CAFE COFFEE DAY BEGINS DUE DILIGENCE ON THE POSSIBLE ACQUISITION OF EASTERN EUROPE RETAIL CHAIN

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CAFE Coffee Day (CCD), the coffee retailing arm of Amalgamated Bean Company (ABC), has begun due diligence on the possible acquisition of a retail chain in east Europe. It expects to open as many as 12 stores in Prague, the capital of Czech Republic.

   “We are keen to make CCD the third largest global player in the coffee retailing space. In markets like the US, one looks at buyout opportunities and not entering on their own. We are looking at this (buyout) seriously. These chains could either have 10 stores or more,” ABC chairman VG Siddhartha said.

   He said that ABC was looking at increasing the available cash. Currently, ABC has cash (which includes cash flow and internal accruals) for a two-year period, which Mr Siddhartha expects to increase to about 3.5 years to ensure that the company is prepared for any inorganic growth opportunities. ABC could eventually look at seeing another $ 100 million being added to its available cash over the next few months.

   In the meantime, ABC is also looking at ways and means of improving productivity on its estates.

   “We are looking at importing high yielding Arabica clones from Colombia. This material can help us to produce around two kg per plant,” he said.

   While not indicating the productivity on his estates, he said that the average production on Indian farms was only about 350-400 kg per acre which was no match to output from farms in Colombia or other South American nations. Mr Siddhartha expects to multiply these clones in a biotech lab located at Chikmagalur.

   The Colombian clones would only have an average life-span of about 17 years compared to conventional varieties in India which have a life-span of close to 50 years. The fact that close to 2,000 to 2,200 of such Colombian clones could be planted on a one-acre plot against the current 1,200 is seen as helping ABC derive significant long-term economic benefit.

   Besides importing these clones, ABC would be importing washers for processing the coffee beans harvested on its estates. These washers, Mr Siddhartha said, were needed as they help to conserve water.

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