Coffee Bean ordered shut amid legal morass

Israel's 14 branches of the Coffee Bean chain were ordered closed by the international franchise as of yesterday, after local franchise holder City Food violated their agreement and fell behind in payments. The local franchise holder owes several hundreds of thousands of dollars.

But there's a catch: Coffee Bean restaurants in Israel are themselves franchises of City Food. After signing 10-year agreements in January, shutting them down would violate these agreements. The U.S.-based coffee house franchise informed City Food in July that it had until yesterday to shutter the branches.

City Food's franchise holders draw their right to run Coffee Beans from City Food's agreement with Coffee Bean international; therefore if the parent franchise holder loses its rights, they've probably lost theirs too, attorney David Gideoni of the firm Tadmor and Co. told TheMarker.

But the City franchise holders are unmoved. "We have no intention of closing. We have an agreement with City that's valid for 10 years, starting last January, and we have supplies for the next six months at least," said one of the company's franchise holders in Herzliya Pituah. "Plus, we haven't been informed officially. Everything we know is through the newspapers."

While the Herzliya franchise holder said their attorney advised them there would be no problem with continuing to operate, given their agreement with City Food, Gideoni said they were opening themselves up to lawsuits from Coffee Bean International.

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More variety may raise volume in coffee futures

Coffee futures contracts trading on the Indian commodity exchanges need to induct available varieties in the market with reduction of lot size to make it more liquid in exchanges in the near future.Spreading more awareness among planters and traders regarding coffee futures market for an appropriate price discovery is also needed.

“There should be more coffee varieties being traded in the exchanges to make future contracts liquid with sound growth in volume,” Babu Reddy, agricultural economist of Coffee Board of India said. He also said that awareness should be created among traders and planters to make coffee as an active contract.

Presently, coffee futures are being traded on the National Commodity and Derivative Exchange (NCDEX) and National Multi-Commodity Exchange (NMCE). While robusta cherry AB variety is being traded in the NCDEX, varieties traded in NMCE are robusta REP bulk coffee with various specifications. In the trading front, NCDEX coffee futures are illiquid and NMCE futures have witnessed less than expected volume in recent time.

“The lot size of 2 tonnes at NCDEX or 1.5 tonne at NMCE is higher for any small planter to enter into futures contract. This lot size should be reduced for higher participation from small and medium planters,” Chowda Reddy, an analyst with JRG Wealth management said.

Coffee is an actively traded commodity in international commodity bourses like Liffe and ICE futures.

As coffee prices are extremely volatile depending on factors such as the size of stocks globally, weather forecast and speculations by fund houses, it has been introduced by Indian exchanges for hedging price risk.

However, lack of introduction of available variety acts as a major dampener to active trading.

“Varieties like robusta cherry AB with a lot size of 2 tonnes can only be provided by curers and not by planters. So, Indian varieties like robusta parchment, arabica parchment and cherry should be introduced in the exchanges, which have more availability in Indian market,” Reddy said.

However, officials from commodity exchanges have a different view about this matter.

“As big Indian exporters normally enter into contract in international commodity exchanges, volume in Indian exchanges are low,” Anil Mishra, chief executive officer of National Multi Commodity Exchange said.

He also said that hedging position in international market helped exporters in giving physical delivery.

Commodity exchanges are also expecting a turn around in volume growth with amendment in Forward Contracts (Regulation) Act (FCRA).

“With amendment of FCRA, financial institutions will be allowed to participate and we expect sound volume growth in coffee contract with entry of counter parties into the trade,” Mishra said.

About participation of small planters, he said that the lot size could be reduced in future for facilitating more of small planters’ participation.

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Coffee can change your life

He fills the jug with cold milk, checks the temperature on the thermometer (it should be 32 F) and keeps the jug aside. He switches on the espresso machine and brews the ground coffee into the white primo cup, then turns on the steam muzzle and fills the milk jug with foam.

After banging (breaking the air bubbles) and swirling (mixing the froth), he pours the milk into the primo cup and sprinkles chocolate powder on the top. The cappuccino is ready to be served. Ajeet Singh Chauhan, 28, has made the morning’s first coffee. We meet him at a Costa Coffee outlet in Green Park, South Delhi.

A lanky man with a shy smile, Chauhan is flying to Dubai next week for the regional finals of the ‘Barista of the Year’ competition, a championship that the international coffee chain outlet is conducting to select its best barista.coffeeBarista is the Italian word for ‘bartender’ and is used for a person who makes and serves coffee.

Chauhan was chosen after winning the India round. If he cracks it in Dubai, he will go to London in October for the final Champion of Champions round. If he reaches the top, who knows... he may buy a car and stop commuting in EMU trains and DTC buses.Till five years ago, our coffee man had never even tasted a cappuccino.

“I had my first cappuccino on August 4, 2009,” he says. “This was the first day of my first job in a coffee chain.” Then, Chauhan was in Bahrain, a tiny Middle-East monarchy. This was his first sojourn abroad and it came after much resistance from his parents, who live in a village called Atohan in Palwal, a district 50 kms from Delhi. “My family feels odd about my profession. We are jaats. It is very tough for me to explain what I’m doing to Papa and Maa.”

There weren’t many opportunities in Chauhan’s village, where his father farms over three acres of land. The future barista grew up in Faridabad at the home of his chacha (uncle). Faridabad, technically a city in Haryana, is across the border from Delhi. Today, it has malls and multiplexes, but when Chauhan was attending a school there, it was a dusty town.

There were no cafes and Chauhan never tasted anything more sophisticated than what could be brewed from instant coffee sachets, which his aunt would make for him on special occasions. Unlike now, he was also not fluent in English. After finishing school, he enrolled in a Gurgaon management institute.

“My dream was to become an MNC executive in Gurgaon, but then I got a part-time job in a pizza chain in Faridabad and I drifted towards the hospitality industry.” Once, Chauhan’s parents came to visit him at the pizza outlet. “They saw me from outside the glass wall. I was wiping forks and knives. I gestured, asking them to come in, but they refused. Later, papa said, ‘Beta, what do you think you are doing?’”

So, what was his reply? “I said, ‘Papa, it’s my choice.’” Chauhan was not the best student during his training as a coffee maker. “I was the last to learn the tricks. Once, I burnt my hand. See this mark here,” he says, showing the back of his right hand. “In my first outlet, I learnt how to make coffee, what it actually is and what exactly is a coffee bean.”

Chauhan was chosen the best barista among his coffee chain’s India outlets after he created the ‘Dates & Figs Frescato’. “I hadn’t even heard the word ‘frescato’ till I joined my company.” His parents are probably still unaware. They prefer chai. “No, my folks don’t call it chai,” says the barista. “It’s chaa — milky and sugary.”

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