CCL Products a Brewing Investment Opportunity?
One day, while I was having my coffee and scrolling through a news app, I came across an article saying that coffee prices were falling and that the earlier issues in the coffee industry were largely behind us.
As an analyst, this got me thinking it could mean an easier working capital cycle, a stronger balance sheet, and better P&L for companies in the space. Basically, good news for the overall industry.
With that in mind, I started reading more about the coffee sector and ended up buying CCL. That’s why I’m discussing this. I own the stock, so yes, my view might be a little biased.
Global Coffee Trends: A Volatile Market
The global coffee market has been quite volatile lately. Prices are swinging due to a mix of factors climate change, supply-demand imbalances, rising production costs, and even geopolitical issues.
Brazil, Vietnam, and Indonesia together account for around 55% of global coffee production, and there have been some disruptions in these regions in the recent past.
Industry Size & Segments:
Basic Coffee Value Chain:
Green Bean Cultivation → Primary Processing → Drying → Milling → Grading & Sorting
Roasting (crucial to flavor profile)
Spray-Dried : Cheaper, mass-market, lower margin
Freeze-Dried : Premium, better taste, higher margin
Coffee Price History:
Driving Factors
1. Supply and Demand
Supply: Coffee production in key countries like Brazil and Vietnam often sees sharp ups and downs. Extreme weather especially droughts and frosts in Brazil can seriously hit crop yields.
Demand: At the same time, global coffee consumption is steadily rising, particularly in emerging markets where coffee culture is catching on fast.
2. Climate Change
Climate change is a major challenge for coffee growers. Rising temperatures, unpredictable rainfall, and more pests and diseases are all affecting crop yields and bean quality.
Many farmers are being pushed to shift to higher altitudes in search of suitable land but that land is limited, which can hurt their livelihoods and raise production costs.
3. Geopolitical Tensions & Trade Policies
Political instability in coffee-producing countries can disrupt supply chains and drive price volatility.
New trade regulations, like the EU’s Deforestation Regulation (EUDR), add pressure exporters now need to prove their coffee isn’t from deforested land, which complicates logistics.
4. Rising Production Costs
The cost of fertilizers, pesticides, and labor is going up. Add to that global factors like the Ukraine war affecting fuel prices, and it’s clear why coffee farming is getting more expensive.
Why Coffee Prices Have Risen Recently
The recent spike in global coffee prices is due to a mix of factors that have tightened supply and added to market volatility.
1. Supply-Side Challenges
Extreme Weather: Major producers like Brazil and Vietnam have faced harsh conditions in recent past. Brazil, the world’s largest coffee grower, has seen both droughts and frosts, which hurt yields. Vietnam has also dealt with droughts and floods, affecting Robusta production.Source: India Today
Lower Output: These weather events, along with labor shortages in some regions, have led to lower overall coffee production.
Thin Stock Levels: Brazil’s coffee reserves are running low. A large portion of the recent harvest is already sold, leaving very little stock before the next cycle.
2. Rising Demand & Market Speculation
Stronger Global Demand: Despite supply issues, coffee demand is still rising—especially in emerging markets across Asia and the Middle East adding further pressure to already tight supply.
Source: INTERNATIONAL COFFEE ORGANIZATION
Let’s see Historical Production vs Consumption Pattern
Source: INTERNATIONAL COFFEE ORGANIZATION
Speculative Activity: Traders betting on coffee futures have added to the price surge. Even when supply isn’t severely constrained, speculation can exaggerate price movements.
3. Higher Production Costs & Other Pressures
Input Costs Going Up: Fertilizers, pesticides, labor, and transport have all become more expensive. These cost increases are often passed on, raising prices at the consumer level.
Currency Movements: In some producing countries, local currencies have weakened against the US dollar. This raises the cost of imported inputs, pushing production costs—and ultimately prices even higher.
Coffee’s Getting Cheaper Again—But Why?
Yes, coffee prices have dropped recently after a long stretch of steady increases.
What’s been happening:
The global coffee price index (I-CIP) fell by almost 12% in June 2025 going below 300 cents/lb for the first time since late 2024.
Both Arabica and Robusta futures dropped too Arabica hit a 5-month low, and Robusta went to its lowest point in over a year.
Robusta especially saw a sharp fall down 17.5% in June alone.
Why it’s happening:
The main reason? Supply is looking better.
Brazil and Vietnam are expecting bigger harvests this year, and the weather has been a lot more favorable than last year.
Coffee inventories are also rising stock levels for both Robusta and Arabica are at multi-month highs.
On the demand side, concerns have eased a bit, and speculative traders have pulled back too so prices are settling.
But it’s not all clear:
Weather can still flip unexpectedly, especially in Brazil and Vietnam.
There are also ongoing issues with logistics and shipping in some regions.
And Brazil’s stockpiles, while improving, are still running low.
So while prices have cooled off for now, things could change quickly depending on how the next few months play out.
Why I’m Betting on CCL Products?
↓ Lower coffee prices → ↓ Working capital needs → ↓ Short-term debt → ↓ Interest cost → ↑ PAT & EPS
New capacity & better utilization → Bottom line grows faster than top line
CCL Products Ltd:
CCL Products Ltd. is an Indian company that has quietly become one of the world’s largest makers and exporters of instant coffee. What started as a small plant in the 90s is now a global operation that serves over 100 countries and manufactures coffee for some of the biggest brands in the world.
History:
The company was founded in 1994, and it started commercial operations in 1995 with a small spray-dried coffee plant of 3,600 tons.
It was started by the current promoter’s father. Mr. Chalash Rishant, the current MD, has been instrumental in scaling it up over the years.
Early Setback
In its early days, CCL tried a joint venture with Jyothy Labs to scale its B2C play using Jyothy’s distribution. But the venture didn’t take off as expected and was shut down
Plant
Country Type Capacity India Spray + Freeze ~60,000+ TPA Vietnam Freeze-Dried ~17,000 TPA
CCL’s capacity has grown 15x over the last two decades from 3,600 tons in 1995 to 77,000 tons in 2025.
The real growth picked up after 2015. In 2015, capacity was 18,600 tons. In 10 years, that has jumped more than 4x.
What’s more impressive? They’ve done all this without diluting equity. The entire expansion has been debt-funded, showing strong confidence and control.
Business Model & Segmentation:
CCL Products Ltd. operates primarily through two distinct business segments: Business-to-Consumer (B2C) and Business-to-Business (B2B).
1.B2C (Business-to-Consumer) ~8–10% of Revenue (target 20–25%)
CCL launched its own brand, Continental Coffee, in 2022. This is a natural next step—selling directly after mastering production for decades.
Why B2C?
Higher margins: Consumer brands have better pricing power.
Built-in industry connects: CCL leverages existing coffee relationships and expertise.
Innovative offerings: Includes unique flavored sachets (e.g., hazelnut) and regional blends like Malgudi and Chikori.
India Strategy
Focused on South India (70% of India’s coffee demand).
Distribution:
100,000 retail outlets
4,000 vending machines
In-house cafes/kiosks
Market share:
<5% pan-India
Low double digits in South India
Growth: ~40% CAGR in recent years
Goal: Scale B2C to 20–25% of total revenue
2. 2B (Business-to-Business) ~90% of Revenue
This is the backbone of CCL. They manufacture instant coffee (spray-dried and freeze-dried) for global brands and retailers. Most of it is exported to North America, Europe, Asia Pacific, and Russia.
Why brands choose to outsource to CCL:
Full-service platform: CCL offers over 1,000 coffee blends (Arabica, Robusta, spray, freeze-dried) making it a one-stop shop for global customers.
Cost-plus model: Clients pay CCL a markup on costs. So, even if coffee prices go up, CCL’s profit per kg stays stable.
Focus advantage: Brands can focus on branding and marketing. CCL takes care of the manufacturing complexity.
No plantations: CCL avoids owning farms staying asset-light and sourcing beans globally.
High switching costs:
Custom blends and recipes are confidential.
New supplier onboarding takes 6–12 months of quality testing and costs.
Wide client base: 400+ clients worldwide; no single customer contributes >10% of revenue.
Exclusive supplier: For many Indian coffee chains, CCL is the sole source.
Financials Statement Analysis:
2021–22: Brazil/Vietnam drought → 5x price spike
High volatility = Shorter contracts = Higher inventory = WC pressure
Management Quality:
CCL’s management isn’t flashy—but they’re quietly building one of the world’s largest instant coffee platforms through clear strategy, discipline, and deep understanding of the business.
Chalash Rishant built it from scratch; CEO Pravin Japury (ex-F&B) is scaling B2C smartly and frugally.
Conservative yet ambitious: targeting 15–20% annual growth, not chasing headlines.
Disciplined Growth, Zero Dilution
Capacity grew 15x in 20 years, all debt-funded not a single share diluted and strategically used
They only expand when capacity hits 85%+ utilization and customer demand is confirmed.
Low-Risk, High-Stickiness B2B Model
Core B2B business runs on cost-plus contracts → protects margins from coffee price swings.
No plantations → asset-light and focused.
High client stickiness: 1. Custom blends (confidential), 2. Long onboarding (6–12 months)
B2C – Big Optionality
Focus on South India, vending + retail push (4,000 machines, 1L+ outlets).
Differentiated SKUs (hazelnut sachets, Malgudi blends).
Q4-FY 2025 CCL Products (India) Ltd Con-call Analysis:
1. Business & Financial Snapshot – FY25
Strong topline growth, better margins even with coffee cost pressures
Revenue crossed ₹3,100 Cr (↑17% YoY), hitting a key milestone.
Net profit grew 24% YoY to ₹310 Cr; EBITDA jumped 25% to ₹564 Cr. Margin boost in Q4 came from a richer contract mix.
Volume growth slowed to ~10% (historically ~20%+), showing a shift from chasing volumes to chasing value.
Q4 saw a spike in EBITDA/kg thanks to high-margin contracts and end-customer sales though management says this may not sustain every quarter.
Working capital borrowings rose to ₹1,150 Cr (part of total ₹1,800 Cr debt), largely due to a 5x jump in green coffee prices from ₹1,000/kg to ₹5,000/kg.
2. Segment & Strategy Overview
Well-balanced B2B/B2C play; doubling down on India; innovation driving premiumization
B2B International (~85% of revenue): Europe and US are steady (flat growth, but market share gains); faster growth expected in China, MEA, and Africa.
India B2C: Out of ₹440 Cr domestic revenue, ₹300 Cr is branded sales led by sachets, e-commerce, and pricing tweaks on large packs.
New launches: Microground coffee, cold brews, and customized blends (blend library now 1,000+). Tailored solutions = pricing power.
Capacity update: Old plants nearly full; new Vietnam plant running at 10–15%, will ramp up gradually.
Private label: 60–70% customers are long-term partners; pricing volatility is shortening contracts, but relationships remain sticky.
3. Outlook & Guidance
Focus remains on absolute EBITDA growth, not just volume push
Guided EBITDA growth: 15–20% YoY; volume growth expected to stay around 10%.
Cost-plus pricing and back-to-back raw material buying reduce volatility but make contracts shorter.
Coffee prices are stabilizing—debt tied to working capital should ease in 2–3 years. Term loans (used for capacity) to be repaid in 3–4 years.
Global expansion continues: gaining ground in China, Taiwan, ME, Africa. In India, long-term tea-to-coffee shift will power high double-digit growth.
Freight/tariff challenges: Red Sea issues are inflating costs temporarily, but dual-country production (India + Vietnam) provides flexibility.
4. Key Risks
Managing coffee inflation and shorter contract cycles with tight planning
Coffee inflation: Raw coffee jumped from 1,000 to 5,000 this pressures working capital and shrinks contract tenures.
Debt stress: Linked to green coffee stocking, not operational strain. Brazil’s 60-day transit time forces ~3 months of buffer inventory.
Tariffs/geo risks: Mitigated via sourcing flexibility (Vietnam, Brazil, Indonesia) and dual-location setup. US–India tariff outlook improving.
Customer caution: Buyers avoid long contracts but CCL’s immediate raw material procurement reduces mismatch risk.
India B2C challenges: Price sensitivity in sachets company using smart packaging and blend tweaks to preserve margins.
5. Analyst Q&A – What the Street Asked
Analysts focused on sustainability of margins, contract visibility, WC impact, and future growth
Growth drivers: Where’s the next leg? Management sees India B2C and emerging market B2B as key levers.
Coffee price risk: Can margins hold? Management leaned on its pricing model and just-in-time procurement strategy.
Debt/Working Capital spike: Clarified that higher debt is order-backed, not speculative. Expect easing as coffee prices soften.
Shorter contracts: Mgmt. acknowledged it’s a trend but assured client relationships are strong.
Product & market bets: Analysts liked the innovation pipeline and the focus on underpenetrated regions.
CCL Capacity Expansion
1. Vietnam – Ngon Coffee (Subsidiary)
Type: Spray-Dried & Freeze-Dried Instant Coffee
Future Expansion: A large freeze-dried project still under construction (~₹199 Cr spent by FY24)
Significance: Now the largest coffee unit in Vietnam
2. India – CCL Food & Beverages (New Subsidiary)
Type: Spray-Dried Instant Coffee
Capacity: 7,000 MT per year
Location: Tirupati, Andhra Pradesh
3. Capacity Overview
FY23 Group Capacity: ~55,000 MT
FY25 : ~77,000 MT
Current Utilization: New plants at ~10–15%, old ones near full
Future Capex: No major expansion planned FY25–FY27 (only maintenance)
Plant Location Type Utilization Status Ngon Coffee – New Capacity Vietnam Spray-Dried + Freeze-Dried 10–15% utilization (new capacity ramping up) CCL Food & Beverages Pvt Ltd Tirupati, Andhra Pradesh Spray-Dried 10–15% utilization (early stage) Older/legacy plants Running at or near full capacity
Author: Devarsh
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