It is easy to feel like a kid in a candy store when one visits the Teabox outlet at Mumbai airport. Prominently located inside Terminal 2, the 250 square feet oval-shaped store is as well thought out as the tea and the tea accessories it retails. Inside the plush store, exotic Silver Needle White Tea shares space with the humble Bombay Cutting chai, as the pure green and black teas sit cosily with blended delights such as Rum and Raisin and Himalayan Wine. There is also the Kashmiri Kahwa and the Oolong Tea, which can be sampled by anyone interested in the classics. An eclectic mix of tea warmers, kettles, infusers and tea sets are also on display, luring the connoisseur and the experimentalist equally.
Kausshal Dugarr, founder of Teabox, says they welcome both. “We look at tea as not just another beverage, but as high-end wine. Every tea sold at Teabox has got distinct notes and flavours,” says Dugarr, CEO of the premium global tea brand. The store is a recent addition to Teabox’s offline presence; its other store is at Bengaluru airport.
Since 2012, when the company started its journey as Darjeeling Teaxpress, it has been catering to tea aficionados across the world. The brand currently supplies to over 117 countries, including the US, Russia, UK, Canada and Australia. Over 70% of its revenue comes from international markets, where it competes with local brands such as Vahdam Teas and Anandini Himalaya Tea, and international ones such as Adagio Teas, Tealish and Grey’s Teas. Teabox’s brews (200 SKUs) don’t come cheap — priced between Rs.5,000/kg to a whopping Rs.200,000/kg — but the buyers don’t seem to mind. The start-up receives 8,000 orders a month and around 60% of its customers come back for more. According to the latest corporate filings by the company, it clocked Rs.164 million in revenue in FY18, a 20% increase over the previous year.
“Teabox is leading the third wave of tea in India, which is similar to the third wave of coffee. Consumers are focusing on speciality/artisanal teas that are incredibly high in quality and sold at a premium price. In that sense, they are creating the category in India,” says Bothra, principal at Singapore-based venture capitalist firm RB Investments, which participated in Teabox’s $7 million Series B funding in 2017. The first wave largely refers to the use of mass-produced and machine-made tea, while the second is of speciality brews from small lots. The third wave, which Teabox is a part of, is the use of artisanal variety tea, sourced directly from farmers and with better-defined tasting notes, unique blends and functional benefits. Besides RB Investments, Teabox has raised funds from Ratan Tata, Accel, NB Ventures, DBS Bank and Dragoneer Investment Group.
What’s more interesting is that Teabox has managed to turn some of its premium customers into investors — such as Singapore-based angel investor Cameron Jones in 2016 and Texas-based billionaire Robert Bass in 2015. In all, it has raised close to $14 million, according to Crunchbase. So, what is it that attracts the global diaspora to a niche tea brand that sources and ships from its warehouse in Siliguri, West Bengal?
Finding his Cup of Tea
Growing up in Siliguri meant that Dugarr spent most of his time amid tea plantations owned by family members and friends. His father was in the business of supplying mechanical equipment required by tea gardens. “We were used to drinking incredibly fresh tea, a taste that remained with me,” recalls Dugarr. However, he couldn’t find that flavourful a cup when he moved out of Siliguri to pursue a Bachelor’s degree in Business Management and Finance at Singapore Management University in 2002.
After the four-year degree, he joined KPMG and worked there as a senior associate for over three years. “It was a great learning experience, but I am a Marwari. So, I constantly wanted to do something on my own, and hence moved back to India by the end of 2010,” says Dugarr.
Once back home, he began looking for ideas, and no points for guessing, the first one he thought of was in the tea industry. He observed that while the industry in India is over 200 years old, it hasn’t changed or developed much. The supply chain was too long and the resultant delay killed the flavour of the tea. “Your tea goes from a producer to auction to an exporter, importer, wholesaler and retailer, before finally reaching the end consumer. They don’t add any value, increase the production-to-consumption time by 3-6 months, and in the process, the quality of the product really disintegrates,” says Dugarr. His idea was simple — to disintermediate the supply chain and go direct from source to end consumer within days of production.
Prashanth Prakash, partner at Accel, says that the innovation of collapsing the supply chain with focus on freshness was what interested them about Teabox, which is Accel’s first investment in a non-tech consumer brand. “Tea as a product is uniquely Indian, but there is no domestic brand that has gone truly global in the past 30-40 years. Plus, Kausshal’s own background — of having a good understanding of the tea market — prompted us to make an investment,” he says.
With the idea clear, Dugarr founded Darjeeling Teaxpress and began retailing through his e-commerce website. He had also outsourced whatever could be outsourced — the SEO was done by a person based in Bulgaria, social media in Kenya, customer support in Philippines, tech in Ahmedabad, web design in Kathmandu, banner on the homepage in New Zealand and accounting by a firm in Delhi. It was a truly global team for a global brand.
The only thing done in Siliguri was buying, packing and shipping tea leaves. Dugarr would wake up in the mornings, go to the plantations located about 1.5 hours away from his home, taste the leaves and buy whatever he liked. In a month, he would buy 300-400 kg of the leaves. While this was much smaller than what regular tea makers buy from the gardens, Dugarr’s relationships and friendships in the hills helped him source the best. “In the beginning, I had only one person at the office to clean, sort, pack and prepare the leaves for shipping based on the orders we would receive,” he says. “The initial pricing strategy was simple: at whatever price that you are buying, the selling price would be 10x that,” he says. And people were willing to pay for Darjeeling tea delivered fresh, within seven days of plucking.
From their first order of $56 for a 300 grams pack that was shipped to the US, Dugarr saw sales picking up. Within a year, from 10 orders in the first month, he was shipping over 500 orders a month, with a typical order quantity of 500 grams for $80. Dugarr soon realised that there was a market that appreciated high-quality tea, and that the tea industry in Assam and Nilgiris could be revamped as well.
Thus, in 2015, they renamed Darjeeling Teaxpress to Teabox, which Dugarr felt was a simple and catchy name. But merely renaming a brand would not do. Teabox had to be positioned right and Dugarr consulted experts in various fields for advise. Vaniitha Jaiin, a wine and spirits expert and founder of The Perfect Pour, was one of them.
In the earlier years, the description of teas talked broadly about their origin, colour and flavour. “But Dugarr wanted to elaborate further and have tasting note descriptions of each tea to be thorough, like we usually see in the wine world. So we refined descriptions further on the appearance of the dry and wet leaves, prominent and subtle flavours, the journey through enjoying a cup of tea and what food could be paired with it,” recalls Jaiin, who is also a regular customer of Teabox and swears by its white and summer flush teas.
The idea was to make technical-sounding flavours and aromas relatable to the customer. So, phrases such as ‘velvety texture’, ‘succulent tropical fruit flavour,’ ‘jasmine-scented green tea’ and ‘soothing notes of holy basil’ were used. Instead of broadly stating that a tea has a floral aroma and taste, it was described in further detail to evoke an experience — such as a sip having a strong rose flavour with notes of wet mud and an intense amber colour.
Is there really all this to your humble cuppa? Yes, and all these are brought out by controlling three things — moisture, temperature and light. Dugarr appreciates this and therefore all the processing at their facility is done in a dehumidified environment. Temperature is controlled by cold-chain processing and light, by a special three-layer aluminum foil packaging.
After sourcing 30,000-40,000 kg of tea a month from 150 tea gardens in the northeastern states, Himachal Pradesh and Nepal, the leaf is brought to Teabox’s 2,000 square feet facility in Siliguri, built in 2015. “We are the only company in India to have cold-chain processing at source. Once tea is plucked and dried, within 24-48 hours, we bring it to our sourcing centre, maintain temperature and humidity, remove all impurity and vacuum pack and store it at -5°C,” says Dugarr. The flavour and freshness of the tea is retained for two years because of this.
Not just loose teas, but tea bags, too, are prepared with care. The start-up spent about six months coming up with ‘nitrogen-flush packaging’ for the dips, which is patent pending. Essentially, they remove the air by pushing in nitrogen like they do with a packet of potato crisps. Nitrogen, being an inert gas, doesn’t react with the product.
It required funding in thousands of dollars but investors don’t seem to mind. Bothra says that Teabox is “the only tea company in India that has invested in back-end infrastructure. That, along with their growing brand recognition, gives them a sharp edge over other domestic brands that are focused on the bottom of the pyramid CTC (crush, tear, curl), which is a volume-driven business.” The CTC method that produces pellets of black tea tends to flatten the flavours in various teas.
Besides these, the third and the most important differentiating factor according to Dugarr is their unique blends. Their R&D team is constantly working on them and bringing out new varieties every season, like in fashion. Last year, the colour of the year was purple, so they launched a blue tea which contains butterfly pea flower, ginger and spices, and zero caffeine. Add a dash of lemon to it and see it turn purple. This year, the theme is berries, which have been used as a key ingredient in a variety of their teas.
Their most expensive offering, the Badamtam Heritage Moonlight Spring White, goes for Rs.200,000 a kg. The tea, made from fresh spring leaves and buds, sourced from the Kanchenjunga-facing garden in Lebong Valley (West Bengal), begins with a floral note and ends with a fruity one. It was launched under their Private Reserve collection this year, and sees almost 50% of its sales coming from India.
In addition to selling carefully-sourced leaves, Teabox began retailing tea accessories priced between Rs.700 and Rs.3,000 in 2016. They are sourced from manufacturers across Scandinavia, India, China and Germany, and currently contribute 10-12% of the start-up’s revenue.
In 2016, business tycoon Ratan Tata, who once helmed Tata Global Beverages — the world’s second-largest manufacturer and distributor of tea — invested an undisclosed amount in Teabox, which Dugarr says was a huge leg up for its India business. Since then, the revenue share of the local business has gone up from 5% to about 30%.
With the India business ramping up, Dugarr decided to foray offline and tried the store-in-store model across outlets of Foodhall and Nature’s Basket in 2018. This was followed by the launch of an experiential store inside Mumbai airport in October and another 650 square feet store inside Bengaluru airport in May this year. At the store, the customer can sample and buy, and can create his own tea blend by choosing from a range of ingredients.
Sales from this offline channel are small, reportedly in single digits, but Dugarr hopes it will encourage more people to try their brand and then place their next orders online. The initial response to these offline formats has encouraged Teabox to open stores in Mumbai and Bengaluru in a cafe format.
In essence, Teabox has redefined the perception of tea. And it has got company in this effort. Over the last few years, niche, gourmet or speciality tea offerings have begun gaining popularity in the domestic as well as international markets. These include Vahdam Tea, Anandini Himalaya Tea, Namhah and Tea Trunk. Founders of these brands say that being in the niche category helps them customise faster.
More people have began appreciating premium teas over the past five years with a growing awareness of the health benefits of green and white teas, and start-ups are setting up shop to cater to these tastes. “Initially, India knew tea only as CTC to be had with milk. The mass market had no idea that more variety of teas existed. That is changing now,” says Anamika Singh, who founded Anandini Himalaya Tea in 2012.
Singh comes from a family of tea barons in Darjeeling — her father Abhai Singh has been in the industry for 50 years while her brother, Kunal Singh, is a tea taster. Her interest in the space was therefore, a gradual progression. Sourced from particular estates such as Manjhee Valley TE (tea estate in Kangra), Risheehat TE (Darjeeling) or Mie Prefecture (Japan), her brand has 116 varieties of tea priced between Rs.300-Rs.2,600/50 grams. These are sold across international markets such as Germany and the US, apart from India, helping the start-up clock revenue of about Rs.1.2 million a month.
Meanwhile, Bala Sarda, founder and CEO of four-year-old Vahdam Teas, draws attention to how niche brands help farmers get fair prices. “With mass producers, not only does the consumer get a non-fresh product, but most of the profit gets skimmed by middlemen before the farmers get a piece of it,” he says. Also, if farmers of a particular tea estate demand better prices, buyers are quick to shift to other sourcing regions.
Determined to change this, the fourth-generation scion of the bulk tea-export business decided to focus on launching his brand, Vahdam Teas. It currently has 120 SKUs of loose leaf teas and tea bags, priced between Rs.200-4,000/100 grams. It ships to about 90 countries. As the market expands, Teabox and the others are poised to make the most of it.
It seems to be the best of times, but it is also the worst of times, with the climate changing and swinging between extremes. “Climate change is a real threat to our industry as it has a direct impact on the quality and quantity of crops,” acknowledges Dugarr. While they have tried to mitigate its impact on their business by having a diversified sourcing base, he says that preventive measures have to be taken collectively and all the stakeholders have to be involved.
The challenges for these niche tea companies don’t just end at the tea gardens. On the retail side, most of them have to fight for store space. “Hence they mostly exist in the internet space,” says Singh. Going offline may be a lesser concern for Teabox in India, given the funding it has received. Without revealing the money spent, Accel’s Prakash says that the decision has paid off with the India business growing 4x since.
Additionally, Dugarr is looking to diversify the company’s offerings and adopt a multi-brand strategy within the tea space across price points and variants. Experimenting with a new offering is easy, given that they have everything in-house — from sourcing, production and fulfillment to quality control, R&D and packaging. “If I come across a trend, it takes me two weeks to launch, whereas it would take a year or more for a conglomerate,” he says.
The opportunity to expand presence and gain market share in the $40-billion tea market globally is surely large. The mass players have captured a dominant share, and it will take more awareness about the diversity of ‘tea’ before the niche catches up. Even so, with its nimble-footed approach, Teabox is making its name one cuppa at a time.