BackChai Point plans to triple network in two years
The start-up, which has so far received `12 crore in funding from Saama Capital, plans to open outlets across Pune, Mumbai, Hyderabad and NCR
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Bengaluru: Nearly half a decade after lifting the widely popular concept of tea stalls off the streets, Bengaluru-based start-up Chai Point is looking to take its tea parlours to more Indian cities.
The start-up, which has so far received ₹ 12 crore in funding from Silicon Valley-based Saama Capital, is planning to triple its network of stores over the next two years across Pune, Mumbai, Hyderabad and the National Capital Region. It currents runs 70 tea outlets in Bengaluru.
Saama Capital made an early stage investment in the company when it was 20-stores-old.
Chai Point is also building a tea delivery business to cater to companies and small businesses across metros, looking to cash in on the Indian consumer’s willingness to trade up to a more nuanced form of the staple hot beverage.
“We want to do for tea what Starbucks has done for coffee," Amuleek Singh Bijral, founder of the start-up, said in an interview at a Chai Point outlet in Bengaluru’s upmarket Koramangala area, where college students and white-collar executives stream in for a cup of tea, paying ₹ 20-40 a cup.
Bijral, founder and chief executive of Mountain Trail Foods Pvt. Ltd and its brand Chai Point, and a former Harvard student, is seeking to raise ₹ 80-100 crore over the next few months to fund the chain’s expansion.
The start-up sells close to 75,000-90,000 cups of tea a day.
It serves customers through its retail outlets and its tea vending machines inside offices.
At present, 60 companies are enrolled with Chai Point for its Chai@Work programme, including Tata Consultancy Services Ltd, Tesco Hindustan Service Centre, Infosys Ltd and Yahoo Inc.
Chai Point faces a tough battle in the office pantry in a market already serviced by industry bigwigs such as Cafe Coffee Day and Nestlé.
Over the next four months, the company will raise a large round of money to add more outlets and bring in new machines to large offices and service neighbourhoods through an app-based delivery business.
Bijral declined to name the potential investors.
India remains a largely tea- drinking market, a phenomenon that is highly visible on the streets of the country, where small hole-in-the-wall joints sell the beverage at ₹ 5-10 a cup. But not many have scaled the organized tea retail market.
“The country has been so obsessed with building coffee chains that chai retail has been largely ignored," Ash Lilani, the San Francisco-based managing partner and co-founder at Saama Capital, said over the phone from Hong Kong. The chai market is six-times that of coffee and is a nationally accepted product, he added.
“It’s a readymade market, it’s about how you service it," Bijral said. While he remains bullish on converting the unorganized tea-drinking nation to a more hip concept, the lack of any predecessor that has scaled the business in the country does not exactly bear any testimony to the success of the business model.
“It’s a scalable model as long as rentals are controlled," said Anand Ramanathan, a director with KPMG, adding that the company needs to work on increasing its bill size.
In India’s ₹ 33,000 crore tea market, not many entrepreneurs have lifted the low-cost model of tea and converted it into a profitable business. “Very few people have paid attention to it," said Bijral, who always wanted to build an indigenous brand. “That sensibility is coming in."
Other tea retail chains such as Chaayos have also been spurting across the country, bridging the need gap for hygienic quality tea at reasonable prices.
But investors remain rather sceptical of scale and margins. “There’s immense potential for any of these chains to scale up to the level of Cafe Coffee Day," said an analyst at a top consulting company who did not want to be named. “While as product it works (since it has an indigenous taste profile), as a retail concept it’s an expensive proposition."
Taking the chain from 80 to 200 stores will be challenging, said Saama’s Lilani, but given the diversified model Chai Point is building on delivery as well, scale will come.
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