What VG Siddhartha's demise means for brand CCD

Since Wednesday morning, news about the death of VG Siddhartha, founder of India's largest coffee chain, Café Coffee Day (CCD), has been doing the rounds. Days before he committed suicide, Siddhartha (60) had reportedly written a letter to board members and employees of CCD, alleging harassment by an income tax officer and expressing regret for not being able to create "the right profitable business".

Siddhartha, son-in-law of former Karnataka Chief Minister SM Krishna, mentioned he was under "tremendous pressure" from one of the private equity partners and Income Tax Department.

“What signals are we sending to the budding entrepreneurs without even an attempt to reform?” Siddhartha wrote.

As the day progressed, social media was flooded with condolence messages as netizens took to Twitter, Facebook, etc., to tweet and post emotional memes.

I did not know him & have no knowledge of his financial circumstances. I only know that entrepreneurs must not allow business failure to destroy their self-esteem. That will bring about the death of entrepreneurship. https://t.co/H4ysr8Ov3U

— anand mahindra (@anandmahindra) July 30, 2019

I am indirectly related to VG Siddhartha. Excellent human and brilliant entrepreneur. I am devastated with the contents of his letter. The Govt Agencies and Banks can drive anyone to despair. See what they are doing to me despite offer of full repayment. Vicious and unrelenting.

— Vijay Mallya (@TheVijayMallya) July 30, 2019

Forget about dealing with markets/suppliers/customers/investors/employees/stake holders. Managing the systematic harassment by the State n it’s pliant agencies is the biggest challenge. IT, ED, CBI, ROC etc are the biggest impediments for ease of business https://t.co/3KOpweDDbC

— Karti P Chidambaram (@KartiPC) July 31, 2019

Siddhartha launched India’s first coffee café — Café Coffee Day — on Brigade Road, Bengaluru, in 1996. As of July 2019, there are 1,843 outlets in India across 28 states. Internationally, CCD outlets are present in Austria (Vienna), Czech Republic, Egypt and Nepal.

Siddhartha recently sold 20.3% stake in Mindtree to L&T. According to reports, he was in talks with Coca-Cola for a stake sale too.

Coffee Day Enterprises’ stock hit its 20% lower circuit on Wednesday (second day in a row) following the news of Siddhartha’s death. ICRA has placed Coffee Day Enterprises on rating watch with negative implications.

The Board of Directors (BoD) of the company on Wednesday announced the appointment of SV Ranganath as the interim Chairman. Nitin Bagmane was appointed as an interim Chief Operating Officer while R Ram Mohan is the new Chief Finance Officer.

In the wake of the incident, BestMediaInfo.com asked experts what the demise of VG Siddhartha means for brand CCD.

Suman Srivastava

According to Suman Srivastava, founder and innovation artist at Marketing Unplugged, a brand consultancy, CCD will see a temporary spurt in brand affinity as people may flock to its outlets to express sympathy for VGS. What happens after that is more interesting. And it all depends on the next leader.

“Founders are not always the best people to run the company after a point in time. McDonalds was built by Ray Kroc, not the McDonald brothers. Google, Über and many other Silicon Valley companies have benefited by 'adult supervision' from a seasoned industry veteran. Will CCD get such a leader?” Srivastava wonders.

“I guess the safe bet would still be against CCD, but I, for one, am rooting for the brand and hoping that a sympathy wave combined with a charismatic leader can take the brand to new heights,” he adds.

Interestingly, a study in Norway looked at 341 privately held firms who had lost their founders and compared them to matched firms whose founders were still around. The study found that the firms, whose founders had died, lost 60% in terms of sales and were 20% more likely to die within two years of the founder’s death.

Going by the survey, one could conclude that CCD is likely to fare very badly. This seems to be the market expectation judging by the sharp fall in the share price of the company over the last two days.

However, India is an emotional country and we hate to see our brands die.

“See the farewell that we gave to Old Monk when it was being withdrawn. Also, the current climate is particularly nationalistic. VGS is already becoming something of a martyr entrepreneur and might end up becoming a symbol of the fight against over-aggressive PF firms and / or over-enthusiastic tax officials,” says Srivastava.

Vineet Gupta

Vineet Gupta, Founder & Partner, Spring Marketing Capital, who started his career at Cafe Coffee Day as a Management Trainee, holds a different opinion and believes that the brand is certainly not going to suffer due to Siddhartha's death.

“It's a very loved brand. It's used by a lot of consumers and there are a lot of emotions attached to it,” says Gupta.

According to him, Siddhartha's legacy is quite strong because of the fact that he has built such a strong brand which by itself has the potential to outlive. Of course, in the immediate situation, everyone associated with the brand CCD may face a tough time. But in the long run, the brand is strong enough to stand on its own, he said.

Echoing similar sentiments, Shubho Sengupta, a digital marketer (ex-Contract, JWT) says that Siddhartha always maintained a low profile, just like Shiv Nadar, founder and chairman of HCL. So, in that case, business should not be affected. It's a brand built over 20 years.

In fact, CCD is not a personality-driven brand at all. Quite unlike Kingfisher, where one questions 'what will happen to Kingfisher after Vijay Mallya is gone?' Another classic example of a personality-driven brand was Apple. But it made the transition after the demise of Steve Jobs since the product was so strong.

“If one asks college-goers or youngsters about Siddhartha, chances are most of them may not know. But of course, there will be outpouring of public sympathy because he is a 'Made in India' success story,” says Sengupta.

“Brands must have a purpose and not just cling to making profits. I don't know what the larger purpose was but Siddhartha made the coffee experience available at an affordable price to Indian consumers,” he added.

And will the brand CCD lose goodwill among investors?

Well, it's too early to predict how the investors are going to react to this tragic incident as investigation will take time.

Perception is more important than reality. The perception is such that India is not a favourable country for entrepreneurs. Here, dealing with the tax department is a backbreaking task for a startup.

“Prime Minister Narendra Modi is promoting 'Startup India'. But are other government bodies, such as Income Tax Department, aligned to his vision? It is something that I am not very sure. So, it's a wake-up call for everyone,” says Sengupta.

Info@BestMediaInfo.com