Let’s face it – India is a Chai (Tea) crazy nation, and tea it is a part of our every social setting! Be it, after waking up from the bed in the morning or during breakfast, during office hours, while meeting friends, while smoking (which of course, is very bad for health), tea happens to be the sun of our universe.
But even after India being a Chai drinking nation of over a billion people; getting a good cup of tea outside the house is difficult. All we have are the unhygienic tapri (roadside) Chai, the teabags or the office vending machine Chai; all of which, of course are not up to the mark.
But with the rise of coffee culture, Tea has seen to be taking a backseat since the past few years.
And statistically speaking, there are over 2,000+ coffee outlets whereas there are not even 100 dedicated organized cafes for Chai. When Café Coffee Day had opened their first café in 1996, no one in their wildest dreams had thought that two decades later they would be running more than 1500 cafes, and would be making ₹1,326 crores.
Industry experts point out that the tea business offers high margins that go up to nearly 50%, and also costs less as it requires less milk and sugar, as compared to coffee.
Even after the having such huge potential, this $10 Billion space in India that has a domestic consumption of more than 900 million kgs of tea, still remains majorly unorganised and untapped.
Enter – Chaayos!
What is Chaayos?
Promoted by Sunshine Tea House, Chaayos is a Chai company that is revolutionizing the way Indians drink tea, which is a chain of 25 cafes that serves 25 different types of tea, customized in 12,000 ways.
It was founded in 2012 with a USP of customization – Chaayos “Experiments With Chai”!
They want to give people the opportunity to have their “meri wali chai” (my type of tea) and tweak it too! Their varieties range from desi chai, classic chai (green tea, earl grey, dargeeling first flush, camomile, jasmine tea, etc), speciality teas (gods chai, cinnamon green, pahadi chai, lemon green, mint and lemon green, Moroccan mint, etc), Homemade ice teas, to real fruit shakes, along with some munchies like sandwiches, etc….
“Don’t be surprised. No one offers tea in a more personalized manner – be it ingredients, less or more milk, various flavours or mixing flavours, you get everything! They allow their customers to customize their version of tea with 12 add-ons such as tulsi, adrak, masala, saunf and kali mirch, and vary the milk, chai patti and sugar levels, all according to their taste.
They take pride in offering freshly made Chai that is made using the best quality ingredients from across the country, only after you place the order.
What is their Business and Operating Model?
Chaayos follows an omnipresent business model of functioning Offline and Online. At one end, they provide a readymade Chai on demand service through their disposable kettles, and have also created their own blends of premium Chai’s as well. These tea blends are also sold through their cafes too.
Besides cafes, Chaayos also runs Kiosks that offer Chai in a to-go model, like a take away joint, at IT parks in Noida. They witness average transactions of about 300/day at these alone.
While on the other end, Chaayos also sells their products on several online marketplaces such as: Amazon, Snapdeal, BigBasket, etc. More than 1500 boxes are sold every month through the online feature itself. Additionally, people can also order food and tea using their Chaayos App, which gets delivered at their door step too. Chaayos has also partnered with IRCTC (to deliver teas to customers in train) and is already delivering Chai through Tiny Owl, Swiggy, Ola Café, Grofers, and the likes of them as well.
Some other of their tie-ups included many big and world renowned brands like the Shah Rukh Khan-starrer Dilwale, along with many premium multi-national brands as well.
Interestingly, Chaayos also offers a subscription model where their Chai is delivered to customers on a daily basis at a pre-defined time.
This (delivery segment and subscription model) helps them to reach out to a large set of customers, which otherwise would have been difficult to reach, in a traditional retail model.
To manage all that, they make use of technology, which is completely developed in-house; due to which, they are able to link their entire back-end supply chain with their point of sale and loyalty program. This helps them to offer better service and also gives them a much higher degree of control to track and optimise various service parameters, as well.
And lastly, to create the desired pull, Chaayos also offers a blended ambience, matching to the needs of the masses. The interiors are a mix of mocha and dark Mexican green and the sofas are made to order–with jute.
Since, Chaayos represents the “Chai way of life”, the interior design of their outlets relate to the very core concept of tea – lamps made of cutting Chai glasses, Kettles, Chai samples in taste tubes, and a lot more….
Basically, the whole idea is to create a warm and friendly neighbourhood space, where people can come with friends and family and also on work. Just like Central Perk in F.R.I.E.N.D.S!
Who is their target audience?
Chaayos targets the upcoming middle class that has decent money but is also equally conscious of the value and quality they get.
Broadly speaking, the Chai drinkers who visit their outlets are between the age bracket of 18 and 45 and are mostly working professionals. But in general, they attract families, kitty party groups, college students and the elderly.
Since, Chai is in the DNA of Indians, their brand is automatically positioned as more reasonable than most coffee chains, and their offerings too, start from a minimum of ₹49 for a cup.
How has their growth been so far?
Chaayos was started by Nitin to solve a pain point that he personally faced.
Chai (Tea) had always been a crucial part of his life. But he could never find a place in India that could offer ‘meri wali chai’ (my type of tea).
Yes, there were many roadside tea-stalls but there were no organized chains in this space. Somewhere between westernisation and coffee chains, Chai had taken a backseat and was no longer the beverage that people bonded over. Thus was born the idea of Chaayos! An outlet that would serve home-like tea; with twists!
Having thought that, he decided to go ahead and start Chaayos. The idea was to create a Starbucks for India, for tea!
Chaayos was born in November 2012, out of a basic principle – a modern version of Chai adda, that served freshly made Chai.
Chaayos was a bootstrapped concept that started with an initial infusion from Nitin of ₹25 lakhs of his savings (of which he used ₹12 Lakhs initially), with a simple premise that – he would give it 6 months, after which he would either put in another ₹12 lakh or close it down.
But to his surprise, his first outlet broke even operationally within just 3-4 months of opening itself.
Post that, Raghav Verma joined Chaayos with an equity partnership, because his online education company didn’t work out. Thus, filling the missing gap!
Raghav turned out to be lucky for the Chaayos! Soon after his entry, Chaayos received their first angel funding of ₹2.1 crores from Powai Lake Ventures, Zishaan Hayath (Co-founder of Toppr.com), etc., which was used to open more stores.
In a span of roughly two and a half years, Chaayos opened seven more outlets and had expanded to a staffing of 50. Their highest grossing outlet was now closing a turnover of ₹1 crores in annual revenues.
Since then, Chaayos has got into an aggressive expansion in all verticals. Today, they run 25 cafes in Delhi NCR and Mumbai, with gross margins as high as 65-70%, and annual turnover of ₹9-10 crores (2014-15).
The café also claims to clock 600 transactions per day with an average footfall of 700 customers per day, and have expanded to a team of 400 employees.
So far, the company has raised a total of $5 Million from past investors, along with Tiger Global Management as well. They are also in preparations to expand to all major metro cities like Bangalore, Pune, Hyderabad and Chennai, as well.
What strategies have they adopted?
The company uses some simple yet out-of-the-box operational and marketing strategies for their business.
This makes the business highly scalable, says Verma. Chaayos works on a hub-and-spoke model, wherein they manage several locations from one kitchen; thus, making the business highly scalable.
To maintain the quality, procurement for their outlets is done centrally and from the best sources. They source most of their ingredients from various fixed vendors across India, while for the food items, they have a central kitchen that supplies daily to the outlets, and finally, the dish is assembled together at the outlets itself.
On the employee end – Chaayos follows a unique model to standardize the processes!
Unlike other beverage chains since tea-making is still an art and is not mechanized, every employee at Chaayos has to attend an industrial training and certification programme that is followed by two weeks of in-store training as well.
Only after one month of this training and passing of the certification exam, the employee is then deployed at the outlets!
The company has never been that heavy on the marketing end. They mainly believe in word of mouth. In fact, they put a lot of effort into our branding outside and inside the outlets, along with the experience that is offered, to cover for marketing.
Overall, on the online end, they make use of the social media and email marketing to keep in touch with the customers. Using the same medium they also keep them informed about the promotional activities and new additions.
On the offline front, they make use of “Below the Line” strategy, and offer dedicated loyalty programs to its customers. They also advertise on the Radio, to create brand awareness and customer acquisition as well.
Who leads the brand?
The company was founded by Nitin Saluja and Raghav Verma, and is currently led by Nitin.
Nitin is the CEO of Chaayos and also does all the Product R&D. In fact, most of the Chai menu has been designed by Nitin himself.
He is B. Tech, Mechanical Engineering pass out from IIT (Bombay) and was also a Summer Research Scholar, Experimental Economics at the University of Exeter, as well.
He started his career in 2005 as an Intern with Mercedes Benz India, and helped them set up a bio diesel refuelling station within their manufacturing facility. Post this 3 month stint, he then founded his first venture ThinkLABS Technosolutions in November 2005, an educational robotics company that enabled school and college students to learn the fundamentals of robotics via hands-on training.
In 2007, he joined Opera Solutions as a Senior Consultant to help several Fortune 500 companies to optimise their supply chain.
He went on to work there for less than 6 years, post which the entrepreneurial bug bit him again, and he started Chaayos in May 2012!
Chaayos, later found another cofounder – Raghav Verma in 2013!
Raghav manages the Marketing and Business Development end of the company. He is an IIT (Delhi) graduate in Chemical Engineering, and has also worked for companies like McKinsey & Company (Analytics Intern) and Opera Solutions (Business Analyst) for around less than 3 years.
Post that, he had also co-founded an online education company called Prepsquare, which was focused on assessment in the Test Prep space and utilized quality video content and advanced analytics to improve student performance.
How disruptive is the QSR sector in India in the near future?
The organized QSR (Quick Service Restaurant) format in India has emerged only in the last 19 years, and started with the arrival and success of McDonald’s in 1996.
Due to fast expanding middle class, urbanization, youth spending, nuclear families, rising disposable incomes, increased exposure to international cuisine and needs for elevated protein consumption, and better logistics, a large market is seen to be moving towards higher value-added products, which in turn has sparked investor interest in the F&B space; thus, paving the way for entrepreneurs to jump in and build next generation brands.
This, along with a successful example of McDonalds, has led to the entry of many national and international players in the QSR space.
According to an analysis by apex industry body ASSOCHAM (The Associated Chambers of Commerce and Industry of India), the QSR sector in India is currently growing at a CAGR (compounded annual growth rate) of 25% at ₹8500 crores, and is likely to reach ₹25,000 crore by 2020.
According to start-up analytics firm Tracxn: between 2014 – to date, there have been 23 investments worth a total of $167 million, in the offline F&B space, as well.
Investors like Tiger Global and Sequoia, who have been purely technology focused in their investment, have started to invest in the space as well. This only validates the potential of the sector even more!