Coffee Board has adopted blockchain in an attempt to provide an edge to growers and coffee from India

How much do coffee growers make from a cup coffee that costs $4 on streets of New York or London?” asks Srivatsa Krishna, Chairman and CEO, Coffee Board of India. Based on street shopping experience, I say 50 cents. He asks me to take another guess. Figuring that it could be lower, I come up with 35 cents. Srivatsa says, “All that they make is 4-5 cents on a $4 cup of coffee.” That’s just 1 per cent of the price charged in New York for the world’s only shade-grown, hand-picked coffee and sun-dried beans, which fall under the mild category.

India, which began commercial coffee production in the 18th century, has 3,50,000 farmers who grow around 3,19,000 metric tonnes (in 2018/19) over 4,50,000 hectares. Despite it being among the top 10 coffee growing countries – over 80 per cent of the crop is exported – returns to farmers are minuscule. Growers have all along struggled to make extra bucks out of the coffee value chain.

According to the Coffee Board, cultivable coffee land in India, which was around 92,000 hectares in the 1950s, had grown to around 4,00,000 hectares in 2010. Since then, there has been little addition. Currently, coffee is cultivated by small growers (under 10 hectares). While cultivable area has stagnated, productivity has grown 10 times. “Our productivity was 100 kilograms per hectare in 1950. Today, we are at around 1,000 kilograms per hectare,” says Srivatsa.

However, higher production has not been of much help to farmers, and that’s what the Coffee Board is hoping to address by using blockchain technology. Blockchain is a distributed ledger technology which allows members to record transactions in a decentralised data log maintained on a network of computers rather than a physical ledger or a single database. The aim is the reduce the middlemen in the value chain. Ethiopia and France already do this.

Sahadev Balakrishna, former Chairman of the Karnataka Planters Association, says in a commodity business like coffee, trading margins are low, 1-1.5 per cent for exporters and curers. The bulk of the profit goes to roasters and retailers. “If a grower sells to a curer or roaster, the price realisation is much better.” There are a number of middlemen clogging the coffee value chain in India. The number of middlemen could be three-six people depending on whether the coffee is for domestic consumption or for export. A blockchain marketplace could disrupt this.

On the Same Platform

The Coffee Board asked Bengaluru-based Eka Software, which offers commodity software, to develop a blockchain software. This is being tested as an app. The pilot, as of now, has 22 participants, which includes buyers, coffee roasters and growers. The stakeholders in the coffee ecosystem – which includes coffee farmers, traders, coffee curers, exporters, roasters, importers and retailers – have to register. Growers can offer any quantity and quality at their expected price for sale. The buyers can either agree to buy at the said price or make alternative offers. Once both parties agree on a price, the transaction is completed.

Blockchain provides a real-time secure framework for sharing ledgers and transactions, a digital ID that follows a physical product, smart contracts, and also the source of record accessible to all parties, making the platform transparent.

Nishan R. Gurjer, a sixth generation coffee grower and exporter who opted to be a part of the experiment, says the entire coffee industry is seeing a shift. “The coffee world is moving away from the traditional middlemen. Right from the origin to the attributes of coffee beans, from taste profile to carbon footprint, blockchain provides key information that consumers are seeking,” he adds. The grower provides this information and it is certified by the Coffee Board.

More importantly, growers have a bigger say in the price they get. “With the grower getting less than 10 per cent of the value, blockchain addresses the issue of transparency and gives better bargaining power for good coffee,” adds Gurjer. Though the blockchain platform is at a nascent stage, Gurjer says he is seeing more enquiries than before, and the democratic pricing gives him more comfort.

Second, the technology also provides agility and scalability. Even though the platform currently does not have an in-app payment option, it is likely to be integrated shortly.

Manav Garg, CEO and Founder of Eka Software, says the building applications on blockchain have been simplified: one can define the fields where data has to be captured, and set rules regarding who can create a record and who can modify. “You can deploy the contract quickly. The whole infrastructure is fairly distributed and there are miners who check them to verify legitimacy,” says Garg. Agility also comes from the fact that multiple versions of the contract can be deployed and changed to stay in step with evolving contract regulations. “For example the current coffee marketplace has gone through several modifications since the work began. When we started discussions, the model envisaged was a bid-ask system like in any stock exchange. Later, we became grower centric so that buyers don’t bring down the price. Later, buyers also wanted better control, so the model was tweaked to enable them to start contracts. On blockchain, it was fairly easy for us to modify and migrate through these multiple models,” Garg adds.

For growers, the platform provides democratic pricing. He can quote a price and negotiate discreetly with the buyer, with other growers not knowing the final price of the coffee, hence offering a better chance of higher price realisation for specialty coffee.

Premium Efforts

The government, too, is taking some steps to support the coffee market. In a bid to increase value and traceability, the Department for Promotion of Industry and Internal Trade recently awarded five new geographical indication (GI) tags – Coorg Arabica, Chikmaglur Arabica and Bababudangiris Arabica from Karnataka, Wayanad Robusta from Kerala and Araku Valley Arabica from Andhra Pradesh.

The franchise of the Coffee Board’s quick service restaurant India Coffee House has been given to two private players – Cafe Coffee Day and Afoozo group – for a facelift. India will also host the prestigious World Coffee Conference, the first ever in Asia, in September 2020.

International coffee prices have declined since 2017, mostly due to over-supply, says the International Coffee Organisation. There is a surplus of 4.16 million bags from 2017. It expects production at 168.05 million bags for 2018/19 compared to 165.54 million bags in 2017/18, and consumption at around 164.99 million bags. So, a surplus of 3.06 million bags is expected, making it a straight second year of surplus.

With low prices for coffee expected to continue, Indian coffee growers now stand at the cusp of technology adoption and creation of a brand identity as India readies to serve a fresh brew to the world.

@rukminirao
source: http://www.businesstoday.in / Business Today / Home> Business Today> The Hub> Story / by Rukmini Rao, New Delhi / print edition August 11th, 2019 – online edition 25th July 2019

Here is all you need to know about VG Siddhartha, the founder and owner of Indian coffee chain Cafe Coffee Day. VG Siddhartha has been missing since Monday morning.

The sudden disappearance of the owner and founder of the popular coffee chain Cafe Coffee Day, VG Siddhartha has sparked mass speculation.

Siddhartha, who is the son-in-law of former Karnataka CM SM Krishna, got off his car near the Netravati River off Mangaluru on Monday evening and has been missing ever since.

Dakshina Kannada Police has launched a frantic search to look for the prominent Karnataka-based businessman.

BUT WHO IS VG SIDDHARTHA?

Born in Chikkamagaluru district of Karnataka, VG Siddhartha comes from a family that has been in the business of coffee plantation for around 140 years.

He is credited with creating India’s largest coffee empire. He is also married to the daughter of former Karnataka CM SM Krishna.

Earning a masters from the Mangalore University, VG Siddhartha dabbled in the stock market in his early career. He joined JM Financial Limited in 1983-1984 in Mumbai as a management trainee/intern in Portfolio Management and securities trading on the Indian Stock Market under Vice-Chairman Mahendra Kampani. He was just 24 years then.

After two years with JM Financial Limited, VG Siddhartha returned to Bangalore. His father gave him money to start a business of his choice. VG Siddhartha bought a stock market card for Rs 30,000, along with a company called Sivan Securities, which was renamed in 2000 as Way2wealth Securities Ltd. Its venture capital division came to be known as Global Technology Ventures (GTV).

By 1985, he was a full-time proprietary investor in the stock market and owner of 10,000 acres of coffee farms. He says, When coffee trading was liberalised in the ’90s, I doubled the money I had invested in the plantations within a year.

CAFFEINATED DREAMS

Thus, was born the Amalgamated Bean Coffee Trading Company Ltd (ABCTCL) in 1993, a company focused on coffee exports. While his plantations produced 3,000 tonnes of coffee, ABCTCL would trade 20,000 tonnes. In two years, the company became the second-largest exporter from India.

The coffee bug had bitten VG Siddhartha.

In 1996, the first CCD store opened on Bangalore’s crowded Brigade Road, where coffee and an hour of Internet surfing cost Rs 100. The coffee chain’s first launch came at a time when Bangalore was on the cusp of a transformation from a pensioners’ paradise to an IT and lifestyle haven.

In doing this, VG Siddhartha and his team went against the better judgement of his MBA friends. The cafe was a runaway success.

While Coffee Day was taking its time in expansion, other rival chains came along and took the concept national. In its new strategy, CCD would open its store right next to its rival.

CCD is India’s largest coffee chain and is owned by Coffee Day Global which is a subsidiary of Coffee Day Enterprises.

Today, CCD has around 1,700 cafes, around 48,000 vending machines, 532 kiosks and 403 ground coffee selling outlets.

A Money Control report puts the annual turnover of the Coffee Day Enterprises at Rs 4,264 crore.

VG Siddhartha owns 12,000 acres (4047 ha) of coffee plantations. A 2015 Forbes list pegged his net worth at $1.2 billion (Rs 8200 crore).

It was reported recently that Coca-Cola was in early talks with CCD to acquire a substantial stake in India’s largest coffee chain. CCD was eyeing a valuation of Rs 8,000 to Rs 10,000 crore from Coca-Cola for the stake sale.

Besides CCD, VG Siddhartha has founded a hospitality chain which runs a seven-star resort Serai and Cicada.

Currently, he also holds board seats in GTV, Mindtree, Liqwid Krystal, Way2Wealth and Ittiam. Infrastructure major Larsen & Toubro had recently purchased around 20 per cent stake of VG Siddhartha and Cafe Coffee Day in tech company Mindtree through block deal for about Rs 3,210 crore.

VG Siddhartha was awarded the Entrepreneur of the year’ for 2002-03 by the Economic Times, for crafting a successful pan-Indian brand from a commodity business.

CAUGHT IN CONTROVERSY

VG Siddhartha was accused of tax evasion in 2017. Income tax raids were conducted at over 20 locations in Mumbai, Bengaluru, Chennai and Chikmagalur by senior officers of Income Tax Department of Karnataka and Goa regions.

The Income Tax Department raids on Cafe Coffee Day (CCD) retail chain found Rs 650 crore concealed income from the documents seized.

source: http://www.indiatoday.in / India Today / Home> News> Business / by India Today Web Desk, New Delhi / July 30th, 2019