Chai Point provides office-goers freshly brewed tea across platforms

It was over many cups of tea eight years ago that 41-year-old Amuleek Singh Bijral and his Harvard Business School professor Tarun Khanna decided to start Chai Point, a company focused on delivering tea to white-collar professionals.

In a largely unorganised chai or Indian tea market, estimated to be Rs 1.51 trillion in size, Bijral and Khanna were taking a huge bet. The organised beverage retail market in India has been skewed towards coffee chains. 

For tea, its very ubiquity, according to experts, has been its bane. India is the world’s largest tea market, consuming 678,200 tonnes of packaged tea in 2017, according to a study by market research agency Mintel. 

Chai Point Founder Amuleek Singh Bijral
Cracking the market, said experts, was never going to be easy, given that virtually every restaurant, hotel, canteen and food stall in India serves tea. Also, organised tea play pushes up price for a cup of tea. Companies such as Chai Point argue  there is an out-of-home market for organised tea, largely among working professionals, seeking something better than the local cutting chai.
  
First mover advantage

Chai Point is the first organised tea retailer in the country. Its pilot store was launched in Bengaluru in April 2010; rival Chaayos came into existence two years later. From then to now, Chai Point has traversed much ground — launching 100 outlets in five cities, putting up nearly 2,000 fresh-milk-based vending machines across the country and delivering tea on call in a span of 30 minutes. 

Competitors such as Chaayos and Chai Thela also have a footprint. Hindustan Unilever and Tata Global Beverages too have experimented with the tea retail format in recent years.

Business model

A combination of stores, delivery and dispensers, says Bijral, who is CEO of Chai Point, have ensured it is India’s largest organised tea retailer today, selling nearly 0.3 million cups of tea daily. Last month, Chai Point concluded its third round of funding led by Mumbai-based Paragon Partners, raising close to $20 million (or Rs 1.31 billion), the highest for an organised tea retailer in India.

So far, Chai Point has raised close to $34 million (Rs 2.23 billion) in three rounds, with existing investors — Eight Roads (Fidelity’s India PE arm), Saama Capital and DSG — participating in the third round. “What Amuleek is building is a clever business model where on one hand there is a hardware, technology-enabled business, visible through the delivery app and vending machines. And on the other, he is building the Chai Point brand through stores,” says Deepak Shahdadpuri, founder and MD, DSG Consumer Partners.

Siddharth Parekh, co-founder and senior partner, Paragon Partners, who has joined the Chai Point board after the third round of funding, says the investment was in line with its objective of helping high-calibre entrepreneurs. 

Bijral wants to quintuple the number of cups of tea sold daily in three years. 
In eight years, Chai Point’s topline is nearly Rs 1 billion and it hopes to double this number in two to three years. The last four years, in particular, says Bijral, has seen Chai Point grow at over 75 per cent per annum. 

It hopes to break-even by the fourth quarter of the current financial year and sees formats such its boxC vending machines being future growth drivers. “The boxC machines alone can give us a growth rate of 75 per cent and above (per annum),” Bijral says.

Road Ahead

The plan is to add around 35-50 Chai Point stores per annum mostly in metro cities. This financial year, Chai Point will enter the Chennai market with its stores, Bijral said, making it its sixth city foray after Mumbai, Pune, Bengaluru, Hyderabad and Delhi-NCR. Ahmedabad and Kolkata are on the radar.

 
Experts say the challenge for Chai Point will be to strike affordable real-estate deals in metro markets. “Even if they are located within office premises and business parks, the challenge will be no less because there are a lot of food and beverage brands vying for this space,” a retail industry executive said.

Brijal says store roll-outs will be done keeping in mind availability and affordability of locations.

Kanwal Singh

Expert Take: Find a way to enter consumer homes

 

Kanwal Singh, Founder and Managing Partner, Fireside Ventures

 

Consumption of tea is a huge market, which allows the building of a scalable business. Chai Point's retail points are more for branding and will be tough to scale. It is seeing numbers in the office supply business of vending freshly brewed tea through machines. Chai Point has created some entry barriers and disrupted the way employees consume tea. This business has good headroom to grow. The only concern is that the office supply business can be light on margins. 

 

At some point, it has to figure out what are the next big things it needs to do to not become a low-margin business. Having provided this experience of great tea to so many office consumers, how can it take the business to the next level? Can Chai Point get into homes of consumers because it has the access? Can it extend that idea and say can 'we give you something that you can take home, or brew it in your home environment'? That will allow Chai Point to create a higher-margin and more valuable business.

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