Not too long ago, the word café was synonymous with coffee. This started changing with the advent of the tea-café culture, pioneered by a host of ambitious entrepreneurs. One of the earliest ones to spot this opportunity was Amuleek Singh Bijral, who founded Chai Point in 2010. To understand how he made Chai Point click, Outlook Business caught up with Bijral at their premium Church Street store in Bengaluru. Edited excerpts:
Tell us a little about your journey before starting Chai Point?
I am from Jammu and Kashmir and my father is a retired IPS officer. I did my engineering from Thapar Institute of Engineering & Technology and joined Tata Consultancy Services as a developer, and then with Microsoft. After five years here, I went to pursue my MBA from Harvard. I always wanted to start my own business, but had to build capital for it. So I worked with EMC2 at their Boston and Singapore offices, and moved back to India in 2010. I then searched for a start-up idea.
How was the idea for a tea bar finalised?
Through a Harvard professor, also a fellow HBS friend, whom I met regularly, Vikram Sharma, I realised that there is a market for selling chai in India. So in 2010, I registered my company, Mountain Trail Foods, and opened a small pilot 150 sq ft store in Koramangala in Bengaluru. Initially, we had built Chai Point as a blue collar, accessible brand for the masses. But it was unfeasible. We shut down all our stores in mid-2012 and rebuilt about 20 stores, pivoting to the white-collar customer base locations.
How did this help?
With this sharper positioning, our numbers substantially improved. Revenue per store grew by 150%.
When did food begin to play an important role?
While scaling up, we realised that the crowd is looking for accessibility and convenience. Since we open our stores very early, around 7.30 am, customers wanted a good breakfast to go with their cup of chai. So we worked on breakfast menu, which included upma, poha and other ‘made for chai’ authentic breakfast categories. Also, the expectation of consumer in every city is different. A Delhi customer has way higher expectation from food as compared to western-India customer. One sees food as a direct contributor to chai experience, while the other sees it as an add-on. Food contributes about 31% of our total revenue.
You are credited for inventing the first heat-retention flask for deliveries. How did you hit upon this idea?
In our business, omni-channel became very important. Our customers wanted chai to come to them, so we innovated on a heat-retaining flask. It uses the material in which blood plasma gets stored, with five layers of the pouch approved for food industry usage and the innermost layer being certified free of BPAs (Bisphenol-A). It took us nine months to finish the flask. The innovation was low cost but it helped grow our delivery business, which is today 21% of our total revenue. We touch 10,000 delivery orders a day and have grown 250% YoY.
Why did you decide to look at institutional sales through boxC?
Well, people used to come to our stores and say “chai flask me bhar ke de do”. Similarly, offices came in with bulk chai orders. That is when we realised that institutional business is so large. boxC was first imagined in 2013-14. The machine, currently installed at about 900 corporates in 10 cities, contributes 38% of our business today. It is also the fuel behind our rapid growth. What sets boxC apart from other beverage-vending machines?
To begin with, it is the first authentic chai-vending machine. Quite likely, nobody had built a fresh milk-based chai machine before. These also IoT dispensers, which can read and write data.
How is your packaged food business shaping up?
The journey for packaged products started about one and a half years ago at Chai Point and is growing fairly fast. It’s still very small but significant in terms of customer experience. It is manufactured through contract manufacturers and sold at our outlets and online. Key is to make available snacks that are loved along with chai. We are just at the start of our CPG (consumer packaged goods) journey and have a patient outlook here. Today, CPG is about two to three per cent of our sales.
What are the future innovations you are working on?
With boxC, we see endless possibilities. For instance, there is a tab with camera that can be used for facial recognition, which saves users’ preferences and make tea accordingly. We can also play video screen saves — with speaker — to tap into ad revenue. We are also working on merchandising, so consumers can take a part of the brand home. The in-store products especially beverages is where we innovate continuously. For example, we just launched Kokum Iced Chai and Vegan Cold Coffee (with almond milk).
From these innovations, what are the tangible improvements in the business?
From last year to now, we have doubled our revenue run rate to around Rs.2 billion and improved margins by 9%. We are expecting a conclusive Ebitda positive year. We will open 40-50 stores this year and increase our boxC presence significantly.
How is your approach different from peers?
We have never lost money on the cup. At the same time, we have constantly embraced high capex areas in pursuit of innovation. Invention of boxC required close to Rs.70-Rs.90 million. Our packaging focus is also relentless, especially since our delivery channel has become very important to our consumers. Then there is store design — we are forever experimenting there to ensure our customer experiences improve.
What are the growth drivers for the tea-bar concept in India?
Growth in physical infrastructure, a consumer mind-set that appreciates authentic F&B offerings and an overall resurgence of tea as a category, largely owing to Asia’s increasing global influence.
Where do you see the brand in the next five years?
Customer experience on each of our channels should be world class — this challenge keeps me perpetually on my toes. The overall size of chai market is Rs.1.5 trillion. We are still 0.01%. There is a huge market. In the next four to five years, you will see 500 plus stores, boxC in 30 cities and a more mature CPG portfolio. So we want to be a part of our customers’ life-cycle around chai and coffee.