High on ‘Chai’
From the Indian streets to the high streets, the journey of ‘Chai’ has been a heartwarming success story. Now making an appearance in the chic tea cafes, the humble cup of masala tea has become a lifestyle drink. The average per capita consumption of tea in India is seeing a rise of 20-30 per cent, according to a recent media report.
Famous as a nation of tea-drinkers, Indians drink around 30 cups of tea for every single cup of coffee, or so, statistics say. In 2017 alone, India’s consumption of packaged tea stood at 678,200 tonnes, according to Mintel Research.
So, what’s driving the growing taste for tea? The perceived health benefit is one answer. Otherwise, the tea café market growth is fuelled by the nation’s love for chai, rising disposable incomes, innovation in blends and technology and sassy tea cafes that have become favourite hangouts.
Several young entrepreneurs are now brewing it right and dominating the space that was recently ruled by coffee chains.
It was a Harvard ex-student, Amuleek Singh Bijral of Chai Point, who forayed into the unexplored tea cafe space in India in 2010. The home delivery feature of the chain gives it an edge over the others. With a year-on-year growth rate of 65 per cent and 100 cafes, Chai Point now sells nearly 0.35 million cups of tea daily. Cha Bar sells 50,000 cups of tea per month. The year-on-year growth rate of Chai Break stands at almost 50 per cent according to the company.
Another key player in the industry is Chaayos; launched in 2012, it is primarily present in North India with cafes in Delhi-NCR, Chandigarh and Mumbai. Established FMCG giants such as Tata Global Beverages and HUL are also testing the waters with their Taj Mahal Tea House and TATACha before making a big foray into tea cafés. Indeed, tea cafés are making the space so dynamic that investors are pouring money into them.
Talking about innovation in the tea cafes, Amuleek Singh Bijral, Co-founder and CEO, Chai Point, says that right from its inception, Chai Point has been at the forefront of bringing innovations into the chai market. “We are driven by the fact that if drinking chai is a ritual in India, then how can we own this ritual and build perhaps the first pan-India chai brand in the country.”
Chai Point has two-pronged innovations — driven by the product and the technology running Chai Point.
“On the product front, we take pride in saying that every cup served to the customer — both in-store and corporate channel — is made from fresh ingredients. We don’t serve premix chai on any of our channels.
On the tech side, we have numerous firsts to our name. Our cloud-based platform Shark, which is developed in-house, runs the entire operations of Chai Point from supply chain to inventory in stores, and from delivery to consumption insights.”
The chain also has a focused offering for its corporate customers — boxC.in, an IoT enabled 100 per cent automatic tea/coffee dispenser, which brews fresh tea and coffee and has 2,000+ active installations. The latest innovation from Chai Point was unveiled at its recently launched 100th store in Indiranagar Bangalore. “We have introduced Face Recognition billing service for customers subscribed to our loyalty programme — PrioriTea.”
“Our customers have been telling us for a long time to make check-outs and billing more hassle free as they visit our stores four times a day and giving their mobile number on every visit is not convenient. Thus, we have rolled out face recognition, where for the first time, a face scan is recorded in an encrypted format in AWS cloud server. The customer’s preference is also stored along with the image. Next time, when he visits any of our stores, the camera fitted at the POS will capture the image and recognise the customer. It is important to note that the image will not be visible to the salesperson on the other side of the counter, he will only see the last four digits of the customer’s mobile and his name,” Bijral explains.
Bijral is confident that face recognition at Chai Point will make billing a hassle-free process. “With the introduction of new technology, we aim to increase our loyalty customer base to 3 million from current 1.5 million in the next one year,” he adds.
From the Flowering Teas, Organic Teas, Herbal Teas, Diet Teas, Fruit Teas, Bubble Teas to an exclusive range of Darjeeling, Nilgiri, Sikkim and Oolong, complimented by the best in Arabic, Chinese, Japanese, Moroccan, Russian, Sri Lankan, South African and Thai Teas – Chai Bar offers over 150 varieties.
On the other hand, Anirudh Poddar, Co-Founder, Chai Break, claims to be the only tea café in the country that is serving freshly brewed teas with Italian thin crust pizza.
The chain serves 30 types of tea in flavours like kesar, daichini, adrak and tulsi. The varieties of tea offered are Darjeeling Tea, Royal Tea, Lemon Tea, Green Tea and Iced Tea. Chai Break calls its affordable pricing and the product quality as its main USP.
Investment in technology
Chai Break, on the other hand, encourages customers with its loyalty programme leading to a loyal customer base with a high redemption rate. “Loyalty redemption is almost 5 per cent of the chain’s turnover. Loyal customers account for over 52 per cent of our sales,” adds Poddar.
Personalising the brew & customer experience
Each cup at Chai Point is brewed from fresh ingredients. “We don’t prepare chai and re-heat to serve when an order comes in. To run such a large-scale operation, our supply chain is also agile to meet our service standards. Chai Point has a programme called “Garden to Glass”, where we bring the freshest tea leaves sourced from the best plantations in India. Our single origin teas are vacuum packed at the source to preserve their freshness. We have also started selling our own brand of loose leaf tea,” states Bijral.
Personalising the entire customer experience is the Holy Grail that we are aiming for, he adds. “We want to gradually use more of AI technology so that we can recognise the customer every time, irrespective of the channel used for interaction, and offer him personalised chai experience and even food made for chai.”
Cha Bar’s menu comprises exotic and cultural blends like the Moroccan Mint, South African Rooibos, Decaf Teas, Green Teas and Ayurvedic Teas. Special category of ‘Chai Hindustani’ and the Cutting Cha has been reinvented at Cha Bar. “Single Estate Virginal Teas from our plantations in Upper Assam are also served here in a contemporary setting delivering a different experience. It was in April 2007 that we first brought Bollywood Masala Mix Cha, Truck Drivers 100 Mile Ki Cha, Katakali, Formosa Oolong, Yellow Tea, Emerald Green, Vervain Blue, Jasmine Pearl, Chinese Lapsang Souchong, Verbena Tea, Licorice Tea, Fruit Melange, and Japanese Genmaicha to our menu.”
To complement the tea collection, Cha Bar also offers salads (mediterranean salad, classic caesar with a choice of dressings), chilli cheese toasties, cha piazi, cocktail sausage rolls and fish and chips, classic English tea sandwiches, pita wraps and rolls, house special soft centered muffins, freshly baked cookies and cupcakes and home-style cakes and pies among others.
Data analytics & consumer behaviour
Chai Point uses analytics to understand and track the customer behaviour and preferences. Some of the key findings indicate that Chai Point has a very high per centage of repeat customer base across its stores. Another interesting result was that tea is a universal beverage that cuts across age groups and is consumed with similar frequency throughout the seasons.
Data analytics has helped Cha Bar decipher what works for the customers and also an understanding of how its cafes in different locations has customers of varied age groups with the behavioural insights. With an evolving tea drinking landscape, data analytics is the key to understanding customer choices deeply and also connecting with their interests. The statistical data from sales and manual feedback collected from the guests are analysed to design and update the menu and service style. Feedback and testimonials that customers post on social media platforms, or share on emails, help Cha Bar’s CRM teams to do an indepth analysis of what works and what doesn’t. Based on the feedback, the chain’s F&B production teams devise special menus besides conducting training for the service staff in engaging and communicating with customers.
Chai Bar’s customer base ranges from children to senior citizens. Its menu caters for all age groups. The chain has a special menu for kids besides low spice offerings.
Chai Break also tracks the customers through data analytics. It helps them understand what customers enjoy at the cafes, which, in turn, helps to curate the menu.
Bijral states that Chai Point was one of the early movers with a clear focus on customer loyalty and, therefore, it launched PrioriTea quite early in the journey. On every purchase, the customer gets a certain per centage of cashback points that can be used for further purchases at Chai Point. Apart from that, special discounts are given during key periods. With the AI-based facial recognition system, Chai Point is taking its loyalty program to the next level by offering benefits like free beverages and food items. The chain’s data indicates that loyal customers ticket size is 20-25 per cent more than non-PrioriTea customers.
Tea cafes & PE investments
When asked about what he thinks of PE investments in the tea cafes, Bijral says, “Chai is a 3,000 years old beverage. It will be correct to say that the market for chai consumption has always existed, but it has mostly remained unorganised. The unorganised market, with its roadside chai shops, has thrived simply because as Indians we love chai. Thus, we embarked on a mission to build this business from the ground up, and the customers were happy to enjoy their favourite cup of chai — a different one for every season and every reason — in a more relaxed setting. The investors’ interest was waiting to be unlocked. They realise the power chai has, as it is not just a beverage but also a social drink with largest consumption in India.”
On April 19, 2018, Chai Point raised $20 million. The investment came from private equity fund Paragon Partners and existing investors like Saama Capital and DSG. In 2015, the company raised $10 million in Series B funding.
According to Poddar, growth in year-on-year performance and profitability are the mantras for attracting PE investments. The Kolkata-based chain receivable a Venture Capitalist funding of INR 5 crore.
Bijral admits that a considerable amount of the brand’s spend goes in digital marketing. As of now, approximately 40-45 per cent of the marketing spend is on digital. “This is across our business verticals with special emphasis on B2B marketing for our IoT enabled vending machine boxC.in.”
Chai Break, on the other hand, uses almost 20 per cent of its marketing budget for digital marketing.
On location strategy, Sengupta of Cha Bar says, “A great location is very critical to every F&B outlet since it influences the success or failure in a host of ways, from attracting the initial set of customers interest to being convenient to visit. We at Cha Bar, look for visibility and vicinity as two important factors while zeroing on locations. Demographic considerations also play a very important role in deciding the location. Our teams carry out a study of people living and working in the proposed locations to understand , analyse and predict customer choices and footfall. Elements like easy accessibility and parking are also considered when deciding on a location.” He points out that real estate cost is one of the biggest expansion challenges faced by tea cafes.
Staying ahead of the competition
“We live with our brand purpose of serving a perfect cup of chai that inspires progress and fuels perfection, with this at the core we believe in innovating across our value chain to ensure the customer experience at every touch point is enhanced. We listen to our customers’ feedback and what they expect from us. Staying true to our brand purpose makes us stay ahead of our competition,” adds Bijral.
Recent media reports in a leading daily reported that with the highest number of organised tea cafes, Chai Point has an aggressive expansion plan of pumping in around INR 120 mn for FY 19. Thirty new cafes will be added by the end of this fiscal, restricting its presence to exisiting cities (Delhi-NCR, Gurgaon, Mumbai, Pune, Bengaluru and Hyderabad). Customer experience will remain the key priority for the company. Chai Point’s flagship product boxC also plans to increase its client base from 500 to 850 by the end of the current fiscal.
Poddar states, “We stay ahead of the competition by innovating in our menus and adapting to consumer demands. We put a special focus on customer feedback so that the loyalty towards the brand is high.” Operating in the Eastern region of the country, Chai Break has a total of 14 cafes across Kolkata, Durgapur, Bhubaneswar and Guwahati.
Tea cafes are betting big on the new avatar of chai in the largely unorganised tea market in India. With the number of players increasing in the space and FMCG biggies eyeing it seriously, it remains to be seen how all of them will retain their individuality and keep surprising their customer base with delightful innovations.