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Meet the man who plans to disrupt the retail coffee biz by democratising it

Chaitanya Chitta isn't the quintessential Silicon Valley geek with roots in 'Bangalore', as he insists on calling the city. "We aren't techies, you see, we're business people. We understand consumer behaviour, we understand building teams, we understand pain points," he says in a matter-of-fact manner.

Chitta, if you must know, runs a Rs 30-crore-a-year business selling coffee under the brand 'SLAY', and sees himself as a gamechanger with plans to disrupt the beans-to-cuppa business by democratising it. Sounds complicated? We'll get to all that in a bit. First let's take a brief look at the man's career curve. 

The early years

Chitta was an ordinary business and commerce graduate when he landed his first job at the Steel Authority of India at age 20, where he'd work at the PSU's plants at Bhilai and Rourkela, before setting off to the US to do his MBA. 

It was while he was still studying at Temple University, Philadelphia, that he took up a job at Barclays in 2001-02, and moved on to KPMG after getting his degree, to take on a fairly senior position handling crossborder deals and domestic M&As. After spending a few years at KPMG, he shifted base to Kuala Lumpur to work with Laureate, which today is one of the biggest names globally in education.

The homecoming and the entrepreneurial bug

Chitta and his wife Lakshmi, a Cornell graduate specialising in HR, moved to Bengaluru in 2011 as she was expecting. Here, they would set up their first startup, smartonlearning, one of the first online education and skill-enhancing platforms in the country, catering to corporate execs and fresh B-school grads. Says Chitta: "It was a fairly successful company, but it wasn't turning out to be the D2C enterprise I wanted it to be. It kind of morphed into something the big universities wanted to use to market their courseware. So I sold it off to another institution at break even."

The coffee bite

A diehard coffee lover, Chitta says his decision to move to Bengaluru, which is both the startup capital and the coffee capital, drove him to set up a new enterprise called Drop Kaffe in 2015. "We saw a huge opportunity here, as India is one of the largest producers and consumers of coffee by volume, though not on a per capita basis," he says. Chitta acknowledges the huge role played by Cafe Coffee Day in popularising the beverage, but he still felt consumption was more an indulgence than a habit. "One drank coffee maybe once a week in the ambience of a swanky restaurant, with family and friends, because a cup of cappuccino, for instance, would cost as much Rs 150-200. It wasn't the kind of stuff the new-age millennial could make a habit of," Chitta says. "My cuppa costs half as much."

At the other end you have the much smaller joints serving filter coffee much cheaper. But they really aren't really up-market and not the kind of place the young, motorbike riding millenial or corporate executive would visit quite often. "Drop Kaffe came somewhere in between the CCDs and Starbucks at one end, and the Udipi at the other," Chitta says.

The business model

Chitta says his plan was to democratise coffee using a three-pronged strategy of selling it online, delivering it on-the-go to the consumer in a hurry, and allowing the family to brew its own cuppa at home. 

Cloud cafes: He set up a clutch of 150 cloud cafes--he is planning another 75 by December--where there is no customer interface. You just order your cup online or on the app, and it is delivered to you piping hot, or ice-cold, depending on what you've asked for, in hygienic, spill-free packaging within 30 minutes flat. Chitta says while brands like Starbucks also deliver at home, the experience is not the same, as the coffee they serve at their cafes is the same that they deliver to your doorstep. While the hygiene standards are impeccable, home delivery is not their focus area. It is only after the pandemic that the bigger players are now entering this space. "In that sense, we have a head start, as we started this model way before Covid-19 struck."

SLAY coffee bars: These are essentially outlets from where you can pick up your beverage while on the go--there is no place to sit down and drink. "You needn't get to the bar to place your order, but can ask for a cup online or on the app if you aren't too far away, and drink it while driving, taking a walk or romancing your girlfriend at the shopping," chuckles Chitta. There are about 15 such strategically located outlets in Bengaluru currently, and Chitta plans to open another 25 in Delhi, Mumbai and Pune by December. Each bar occupies no more than 50-100 sq ft, and has just one barista (that's a generic term for the guy who makes the coffee, not the brand) managing the whole show. So there is a huge saving in terms of real estate, manpower and energy, a substantial portion of which is passed on to the customer. 

But, of course, if you are the Do-It-Yourself kind, you can always pick up a packet of beans or powder. 

Sure, there were hiccups when Chitta and wife began in 2015. "We were first selling under the Drop Kaffe brand. The ecosystem wasn't as mature then as it is now and even Swiggy and Zomato, which account for a very large part of our sales today, had some way to go. So essentially we had to create demand, prepare the product and also deliver," says Chitta.
That was also the time Drop Kaffe got into bottled gourmet coffees and smoothies, which it tried to sell through distributors in five cities. "We scaled our business to 2,500 outlets. But we soon encountered 'death by a thousand cuts' in the form of working capital issues, as collections were a major problem. This forced us to finance receivables and inventory out of our own resources. 

"There was a learning in all of this," says Chitta. "If you're a startup that's building a consumer brand, that too in F&B, then the only way to do it is D2C. You not only get the money upfront and save on working capital costs, but instant consumer feedback, too. My take is that if you aren't able to do a revenue of Rs one crore a month using Amazon, Flipkart, Grofers and all of that, only then shuold you scale up with your own infrastructure."

The SLAY value proposition

"Our model isn't a cafe experience, but a cashless, conversation-less and contact-less one with 100 per cent digital payment for top-class hand-crafted beverages at the best possible price, in the most efficient manner, without impinging on your time," says Chitta. "Our products are on par with, or possibly even better than, those offered by the bigger guys."

That seems a tall claim, but Chitta asserts that a cup of cappuccino could cost you as much as Rs 200 in a dine-in, but a SLAY of the same genre would come for just Rs 75. And quality? Chitta claims SLAY has been optimising its supply chain to enhance customer delight. "The quality of food products lies in their freshness. As far as coffee is concerned, the smaller the gap between the time the beans are roasted and the point at which you put the cup to your lips, the greater the experience." Chitta says his firm has developed a blockchain-enabled traceability solution called SLAY Grid, using which a customer can scan a QR code and find out when his coffee was roasted. 

"By promising quality to the customer so upfront, we're challenging ourselves and our entire system of vendors, right down to the farmer. We tell our vendor partners that the customer knows when his coffee was roasted, so we have to work that much harder to give him the freshest possible cuppa," explains Chitta. 

The financials and the funding

Chitta claims his company does about Rs 2.5 crore a month, or Rs 30 crore a year by revenue, and plans to ramp that up to about Rs 50 crore by December. Drop Kaffe has received total funding of Rs 50 crore so far, with Kanwaljeet Singh of Fireside Ventures being the first backer. More recently Rebel Foods, which owns Oven Story, Faasos, Behrouz Biryani), also supported the enterprise. Somewhere in between angel investors such as Infoedge CEO Hitesh Oberoi, Nirupa Shankar of brigade group, Bengaluru, and a few others also bet on the company, but have since exited.

Says Ankur Sharma, Co-Founder, Rebel Foods: "We always put our customers at the heart of every decision we take. SLAY Coffee is one of the first brands we invested in and onboarded on to our platform, not only because of the great tasting coffee, but also because they aligned with us on our ethos. They have cracked the delivery segment with their spill-proof and temperature controlled packaging and some other great innovations that address the pain points of coffee drinkers, and this is the kind of endeavour that sets brands apart."

Drop Kaffe is breaking even at the operational level, but there is some burn at the corporate level in areas such as marketing and payroll. "But even here, we hope to break even within the next 3-4 months," Chitta says.

The road ahead

SLAY is present in 10 cities, with Kolkata being the latest. "The plan now is to expand into smaller cities like Lucknow and Chandigarh," says Chitta. He is bullish about the coffee market, whose size he believes will double from Rs 15,000 crore across genres currently, to about Rs 30,000 crore by 2025. By 2030, it should reach Rs 55,000-60,000 crore, he says. 

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