Chai Point, run by Mountain Trail Foods, expects to expand its outlet footprint and its corporate sales channel aggressively.

Chai Point plans to raise more than $10 million in Series C funding

Chai Point, which completes with Chaayos, has raised close to $13 million so far and plans to use the next round of funding to expand across channels

Bengaluru: Mountain Trail Foods Pvt. Ltd, which owns the Chai Point chain of tea stores, plans to raise more than $10 million in a Series C round of funding, which it expects to close in the first half of 2018.

The next round of funding comes as the tea retailer targets turning Ebitda-positive in the next few months, and expects to expand its outlet footprint and its corporate sales channel aggressively, a top executive said. Ebitda is short for earnings before interest, tax, depreciation and amortization.

In 2015, Chai Point raised nearly $10 million in its Series B funding, led by Fidelity International Ltd’s investment arm Eight Roads Ventures, DSG Consumer Partners and Saama Capital India Advisors LLP. The Series C round will be much larger than the previous one and will look at raising money from existing investors as well as new ones, said co-founder and chief executive Amuleek Singh Bijral. He did not disclose details.

The company—which competes with the likes of Sunshine Teahouse Pvt. Ltd’s Chaayos—has raised close to $13 million in funding so far. It will use the money from the next round to expand across channels.

“78-79% of the non-alcoholic beverage market in India is chai. And there is a lot of work that can still be done on it. In the next five years we can build 500 stores (in total) and we are pacing ourselves with that number in mind," Bijral said.

There are currently close to 90 Chai Point outlets spread across Bengaluru, Hyderabad, Mumbai, Pune and Delhi.

The company plans to enter Chennai in the next few months. Apart from the outlets, Chai Point sells its tea to white collar workers—its main target segment—through home delivery services and via vending machines located inside company premises under the brand name boxC (the C stands for chai).

It is now banking heavily on sales of the boxC vending machines and expects revenue contribution from those, currently at 40%, to outpace that from its stores in the future. Store walk-ins account for about 40% of overall sales at the moment, while delivery makes up the remaining 20%.

Chai Point launched the first version of its semi-automatic tea and coffee vending machines for corporates between September and October last year called boxC 1.0, taking on the likes of Coffee Day Enterprises Ltd.

It has deployed around 1,000 boxC 1.0 machines so far and has launched an upgraded, all-Android, IoT version of the machine called boxC 2.0 this October.

It expects to deploy 3,000-5,000 boxC machines next year as it seeks to tap further into India’s massive tea market. Indians consumed 173.3 cups of tea per capita per household in 2016, an increase of 2.9% compared with 2015 according to data from research firm Euromonitor International.

In contrast, the coffee market remains significantly smaller with the country drinking only 17.6 cups per capita per household in 2016 versus 16.6 cups in 2016.