Information Memorandum March-101

Business Overview

Amalgamated Bean Coffee Trading Co Ltd., (ABC) is a unique player in coffee, with amulti-channel strategy encompassing cafes, vending machines, Xpress kiosks and F & Goutlets for marketing filter coffee powder.

ABC currently has 915 cafes, 14,306 vending machines, 999 xpress kiosks and 409 F&Goutlets & 3,3434 Gemini Machines (as of 31st March, 2010).

The turnover of ABC for the last 5 years is given below:

Retail and Export Division breakup of turnover for year ended (FY ’10) is given below.

ABC has lined up an aggressive expansion plan for the next five years. Details are givenbelow.

Projected Closing Number of units

Divisions 2011 2012 2013 2014 2015

Cafés-

Xpress- Kiosks

Vending- MachinesF & G-Outlets/Machines

Exports - Tonnes

Int. Cafes

1131

1049

16308

437/5292

13805

14

1431

1349

19808

477/6392

13929

19

1751

1649

23308

540/7592

14170

19

2066

1949

26808

603/8792

14416

19

2376

2249

30308

666/9992

14666

19

Gross Revenue Projection

History of ABC:-

Amalgamated Bean Coffee Trading Co. Ltd., (ABC)was promoted by Mr. V G Siddhartha in the year1993 for exporting coffee beans. Coffeeprocurement network and processing facilities weresetup at Chikmaglur and Hassan to enable export oflarge volumes.

Since 1995 ABC forayed into retailing of coffee in different formats like café, vendingmachines, xpress kiosks and selling F & G powder all under the brand name“Coffee Day”

Present Corporate Structure:-

ABC is the flagship company. Mr. V G Siddhartha and Associates are the major shareholders with 65.47% stake. Other investors hold 34.53%. The list of subsidiaries and theholding structure is given below:-

Amalgamated Holdings Ltd., (AHL):- AHL is a 100% Subsidiary ofABC. The Company operates F & G outlets.

Ganga Coffee Curing Works Ltd., (GCCL):- Is a 100% subsidiary ofABC and owns and operates coffee curing works and coffee roasting plantat Hassan.

Coffee Lab Ltd.,:- Is a 100% subsidiary of AHL, engaged in research anddevelopment on coffee.

A.N Coffeeday International Ltd.-Cyprus :- Is a 100% subsidiary of ABCand is the holding company for all International operations.

Coffee Day Gastronomie Und Kaffeehandles GmbH- Vienna(Austria):-Is a 100% subsidiary of A N Coffeeday International Ltd., The companyowns and operates cafes at Vienna, Austria.

ABC’s holding structure

Management:-

The Chairman of ABC, V.G. Siddhartha(VGS), has a long association with coffee, giventhe family’s interests in coffee plantations in Southern India for more than 125 years.V.G Siddhartha saw tremendous opportunity in the coffee business, even prior toliberalization of the coffee sector in India and started acquiring more coffee estates. Withthe Government announcing liberalization of coffee trade in India, VGS set up ABC in1993 to export coffee beans and later forayed into retailing in different formatswhich heralded the Coffee Day movement in India. For his relentless efforts in thisdirection, VGS was recognized as “The Entrepreneur of the Year” by EconomicTimes in September 2003.

VGS has put together a highly competent management team, which has displayed itscapability by establishing the “Coffee Day” brand and leveraging it across multipleproducts and channels. The management team comprises of professionals with good pastwork experience.

A brief description of the qualifications and experience of Directors and key members ofthe ABC team is provided below:

V.G. Siddhartha-Chairman, ABC Group:V.G. Siddhartha, 48, hails from a family of Coffee Planters from Karnataka inSouthern India. After obtaining Masters in Economics, VGS joined J. M FinancialServices-Mumbai in the Equities Division; VGS has been a highly successfulequity investor. Recognizing the impending transformation in the technologysector, he invested in several start-up companies, through Global TechnologyVentures Ltd (GTV). GTV, as angel investor, had invested in start-up companieslike Kshema Technologies, MindTree Consulting, ITTIAM and IvegaCorporation. GTV exited some of these investments at good valuations. GTVthrough its 100 % subsidiary viz., Tanglin Developments Ltd owns a technologypark in Bangalore spread over 130 acres. The tech park is an approved SEZ.

Alok Gupta- Director, Café DivisionMr. Alok Gupta, as a Director heads the Café Coffee Day division. Apost graduate from IMT, Ghaziabad, has worked for 21 years withseveral companies viz. Autometers, Dabur, Shaw Wallace and TheUB Group having handled different areas of business like strategicplanning, operations, sales and marketing. He has also completedAdvanced Management Program from The Harvard Business School.His stint at the UB Group lasted 14 years, major part of which waswith the flagship company ‘United Spirits Limited”. As part of themanagement committee member at the UB Group he played a crucialrole in areas of global strategy including the launch of KingfisherAirlines. His last assignment at the UB Group was as ChiefOperating Officer of Whyte and Mackay based at Scotland.

Malavika Hegde-Director.Malavika Hegde wife of Mr. V G Siddhartha aged around 42 yearsactively involved in day-to-day running of the company, she is a graduatewith commerce background, She is a director in the following companies.

a) Global Technology Ventures Limitedb) Coffee Day Holdings Pvt. Ltd.,c) Coffee Day Pvt Ltd.,d) Sivan Securities (Mangalore) Pvt Ltd.,e) Rajgiri & Sankhan Estates Pvt Ltd.,f) Sampigehutty Estates Pvt. Ltd.,g) Coffeeday Consolidations Pvt. Ltd.,h) Bangalore Best Veterinary Products Pvt. Ltd.,

K P Balaraj – Nominee Director-Sequoia Capital.Mr. K P Balaraj aged around 39 years with vast experience in industryappointed as a nominee director from Sequoia Capital during 2006. He is adirector in the following companies.

a. FirstSource Solutions Ltd.b. Tarang Software Technologies Pvt. Ltd.c. Intercept Technologies India Pvt. Ltd.d. Brainvisa Technolgoies Pvt. Ltd.e. Tutorvista Global Pvt. Ltd.f. Indecomm Corporationg. Astra Business Services Inc.h. Travel Guru.comi. Sequoia Capital India Advisors Pvt. Ltd.j. WestBridge Ventures I, LLCk. WestBridge Ventures Co-Investments I, LLCl. WestBridge Advisors I, LLCm. WestBridge Ventures I, Investment Holdingsn. CBD Holdingso. KPB Capital

Krishna Bhat –Independent Director.Krishna Bhat aged around 71 years has been associated with ABC as anindependent Director since March 2007. He was working as Chairmanof Karnataka Bank Ltd., before joining ABC for 6 years from 1995 to2000. He is a Qualified Chartered Accountant. He is actively involved inthe voluntary organization in and around Mangalore and he is also one ofthe main person responsible to taking Karnataka Bank to its successduring his tenure as Chairman of Karnataka Bank Ltd.

Gaurav Pradhan – Nominee Director-Dautsche Bank.Mr. Gaurav Pradhan aged around 38 years associated with ABC since2008 as Nominee Director of Deutsche Bank and he is also Director inArihant Domestic Appliances Pvt. Ltd.,

Rajeev Gupta – President, Exports.As head of the Exports divisions, Rajeev formulates strategy for the division,which involves detailed analysis of export market, scouting for new buyers,finding new markets for existing as well as new products. Prior to joining ABC in1998, Rajeev was heading the Coffee Exports division at Tata Tea Limited.Rajeev Holds a P.G.D.M from the Indian Institute of Management, Calcutta.

Jayraj C Hubli - Chief Financial Officer.As Chief Financial Officer, Jayraj is responsible for all finance-related functionsincluding financial accounting & reporting, internal audit, treasury managementfunctions across all divisions of ABC and its subsidiaries. Jayraj is a CharteredAccountant. Prior to joining ABC in 1994 he worked with Karnataka StateFinance Corporation for 10 years.

Shankarnarayan – Head, Vending DivisionShankarnarayan heads the vending division. He has been associated with ABCsince April-2002, and has been responsible for setting up the division with a well-knit sales team. Prior to joining ABC he worked with companies like CMCLimited, Wipro Infotech, ICI Paints, ICI India Ltd., and Coco-Cola India, Heholds B.Tech. degree from IT-BHU, Varanasi, and PGDBM from XLRIJamshedpur.

C J Jayanth – Head, F & G Division.Jayanth heads the fresh & ground division. He has been associated with ABCsince 1995. Before joining ABC he worked in Hindustan Ciba-Geigy Ltd., andColgate Palmolive India Ltd., for 13 years. He is a management graduate(PGDBM).

A G Puttaraj – Head, Xpress Division.Puttaraj, an MBA, has been associated with ABC since 1995. He took over theCoffee Day Xpress division in March 2006. Prior to that Puttaraj was in-charge ofmarketing at other divisions viz. F & G, Café Coffee Day and Vending.

Ms. Sunalini Menon – Head Coffee Lab Ltd,.Sunalini heads Coffee Labs, the research and product development subsidiary ofABC, She has over 30 years of experience in the coffee industry, including 20years at Indian Coffee Board. She is actively involved in research anddevelopment aimed at enhancing the final product offerings of ABC, throughimprovement of processing techniques, blending as well as precision in preparingthe final ready to drink beverage. She has developed unique blends for the F & G& Vending as well as innovative coffee beverages for the Cafes & Xpress.

Ms. Shweta Shetty – Head, Business Development.Shweta leads all business development efforts at ABC across all divisions. Itincludes retail stores expansion and key accounts management withRailways, Airports & Oil Companies (HPCL, PPCL, Indian Oil, ONGC).She joined ABC in 2002. Prior to joining ABC she worked as an Analyst withGlobal Technology Ventures Limited and Lintas Advertising India. Shwetha isan MBA.

Mr. Sadananda Poojary – Company Secretary.Sadananda is the Company Secretary. He also looks after finance & accounts of

exports. He joined ABC in 1996. Prior to joining ABC Sadananda worked withKarnataka State Finance Corporation for 6 years. He is a qualified CompanySecretary (ACS) and a Cost Accountant (ICWA).

Business Divisions

ABC has five distinct business divisions, each of which is a separate profit centre.

These are:

Café Xpress Fresh & Ground Vending Procurement,

Processing & Exports

A detailed description of each of these business divisions is provided in the followingpages.

CAFÉ DIVISION

The Opportunity in the Café Segment:-

The growth in café segment has been spurred by several factors including increasing demandfor innovative, sophisticated products as well as growing demand for specialty cuisine and beverageoutlets as opposed to broad-menu food outlets, Starbucks is the world’s largest owner/operator ofcafes with over 14000 outlets across the globe. Other major café chains include dried rich andTully’s in USA, Costa Coffee in the UK and Doutours in Japan.

The key positioning platforms for these specialty outlets is good quality product offerings coupledwith an ambience that promotes relaxation and indulgence as evident below.

The Café segment has already taken off in India as well, on the back of the significant shifts inincome and demographic patterns, which together are leading to increased urbanization, higherdisposable incomes and growing exposure to consumption trends. Increasingly Indianconsumers, similar to their Western counterparts are seeking innovative, specialty foods andbeverages. This in turn has translated into growing popularity of the café concept in India acrossthe country evidenced by the growth of Café Coffee Day.

Café Coffee Day is the clear market leader in India with Barista the other café chain(taken-over recently by Lavazza) operating only 150 cafes. Sensing the opportunity forsetting up more cafes in India, Starbucks has announced plans to

enter India by Dec ’07. Considering the rapidly growing café culture in India,ABC feels there is enough room for many players, including Starbucks.

Café Coffee Day - BackgroundThe Café Coffee Day division was started in November, 1996 with the first outlet locatedon Brigade Road, Bangalore. As on 31st March, 2010, the ABC had 915 cafés across 130cities/towns in the country.

Geographical spread of Cafes

International operations.

In addition, ABC through its subsidiary in Austria, has setup 4 cafes in Vienna.The first one was setup in Nov ’05, the second one in Sep ’06, the third one in Feb’08 and fourth one in Oct ’08. These cafes have received good response on account ofhigh quality beverages and food varieties apart from the ambience. Locations of thesecafes are as follows.

1) Tegetthoffstrasse1010 Vienna, Innere Stadt –Austria

2) UniversityDr-Karl-Lueger-Ring-10, 1010 Vienna.

3) Wahringerstrasse 221090 WienAustria

4) Shopping Center Nord Top 121Ignaz Kock Strasse 11210 Wien

In Nov, 2006 ABC opened its first outlet in Karachi, Pakistan. The second one wasopened in April 2007. Both are operated by franchisees.

Positioning:-CCD targets students and young professional in the age group of 18 to 35 years. CCD ispositioned as the neighborhood café, offering attractively priced products in a warmambience, which heightens the pleasure of drinking coffee. The cafes blend excitingdesign elements with functionality to create an atmosphere where people can unwind.

The tagline of CCD is ;

On an average, over 1,25,000 customers visit CCD every day. Over 70% of customers arerepeat customers who frequent the cafes more than thrice a week. The cafes are openthroughout the year and around 12 to 16 hours per day depending on the location.

The age profile of the visitor is depicted in the following table.

Age Profile % of visitors

15 to 19 25%

20 to 24 38%

25 to 29 23%

30 + 14%

Café formats:-

The Company has adopted various formats for its cafes. All cafes are company owned,company operated and are on leased premises. The leases are typically for 3 to 5years renewable at the option of the lessee up to 10 years. The various formats areas follows:

High Street : Typically these are located in commercial shoppingcomplexes and key in-city hubs with high footfall. The sizes are normallyin excess of 1500 Sq. ft. & each city will have at least one such caféwhich acts as the brand ambassador in that city.

Garden Cafes : These cafes typically have a large outdoor seatinggiving it a unique ambience.

Lounge Cafes : These cafes are designed to provide coffee lovers amore relaxed atmosphere over a delicious cup of coffee.

· Fashion/Music/Book Stores : These are located within a store.

Highway Cafes : These are generally constructed over a large pieceof land taken on lease. This offers a good stopover with a leisurelyambience apart from world class restrooms to freshen up.

Cafes at Gas Stations : CCD has tied up with Indian Oil, BharatPetroleum, Hindustan Petroleum and ONGC to set up cafes at theiroutlets.

Airport Cafes : Generates high volumes.

Cafes at Malls : CCD has targeted every major mall coming up inall cities across the country.

Location Identification:-

ABC has a full fledged business development team. The team has executives located inall major cities engaged in identifying locations across the region for setting up cafes.Initial enquiries leading to serious negotiations are short listed and are placed beforethe Site Selection Committee, for final clearance. The Committee is headed by theChairman.

Setting up of Cafes.

Once the site is selected the projects team gets into action. The team has in-housearchitects, designers and engineers who co-ordinate with outside contractors to get thecafé ready within 30-45 days from signing-up of locations.

Outlet Management

ABC has consciously adopted a strategy to own and manage all cafes as opposed tofranchising. This facilitates greater quality and service. Typically a café is headed by aCafé Manager with a team of 4 - 8 members depending on the size. There will be an AreaManager overseeing 5 - 8 cafés who in turn will be reporting to the City Manager.Cities/Towns are clubbed under a region headed by Regional Managers reporting toNational Head -Operations.

Sales Mix:-

Typically the sales mix of cafes is as follows:

a) Beverages --- 59%b) Food --- 35%c) Merchandize --- 6%

Beverages : Cafes offer a range of beverages comprisingof a wide varieties which include hot and cold coffeebeverages, coladas, fruit-crushes and frappe etc. These canalso be tailor-made to individual preferences for specialflavors and cream toppings.

Food : Cafes offer a range of food productswhich are suitable accompaniments to beverages.The food range includes pastries, sandwiches,samosas, pizzas, burgers, rolls, submarines apartfrom ice-creams, and Biriyanis.

Food is sourced from vendors who can adhere to the strict quality normslaid down by ABC. Given the absence of vendor with national presence ABChas entered into multiple arrangements, one for each city. Most of the food itemsin the menu are common across cafes. However depending on the local tastechanges are made in the menu. Recently at select outlets light meals have beenintroduced.

Merchandize:- Cafés also offer several products under the Coffee Day brandlike mugs, coffee-filters, apparels such as T-shirts, caps apart from cookies, mints,coffee-powder etc. The objective to sell merchandize is to enhance the visibilityof the brand –Coffee Day.

Technology:-

Cafés have been equipped with state-of-the-art Wi-Fi enabled POSterminals. These are integrated with printer and smart card readerfor order taking cum billing.

Manpower & Training:-

The total strength of this division is 6070 personnel which includes 4656 direct and 1414outsourced as on 31st March ’09.

Employees managing cafes undergo an intensive training programme upon induction.The training covers various aspects including taking order from customers, preparing thebeverage, cleanliness, efficiency of service apart from taking customer feedback.Employee performance is continuously monitored.

Operational Efficiency and service

ABC is attempting to maximize operational efficiency through several measures. Thekey raw material-coffee beans- is sourced through ABC’s procurement set-up, whichtranslates into lower costs as compared to non-integrated coffee players. Food productsare delivered directly to the cafes and the respective suppliers ensure timely availabilityand freshness of these products. The consumption patterns are tracked in each store on adaily basis, which enables demand forecasting and reduces wastage.

Each café is evaluated and graded on service parameters and incentives for superiorperformance have been built in to the employees’ compensation package. The incentivesare paid to the entire team managing the café in order to encourage teamwork.

Marketing & PromotionThe focus of the marketing and promotion activityhas been to increase the visibility of the Café CoffeeDay Brand and get closer to the customer. TheCompany has primarily relied on ‘word of mouth’ toincrease branch awareness. With this objective inview, management endeavors to ensure customersatisfaction which not only translates into a repeatvisit but also positive feedback to other potentialcustomers. Besides, the merchandise sold throughthe cafes also aims to enhance brand visibilityoutside the café.

The company also undertakes promotion schemes on a periodic basis, which are asfollows:

Special promotional schemes such as free sampling, attractive introductory offersat the time of Café launches and at the time of new product launches.

Special schemes on festive occasions such as Diwali, Valentine’s Day and NewYear’s Day.

Café Division Organisational Structure:-The Café Division is headed by MD. He is assisted by a team of Professionalsspecializing in key functions,

Alok GuptaDirector

Venu MadhavOperations & Sales Ramakrishna

Marketing

Shyamala DeshpandeHR & Training

Tarun SarafFinance & Accounts

Kiran ThamannaGM Projects

Satyananda B SSCM & Maintenance

Ramchandar RamanFood & Beverage

Mr.Venu Madhav – Head, Operations & Sales.Venu looks after operations and sales at Café Coffee Day. This involvesmonitoring performance of café and overseeing operational issues. Prior to takingover operations at Café Coffee Day Venu was part of the Exports team and washeading Packaged Coffee Division which was later merged with F & G. Prior tojoining ABC in 1996, Venu was working in the marketing division of IPCL,Mumbai. Venu is a post graduate in management from BITS, Pilani.

Ms. Shyamala Deshpande - HR & TrainingShyamala has been working with Café Coffee Day since October 2000. She hasa total work experience of more than 16 years and was associated with HotelCentral Park, Bangalore as an Executive Housekeeper before joining CCD. Shepassed her Diploma in Hotel Management & Catering Technology fromIHMCTAN and has a Masters in Tourism Management from IGNOU.

Mr. Tarun Saraf - FinanceTarun heads the Finance Department of Café Coffee Day. He has beenassociated with Café Coffee Day since March ‘09. He is a CharteredAccountant & was working with InCap Contract Manufacuring ServicesPrivate Limited before joining Café Coffee Day.

Mr. Sathyananada. B. S - SCM and MaintenanceSathyananada has been with Café Coffee Day since the year 2000. He wasassociated with M/s. Manju Enterprises as an Administrative Assistant beforecoming on board with CCD. His academic qualifications include M.A. fromMysore Open University along with B.Ed from Bangalore University and B.Afrom Kuvempu University.

Recognition for Café Coffee Day:Café Coffee Day has won several recognitions / awards for its efforts as detailedbelow:

Café Coffee Day named ‘The second most respected company in food retail inIndia’ by Business World 2006.

Cafe Coffee Day named ‘Food Services Retailer of the Year’ and‘Exclusive Brand Retailer of the Year’ at the 1st ICICI Bank Retail ExcellenceAwards in 2005.

Cafe Coffee Day was rated the No.3 Food Services Brand in theBusiness World and Brand Equity Surveys in the year 2004.

Café Coffee Day ranked as the 3rd best “Retail F & B" chain in India in the BrandEquity Survey in 2004.

Café Coffee Day has won all the top awards in the India Barista Championshipfor 3 years in a row - 2003, 2004, and 2005.

Café Coffee Day representative had gone on to represent India at WBC 2003 (WorldBarista Championship) winning silver medal in 2002 and 5th place in 2004 for thecountry

The total strength of this division is 7465 personnel, which includes 5663 directemployees and 1802 outsourced employees as on 31st March ’10

Growth of cafesThe growth of cafes over the last three years has been as follows

Number of cafes

761915

218 289402

563

2005 2006 2007 2008 2009 2010

Xpress – BackgroundXPRESS DIVISION

The Xpress division was started in February, 2003 with its first kiosk set-up in Bangalore.As on 31st March, 2010, the company operated 999 Kiosk across various locations in thecountry

Coffee Day Xpress is a small format convenience café serving hot & cold beverages andready to eat foods and thus, servicing the need of ‘people on the go’ and is a perfect valueadd to other retail formats as a store-in-store café.

Coffee Day Xpress is a step towards realizing ABC’s mission to be present at all pointsof the value chain. This format offers ready to eat food items and hot and cold coffee andmilk shakes brewed by indigenously developed vending machines, Moreover, the menuis customized keeping in mind regional preference and is changed at intervals to prevent“food fatigue” locations are so identified that they support ‘high people traffic’. Shoppingmalls and complexes, move theaters and multiplexes, stores, airports, petrol stations andeducational institutions form ideal sites. The kiosk, which has been designed keeping inmind international formats, belong to two types, viz. indoor kiosk outlets in retail martsand outdoor kiosk. The modern graphics on the kiosk reflects the lifestyle of the urbanconsumer.

These graphics and bright colours along with the food display case make this kiosk smalloasis in crowded office area and malls.

The Coffee Day Xpress is modeled as ‘Company Owned” and ‘Franchised” presently outof 999, company owned are 708 and franchised are 291. Certain alliances, for examplethe one with BPCL, HPCL, IOC & Railway retail outlets have been entered into in orderto widen the reach of the division. The product proposition is of hygiene, speed ofservice, superior quality, affordability and freshness.

The Company has won a tender from IRCTC (Railways) to set up 150 kiosksacross major railway stations. These will not only ensure higher sales but offer greaterbrand visibility.

Organizational Structure

The Xpress Division is headed by Mr. Puttaraj. The current structure of the Xpressdivision is given below.

A G PuttarajHead

Anand HangalHR & Admin

Pramod K GFinance Manager

Kiran M KBusiness Development

The total strength of this division is 930 personnel, which includes 193 directemployees and 737 outsourced employees as on 31st March ‘10.

Growth of Xpress kiosks

The growth in number of operational kiosks for the last 5 years is given below:

Number of Kiosks

790922

999

534

300 327

2005 2006 2007 2008 2009 2010

VENDING DIVISION

Vending Operations-Background

ABC ventured into vending in line with its overall objective of providing consumers anauthentic coffee experience, with fresh filter coffee on offer, as opposed to instant coffeeprovided by other players.

ABC has indigenously developed its own vending machines. The machines vend hotcoffee, and teas of different flavours. ABC has two types of vending machines as givenbelow.

A: Liquid Coffee: This machine vends coffee using coffeedecoction and a premix of milk powder and sugar.

B : B2C (Bean to Cup): This machine vends coffee fromfreshly ground beans giving an authentic coffee experience.

As on March 31st 2010 ABC had 14,306 operational vending machines.

ABC has a network of distributors. ABC places the vending machines through thedistributors with corporates and retailers, against a security deposit. ABC sells coffeebeans and other consumables to these corporates and retailers. ABC maintains thesemachines through its own service network.

The sales team at the vending division co-ordinates with the distributor foridentifying potential end users of the vending machine and a three way tie-up ismade between the company, the distributor and the end user (Corporates/Retailers).The supplies of coffee beans and consumables are made at a discount on theMRP to the distributor to provide a margin.

ABC has a significant procurement advantage over its competitors, having access to therequisite variety of beans at a far lower cost, given the absence of any cost-build up dueto intermediation and multiple handling.

Vending: The Potential

With increasing urbanization and more time spent outside home, vending machines arebecoming an increasingly important distribution channel for beverages given theconvenience to consume, while on the move.

India currently has approximately 50,000 vending machines. Major players in thissegment are HLL and Nestle. Each is estimated to have about 15,000 operationalmachines. Other significant players include Tata Coffee (3500 machines) and Fresh &Honest (2500 machines). However, the potential market is believed to be much larger atabout 3x the current size. With the exception of Fresh & Honest, all other machines offerinstant coffee.

Organizational structure

The vending division is headed by Mr. Shankarnarayanan

The current structure of the vending division is given below:

ShankarnarayananHead

Shruthi AgarvalMarketing – Asst.Manager

SmithaHR

Sundaram P K SFinance & Accounts

The total strength of this division is 1134 personnel, which includes 264 directemployees and 870 outsourced employees as on 31st March ‘10

The number of Vending Machines for the last 5 years are given below:

Number of Machines

72148615 9222

10916

1310414306

2005 2006 2007 2008 2009 2010

FRESH & GROUND DIVISION

Fresh & Ground (F & G) Division – Background :-

ABC forayed into coffee retailing in 1995 in Southern India- the prime coffee drinkingregion in the country. The aim was to provide the filter coffee drinking consumer with avariety of blends of freshly roast and ground coffee powder. Fresh coffee powder isbelieved to provide a superior taste as opposed to packaged/instant coffee.

Currently there are 389 F & G outlets located in key residential areas across the country,Out of 389outlets, 329 are self-managed outlets and 60 are franchised. The F & G outletsare operated by Amalgamated Holdings Ltd. which is a 100% subsidiary of ABC.Typically, most outlets in large cities and towns are owned and the franchisee route isadopted in smaller cities.

F & G Positioning:-The F & G outlet aims to be the friendly neighborhood coffee outlet that understands thetastes and preferences of its consumers, and offers products tailored to individual palates.

F & G Product mix :-

F & G outlets offer about 25 distinct blends of fresh and ground coffee, using bothArabica and Robusta varieties. Blends are prepared with the assistance of Coffee Labs,which are then tested by consumer panel. The blends are finalized based on theconsumer preferences revealed through the consumer panel test. F & G outlets offer aproduct mix tailored for customers in different regions.

Packaged Coffee :-The F & G Division also markets packaged coffee throughretail distribution network with the brand name “Coffee DayPerfect” The product has greater chicory content ( 47 % ).

Focus on Quality and Service:-ABC is highly quality conscious and aims at providing consumers fresh coffee of therequisite quality. This is one of the prime reasons underlying replenishment of stockonce in 3-5 days in the outlets other measures to keep a strict control on quality includeobtaining samples from outlets incognito and checking them for pre-set quality standards.In addition to that, the company invites feedback from customers- at each shop customersare encouraged to fill the suggestion slips which are actioned upon by the management.

Organizational Structure

The F & G division is headed by Mr Jayanth.

C J JayanthHead

RavichandraMarketing Manager

Sandeep Hegde Y GHR

Narayana BhatFinance & Accounts

Venkatesh BabuSystems

The total strength of this division is 692 personnel, which includes 177 directemployees and 515 outsourced employees as on 31st March ’10

The growth in number of F & G outlets for the last 5 years is given below:

Number of Outlets

330 347391 399 389 409

2005 2006 2007 2008 2009 2010

PROCUREMENT, PROCESSING & EXPORTS

Procurement & Production :-

One of the key differentiators for ABC is its well-established procurement set up on the back of thepromoters’ long association with coffee plantations.ABC procures coffee from three key coffee-growing districts in Karnataka-Hassan,Chikmagalur and Coorg. The company has 38agents working exclusively for it, who collect thecoffee from this area and bring it to the curingworks at Hassan and Chikmagalur on a commissionbasis.

ABC announces, on a daily basis, the price at whichit would buy coffee from planters. This price iscalculated after deducting its own costs (such asfreight, curing etc.,) and margin, from the previousday’s closing price of Arabica and Robusta on theNew York and London exchanges.

ABC has won the trust of many planters through a plethora of services and facilitiesoffered to the planters. These include

Consignment facility- for planters who do not wish to sell their produce at thecurrent prices, ABC offers facilities to cure and store the produce till such timewhen the planter finds the prices attractive. This has proved to be an excellentstrategy to ensure that the planter finally sells his produce to ABC.

Credit Facilities ( Fertilizer and Picking advance)

Providing of free packing and transportation of raw coffee beans.

Incentives for better quality beans.

Significant advantages to ABC in procurement- in terms of quality as wellas cost

The extensive procurement set-up provides access to a wide mix of varieties, includingsuperior varieties of coffee cultivated in the highlands, which would not be feasible forplayers sourcing smaller quantities. The wide mix of varieties allows it to prepare specialblends, which is not possible for other player who would need to source differentvarieties at varying rates from a vast number of sources.

Curing of Coffee

ABC cures its coffee in-house, at its plants at Chikmagalur and Hassan both plants havestate of the art machinery, including optic grading facilities. The plants have a curingcapacity of 50,000 MT per annum which can be extended to handle upto 60,000 MT perannum.

Roasting of coffee

ABC has set up state-of-the-art roasting and packing facility at Hassan which caters to theentire requirement of retail divisions. Additional roasting line has been imported foraugmenting the capacity & will be commissioned shortly.

EXPORTS:-Exports Background:-

ABC is one of India’s leading exporter of Coffee averaging 15000 tonnes of processedcoffee annually. ABC has a dominant presence in all Indian grades, both commercial aswell as specialty, spread over 4 basic varieties:-

Arabica Parchment Arabica Cherry Robust Parchment Robusta Cherry

Export Division: Structure

The Export Division is headed by Rajeev Gupta, along with Mr. Sadananda handlingExport Finance relationship with planters.

Total strength of the division is 600 including 100 direct employees.

Expansion Plans

The major focus in the coming years would on increasing value added exports (roast andpacked beans) to earn better margins.

Research & Development:-

ABC set up Coffee Labs Ltd in 1996 with world-classresearch and product development capabilities available in-house, which provides a significant competitive edge.Headed by Mrs. S Menon, a renowned coffee expert with

over 30 years of experience in the industry the lab is engaged in following activities:

Coffee evaluation- evaluation of moisture content, visual evaluation and defectcount analysis, cup quality evaluation.

Training – conduction training programmes and workshops for growers onprocessing techniques and technology for quality upgradation.

Blend development- for all retail divisions of ABC

In addition ABC has set up an in-house testing lab at Chikmaglur to provide on-linetesting services for processing and roasting units.

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