality time at a cafe, and his signature statement “a lot could happen over coffee" paid off. This is when the IT crowd, college goers, and company executives started frequenting CCD outlets all over Bengaluru and using CCD outlets as their makeshift offices, conference rooms and client meeting places.

In conclusion

CCD looms larger than life over the industry. That’s why there’s fear in the air. “Their growth created a good base and gave some kind of stability for domestic prices. That is the reason why you can find their prices quoted every day in the local newspapers. So if they go down in a spectacular way, the domestic market will also suffer. Some 40,000 employees would also be involved. It has become one of those sectors where growth happened very quickly and suddenly a vacuum has been created," said the Bengaluru-based expert on coffee research quoted earlier.

One of the reasons Siddhartha, who was always on the lookout for unusual types of coffee, loved Mangaluru was because it serviced the coffee planters of Kodagu, Chikamagalur and Hassan by offering garbling, curing and drying facilities. In particular, “Monsooned Coffee" discovered by Siddhartha was from Mangaluru. When raw coffee beans were stored in depots during the monsoons, the coffee used to get a particular aroma due to the moisture—these were not to be roasted but boiled to make green coffee. That’s why in his home territory, he will be remembered for his role in developing the coffee ecosystem.

M. Raghuram is a journalist based in Mangaluru.

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