CCL Products

(Prem Bhat) #188

Found the following resources helpful in understanding the industry :

Starting from basics of coffee : i)

to current trends : ii)

(Vinith Jain) #189

SLN Coffee launches their brand for the domestic market

(Donald Francis) #190

Thanks for the heads up. They are talking of exporting 10,000T !!
Even if there is some marketing speel, they might still be doing 6000+T which is big in context of Tata Coffee at 8000T.

We should find out more - if more such smaller guys are finding markets/and able to scale up!!

(Donald Francis) #191
That is why SLN Coffee is one of the leading exporters of coffee from India, one of the largest suppliers of roasted and ground coffees and has recently taken the step of setting up a soluble coffee plant.[Quote from SLN site]

Okay. So instant Coffee (also termed as Soluble Coffee) is a new foray. 4000MT capacity in Kushalnagar Coorg.

(Vinith Jain) #192

10K T would be its entire exports, that includes instant, ground coffee & coffee beans. I think they have approx 3000 T instant coffee capacity and that too it is coffee powder not agglomerated or freeze dried.

(Arun S G) #193

I had (have) slotted CCL as a “processor” type of company - the one that takes inputs ( beans ) processes them, and then sells them at a margin, and thus the growth is more driven by volume than value-add. In other words, more input, more output.

After these posts, I checked again the OPM of CCL - a healthy 20+%. Interestingly, so are margins of Starbucks & Kraft-Heinz, and could not find numbers for JDE being privately held. So**,if** KH and SB are customers of CCL, how does CCL also maintain margins? In fact their AR-2017 states:

Competition & Market Risk:
The coffee markets in which we do business are highly competitive and competition in these markets is likely to become increasingly more intense due to the relatively low barriers to entry. The industry in which we compete is particularly sensitive to price pressure, as well as quality, reputation and viability for wholesale and brand loyalty for retail. To the extent that one or more of our competitors becomes more successful with respect to any key competitive factor, our ability to attract and retain customers could be adversely affected. Our private label and branded coffee products compete with other manufacturers of Instant coffee

At least from the AR it is not clear the breakup of their B2B & B2C revenues, especially as they sell to stores for their private labels where the margins can be extremely thin.

(phreak) #194

I tried Continental Speciale and I am sold. Its nice. Not as nice as the Indonesian Arabica I was having previously but not bad at all.

I think CCL Products has got to get into TV advertising. Seriously. Someone tastefully used the Nina Simone - Feeling Good soundtrack for the Jockey ad for Page Industries. I think CCL Products should use one of the Jazz renditions of ‘Black Coffee’ and build an image.

(Jaclyn) #195

After reading this article you may think twice before drinking any exotic coffee.

Spilling the coffee beans

Votaries of the brew are ready to spend hefty sums for favourite blends

Jackie Chan once famously said that coffee is a language in itself, and votaries of the brew would agree, revelling as they do in its complex aromatic grammar and social semantics.

A steaming mug of coffee kick-starts the mornings of millions every day. Perfectly blended and brewed, your favourite can cost anywhere between $1 and $500, but, for those who love the beverage, it’s a price worth paying. For there is nothing that can beat the aroma, flavour and feel of that perfect cup.

Surprisingly, the several versions of coffee — latte, espresso, cappucino or mocha — are made primarily from two types of beans — Arabica and Robusta.

Over the years, both the variety and quality of coffees has improved dramatically.

Avid coffee lovers are ready to fork out hefty sums for their favourite blends and producers have been outdoing themselves in catering to this clientele by offering beans grown in special climatic conditions or processed in strange ways, sometimes involving animal poo!

For instance, the Indonesian Kopi luwak, one of the world’s most expensive brews, is made from part-digested coffee cherries eaten and excreted by the Asian palm civet.

What influences the price
Coffee shops across different regions and countries charge different prices based on the size of the coffee, type or blend, and the specific variety chosen. Arabica, for instance, is pricier than Robusta as the latter is easy to grow but has a harsh, strong and bitter taste.

Arabica has a sweet and smooth flavour but is grown at high altitudes and takes a long time to bear fruit, usually over a year. Thus, it is a common practice to blend the two to balance the taste.

That said, the beans are not the only factor that determine a coffee’s price. Rahul Leekha, owner and director of Coffee by Di Bella (India), says there are wide price variations within a country and its regions that are largely attributed to climatic conditions, soil, the flavours added and the harvest volume.

Global output is another factor affecting the price of your steaming mugful, as also the method of production. Some coffees taste better as the trees are older and well-maintained and, hence, their price is higher. Other specialty coffees, especially the ones produced from animal faeces, are sold at very high prices, because of the way the beans are roasted and brewed.

Exclusive coffee
“You can make all kinds of wines with different varieties of grapes, but the premium wines are those made from grapes grown in specific regions, which have their own unique tastes. The same applies to coffee also,” says Leekha.

It is not what is being added to a coffee but the factors that contribute to the production of the coffee that makes it expensive. For instance, Panama Geisha coffee, from Panama is considered the most expensive in the world.

This particular coffee has a high demand and is usually grown 1,500 metres above the sea level.

Production is also very limited; hence, the high price. Says Leekha: “In a coffee auction recently, Panama Geisha fully Arabica coffee, was auctioned at a record breaking $37,000 for 100 pounds.

It is the only type of coffee grown in those regions and has a unique and complex flavour with notes of tropical fruits in it — a perfect balance.”

Blue mountain coffee is another popular, high-end product grown in the mountains of Jamaica. The cherries are grown at an altitude of 7,500 feet above sea level; the climatic conditions and soil give the roast a mild taste.

Japan buys almost 80 per cent of this coffee and is partly responsible for its high demand.

Coffee such as Hacienda El Roble, a rare coffee grown in Colombia, is also expensive mainly because of limited supply.

Di Bella’s Leekha says “Only 22 kilos of this coffee is available each year, it is very exclusive and has a unique taste. It easily costs upward of around $300 a cup.” Coffees grown in volcanic regions, because of the soil, enjoy a premium pricing too.

Bizarre beans
Some coffee growers use highly unusual methods to produce coffees that surprisingly seem to find favour and feature in the premium pricing segment. For instance, Black Ivory, is among the notably expensive coffees globally, produced in North Thailand.

Here, the Arabica cherries are fed to the elephants. The cherries pick up unique flavours as they pass through the elephants’ intestines. When excreted by elephants, they are smoother, less bitter.

These fruit are then roasted, processed and sold. Since only few of the cherries survive the production process, this coffee is considered super expensive, around $1,500 a pound.

Kopi Luwak is also expensive for the same reason. In this case, the cats eat and excrete a combination of both Arabica and Robusta cherries, bringing out a unique blend each time that costs $200-$600 per pound.

Besides the manner of production, the additives — flavours, fruits and other ingredients — can also enhance the taste.

So, next time you buy coffee, find out what type of beans, and the proportion of beans, used in the blend, ask how it’s been roasted — light, medium or dark. Then pick the flavours or ingredients you want in your coffee.

And if you prefer the exotic, go for ones that have passed through the innards of some beast.

(Sunray) #196

In addition…

Several years ago NPR featured Dr. Douglas Emlen, an entomologist, to discuss dung beetles. (NPR makes even bugs interesting to the average listener!) At the end of the interview Emlen threw in an extra tidbit of information: pre-ground coffee contains ground-up cockroaches.

This happens with coffee because the large piles of coffee beans get infested with cockroaches and, according to Emlen, it is impossible to remove them completely. So they are simply ground up with the coffee beans.

Bug parts in coffee (and other foods) are allowed by the FDA as long as they don’t make up more than a certain percentage.

There is a growing awareness that cockroaches adversely affect many, and it is now known to be a trigger for asthma and allergies.

Thankfully you can avoid this by buying whole bean coffee. I recommend organic, because coffee is a highly sprayed crop

(Sudheer) #197

@tirumal @mpbhat

Still the growth aspect is not convincing enough, though they enjoy a moat now in terms of long customer relationships and blends and advantage in Capacity ramp-up. Even the US opportunity seems a no go now when i consider the Psychological view of US people that @rupaniamit nicely outlined. In this context I was brainstorming with my friend to understand what other risks we are missing and then came across an interesting factor to include. we are assuming that CCL is in a position to gain market share from smaller players, but what about the possible China effect?

  • As of now Coffee is still seen as occasional social drink in China [Read] and slowly pickingup associated with upscale coffee bars similar to our barista; “as the country prospers from urbanization, a growing middle class and rising incomes”. Where as tea which is part of their life style and still dominant in all proportions. One specific thing we need to remember is China is different, they are not like any other free market. Chinese government strictly monitors forex outflow and creates their homegrown brands. They will never allow outside brands to dominate.

  • If coffee consumption increases in China that might prompt them to import raw coffee beans from Vietnam/Indonesia and setup brands to process them locally and once that happens they will move to exporting also in the next step. Normally they will allow Global brands when market for specific product or service is nascent. Once market is created for the product they will create their homegrown alternatives and eventually Global brands are reduced to small share. Some of them may even pull out.

  • This is standard template they follow. Even gaints like Google, Amazon, Twitter, WhatsApp, IBM, Earlier Moto, GM,Cisco, Lucent, Walmart etc couldn’t beat

Also it seems the global market (other than saturated ones like US and EU), are in the same inflection point as EU/US when instant coffee pickedup… now they are seeing 1% de-growth - so need to consider that effect for future growth

Note: This is a long term risk view in context of market share capture… We can always exit in few years if we see signs of above in china but imp to factor in this.

Disc: Following the story. Not invested yet

(logumay25) #198

Dear Seniors,
I’m going thru the thread to understand how yo analyse a company, pls help me understand how this business is attractive when the FCF Yield is only 2%? I’m a newbie ,I know I’m missing something ,just wanted to understand the valuation process better.

FCF = $851 Million
Shares = 133 M

Cash yield = 851/(133*300) = 2%

(Learning_investor) #199

I recently ordered Continental coffee from Amazon and was very happy with the taste, price and quality. Although they took 80 Rs as delivery charges for 200 gm coffee.
Wondering Y they are not aggressively marketing on various media platforms??

(eshwar) #200

Their marketing is mostly offline, recently I saw a special promotion(store space at the beginning of the entrance, 1+1 offer, coffee to taste e.t.c) at Hypermart, inorbit mall, Hyd. I spoke to the store guys they said Continental coffe sales are higher than Nestle and Bru in december 2017, and there are repeated customers to it.

(rkothuri) #201

Yes, my wife bought 50gm packet from DMART and they are running a 1+1 offer. She feels the test is very good, in fact better than Bru/Nescafe and at the same time feels price is expensive.

(James Sebastian) #202

I recently started seeing this in EasyDay I shop in Rohtak (which is a small city compared others) in Haryana. We liked it and we switched from Bru. Also I invested 3% as I was watching this thread and liked the story. So through organised sales they are in Northern small cities as well now. Fresh & Pure brand is what we started seeing from Dec end here.

(Rudra Chowdhury) #203

Is this the coffee you tried ?

(James Sebastian) #204

Yes. The same. Yesterday i bought another bottle for rs.79 for easy day club customer (MRP 115 50 g) and I asked the staff and he says this brand sells much faster than Bru and Nescafe . Also he did not hear any complaints yet from anyone so far and all are satisfied with quality.

Now back home I come from coffee growing small scale farmer family, so we used to drink coffee from childhood and liked this in price comparison and taste. So it looks like CCL silently spreading it.

(Jaclyn) #205

I did not come across anywhere that Fresh & Pure is a brand owned by CCL. If it is mentioned anywhere please share the same.

(rajput.delhi) #206

(Prem Bhat) #207

In marketing terms, it is called as a private label.