Kaldi’s Coffee

‘A degree is a plus, not a necessary ingredient, to succeed’

Kaldi’s Coffee is one of the best-known Ethiopian brands. The company’s reach is impressive, with 30 branches throughout Addis Ababa and in Bishouftu, a town 45km southeast of the capital. In 2017, Kaldi’s will also cross the Red Sea, to serve coffee enthusiasts in Dubai.
Its founder, Tsedey Asrat, 40, a model-turned-entrepreneur, isn’t as well known as the brand she manages because she avoids journalists. This is due, in part, to the controversies that have surrounded her tenure at the helm of the Kaldi’s brand. The controversies began when she opened her first branch in Bole Medhanialem in 2004 because she said she would open 40 branches, considered by many an immodest statement. The resemblance of Kaldi’s logo to that of Starbucks – a giant American coffee chain founded in 1971 that operates more than 23,500 branches worldwide – added to the controversy. Starbucks later approached the Ethiopian Intellectual Property Office to ban the use of Kaldi’s logo, a battle she eventually won.But cafés are just the beginning. Tsedey, a mother of four, also established a coffee roasting company, a diary farm and has now expanded her enterprise to include a chicken farm.
Her most recent project, a three million birr facility called the Kaldi’s Training Centre, will train hospitality professionals. She began planning the Centre because many competitors take her employees since she groomed them from entry-level positions to senior-level responsibilities. This hinted to her the scarcity of trained human resource in the sector, which she views as a business opportunity. Her coffee roasting company was also established in response to growing demand for quality coffee that her suppliers couldn’t provide reliably; the same reasoning led to the establishment of Loni Diary, at a cost of ETB38 million. Now, because she constantly faces difficulties in accessing the amount of quality eggs she needs – 4,000 per day – she established a chicken farm for ETB3 million.
Together, her enterprises employ 1,800 people, far more than any of the private insurance companies and even some banks in Ethiopia. The café earned ETB129.5 million in revenues and paid ETB8.8 million in profit tax last year – an achievement for which she received a trophy from the Ethiopian Revenues and Customs Authority.
Given her overwhelming success at a relatively young age, one fact may surprise some readers: Tsedey never attended university. She says that she reads regularly to improve her business acumen, with the works of John C. Maxwell, an American author who writes about leadership, being her favourite. EBR’s Amanyehun Sisay spoke with Tsedey, in a rare interview, to learn more about her 12-year business journey and what she has in store for her ever-expanding empire.

Tell me about your personality traits as a child and now.
I am very ambitious; I stand firmly for what I believe in and I am addicted to challenges. Challenges for me are the flavours of life. In fact, I don’t appreciate a smooth life.

I usually ask advice, but if I reach a point that I believe in something, I go for it with all my effort until the end, no matter what. For example, once I decide to open a café in a certain neighbourhood, I won’t take any threatening advice from people around me, even if they say there are 20 cafés in the area and we will face stiff competition.

I thought it is common for business leaders to consult with experts about the market before spending money on a new start-up.

These things are probably important for bigger businesses, but for us it is enough to assess the environment. There is a huge unmet demand.

What do you mean by ‘assessing the environment’? Doesn’t studying the financial capacity of the people in certain localities matter to you when opening a café? It is when you do a careful market assessment that you will see if there is enough need for your services.
No, at Kaldi’s [those things] have never been assessed. Usually such things are evident on the surface. Take Bole [for example]; we have five café’s [in that area] and every time you go to any of them they are filled to the brim. We recently opened a third café in CMC. The story is the same.

For sure, the demand is there and the sales lead us, without any further detailed studies. Even in places where there are no famous cafés, such as Addisu Gebeya [in northern Addis Ababa], we dared to open one, and the case has been the same there as well. Many customers come in a few days after we open. Now we are opening another branch 1.5km south, on the same route to Addisu Gebeya. The market just leads us.

How many café branches do you have?
We have 30 cafés, but we will take a pause next year. We will open a training school. Currently, our centre trains only in-house employees. Now, the school will also train more entry-level trainees for others too.
I decided to open the Kaldi’s Training Centre because whenever a new café opens near [one of our branches], our workers move to the new cafés because they are paid better, as the owners of the new cafés don’t want to train entry-level employees. We don’t have a problem replacing them because we constantly train new employees. But the situation shows that there is a scarcity of trained personnel. That for me is a big opportunity; it led to the establishment of the training centre [at a cost of] ETB3 million. I have already hired a Kenyan manager for the centre.

You are also expanding into the diary business – and you already opened Gusto Ristorante. What is next?
The first enterprise we expanded into was a coffee roasting business; we opened that because there was a scarcity of quality coffee. Kaldi’s Coffee Roasting Company was established with ETB2.6 million start-up capital. We use the coffee for our consumption and the market.

Then came the problem of milk supply; our suppliers sometimes provided us adulterated products. That is why I established the diary factory with ETB38 million. Now we produce milk, cheese, butter and flavoured yoghurt.
The other business we are expanding into is a chicken farm, with ETB3 million capital. The construction is complete and the chicks are ready to come from Holland. We use 4,000 eggs per day. Yet, we don’t find egg in abundance, and sometimes we get spoiled eggs. It’s a risky business because supply is unreliable. We also need chickens for sandwiches.

Tell me about Gusto Ristorante.
Gusto was opened with the intention of creating a brand that elevates the lifestyle and standards of our cosmopolitan city. We strive to deliver an enchanting dining experience by delivering outstanding service and authentic cuisine by an Italian chef. This has made our expenses very high. As a result, Gusto is not making money right now; [but] we are creating a brand. We will open ten restaurants under Gusto in five years. They will be called Tratoria Gusto and will be intended for middle-income customers serving pizza, pasta and burgers. We will open three this year.

I also ventured with four friends to open Gursha Restaurant, a big Ethiopian restaurant, which will open next month at a cost of USD1.5 million. Gursha will be one of the seven world-class restaurants in the Palm Dubai area. Kaldi’s will open in Dubai next year.

There is Kaldi’s, a coffee roasting company headquartered in St. Louis, Missouri, which opened 20 years ago. There are even other Kaldi’s coffee shops in Maryland, also in the United States. How come yours has a similar name even though you opened 12 years ago?
When I first planned to open a coffee house, it was to franchise Starbucks, but when I visited their website, I came across information regarding the Ethiopian herdsman who discovered coffee – Kaldi Aweke, and then I thought I can use the name for my business. That is how I named my company. I later learnt that there are many coffee businesses with the name of Kaldi in Thailand, Kenya, Turkey, the USA, England, and Australia.

Your logo resembles that of Starbucks; was it necessary to make it look alike?
Yes, it was very important when we started the business. But that has created problems for me. A few years ago we were challenged to renew our license because Starbucks claimed that we used its brand, [violating copyright laws]. But the fact that the resemblance is mainly on the colour and beans, the intellectual property law can’t protect it. So we won.

What is the next foreign destination for Kaldi’s?
We will open in Dubai next year. We received franchise requests from Sudan, South Sudan, South Africa, Saudi Arabia and others. But we don’t want that. Even many in the country think that the thirty cafés are franchised. They are not. All of them are ours.

Why do you reject franchise requests?
We have to be ready for that. Our supply chain management has to be set first. In the rest of the world, a franchise uses all supply sources from the mother company, the brand holder. There are laws and regulations that guarantee and safeguard the business. In Ethiopia this law is missing. So starting a franchise business model without the appropriate legal framework risks the brand.

Let’s talk about your leadership approaches.
It is my favourite topic. I’ve participated in several leadership trainings and John Maxwell’s books are my favourite. It is from reading his books that I learnt valuable leadership philosophies. I especially like his book Today Matters: 12 Daily Practices to Guarantee Tomorrow’s Success, the most.

I learnt the meaning of success from him. It is two things for me. You have to balance business and relationships. Even if you are profitable and successful in business and fail in relationships, with families and friends, that makes your business success zero. You also need to have followers; you can’t be a leader alone.

For example, we don’t bring people from elsewhere for higher-level positions; we give priority to those who work in the company. There are people who reach area head position starting from an entry-level waiter position. I believe that is my leadership influence. The head of our finance department was first hired in the café for ETB250 a month. Now she is finalising her master’s studies. There are unlimited opportunities at Kaldi’s. To be frank, I am ready to hand over my responsibilities because I want to engage in another business. We give freedom to our employees and we learn from mistakes. In fact we celebrate mistakes because that helps us learn.

What kind of leader are you?
I say I lead by example. I lead 20Pct of the people in my company and these people lead their portion of 20Pct in their divisions.

What staff retention mechanism do you have?
We have 1,800 employees. And I have a savings scheme for my executive team. First, I deposit ETB10,000 for each. Every month they save and I add to that twice their monthly savings. This will continue for five years. If a worker wants to leave within five years, she or he can leave only with their own savings, not the amount I matched. I have done the maths and if they stay, then they will have up to ETB100,000 after five years. With this money, some paid for their condominium housing, some started their own business.

How much was your total revenue and taxes last year?
We have ETB129.5million in revenue from Kaldi’s cafés alone and paid ETB8.8 million in profit taxes.

Tell me about your educational background and childhood experience?
I attended elementary classes in Lideta Catholic Cathedral School; I was naughty back then. [I attended] high school at Tikur Anbesa. I had the score to go to Addis Ababa Commercial College, but I didn’t. I believe a university degree is a plus, not a necessary ingredient to succeed. Skills and the motive to learn are the most important things. Then I got training on sales and marketing at Ethiopian Airlines and got hired at Dalol Travel Agency for a few months with an ETB800 salary. I used to earn more because I used to get commission by hiring cars. I don’t like stable jobs. At that time, my interest was to be a whole seller. Now I know if I sell my business, I can have a building that can support me for the rest of my life without additional income. But whenever I add a branch, the human resource I hire gives me more satisfaction. I travel a lot and see experience of others to bring home valuable lessons, particularly working habit.

Do you feel you could have worked more if you were a man?
Yes, definitely! When I was pregnant I was not working for at least four months because of morning sickness. When I gave birth, I spent time with my children for as long as half a year. Being a mother itself also took time. Also I have to be a wife. Nobody gives you an excuse if you fail in life as a mother and wife because you have lots of responsibilities as a business leader. Everyone wants you at your place no matter what. If I were a man I will be sure that I have a wife who looks after everything at home so that I wouldn’t worry and can focus on my business.

What comes first to you, business or family?
My family comes first. I read a lot of books, particularly biographies of successful people. The most common thing I found out in these readings is a lot of successful people regret not spending much time with their families. I don’t want to repeat that mistake.

Do you have any regrets?
I have nothing to regret as such. Being a hostess was my childhood dream but I didn’t pursue that. When I was 18, I started modelling. I worked with Gash Wubshet Workalemahu and I modelled for Coca-Cola, Philips and others; I used to be in television commercials. At that time, I used to be paid ETB75 for walking in a fashion show and that used to be a lot of money. I was also paid ETB6,000 for modelling in Coca-Cola advertisements and photo shoots for their calendar. I was busy and provided with a lot of opportunities that I forgot my dream. I even ignored my chance to join Addis Ababa Commercial College. I was usually fighting with my parents.

Have you ever regretted for not pursuing your education?
No, in fact I think if I had pursued my education, I might have ended up being an employee. Or maybe I might have tried to do everything and do nothing at the end. But now I know my limitations and I am doing well.

Does that mean you don’t believe in education?
I do believe that education is important. There was a time when I regretted not pursuing my education. I realised this when our finance department gave me the income statement of our company – I couldn’t read or understand it. Then I went to a friend of mine who has accounting knowhow and she coached me. Now I participate equally with the auditors on matters of accounting.

Tell me about your husband.
I can’t tell you enough about him. He [Capitan Elias Ketema, an Ethiopian Airlines pilot] is a good supporter. When the first Kaldi’s opened, he used to clean the floor and toilets to set the cleaning standard. He is also a good barista. By the way, it’s he who established Gusto and is responsible for its management.

You are a wife and a mother of four; also a business leader. How do you manage to balance these?
This is one of the reasons why I said my husband helps me a lot. And I believe I am a good wife and a good mother. Motherhood and being a wife for me are a break from the business routines. I give orders all day in my business and proudly serve my family at home later.

What can women learn from you?
They can learn from me how to balance life in every direction: work, family and friends are important.

Do you prefer hiring more women?
We don’t have a policy to lean towards women during employment, but based on 12 years of experience, [I’ve learned] women stay longer at Kaldi’s and handle responsibilities more efficiently. They are stable and respect company policies better. So we tend towards employing more women these days. And personally I am not a feminist.

You don’t look 40; you still look very young and energetic.
I tell my age proudly. I have wasted no time. While I was very young I used to play basketball; I was naughty in that I got punished often. When I grew up, I enjoyed my youth, used to go to clubs. I also worked as a model. Then at the age of 25, I met a wonderful man and married him. We have four kids. I have no reason to hide my age. It’s not time wasted.

Tell me about your parents. Who has had the biggest influence on you?
Both my parents are hard workers. They raised me among four daughters, two of them are now in the United States. I resemble my mother, who had worked for decades at the Ethiopian Insurance Corporation.

What are your plans for the next five years?
Primarily we will strengthen our supply chain management; and we will expand our cafés to 40. We might also start franchising. EBR

4th Year • March 16 2016 – April 15 2016 • No. 37


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