Almost 50% of Chai Point’s revenue comes from its B2B arm

Even then deliveries were a happy coincidence. Chai Point’s primary business was to become a premium Quick Service Restaurant (QSR) chain by expanding its outlets. “High-impact stores,” Bijral insists. High-impact stores are in business parks with a focus on white-collar employees, and the ability to pay more for a cup of tea. These customers would come in once a day and sometimes hold meetings at the store. They were his ideal customers.

The biggest challenge, however, for any QSR is to get them to come in every day.

Growing itself in the food and beverage field

“It is not just the location that matters,” says Dhanraj Bhagat, partner at Grant Thornton India, one of the world’s largest accounting and consulting firms. His focus area in the consultancy is food and beverage. “It is also a fact that several times, it is just a fad. The novelty wears off, and people go back to other outlets because there’s no shortage of cafes in this country, both local and international chains.”

Once the novelty fades, the numbers start dropping.

So, Bijral spun off his delivery idea to start the dispenser business. The company’s first dispenser client was VMWare. It started with one and expanded to 15 locations across the country within the same company. “We borrowed from the printer cartridge business model,” says Bijral. The machine was leased with bi-annual maintenance contracts, and Chai Point delivered the loose tea leaves. All the customers had to do was keep it plugged in, keep adding fresh milk every day and keep it connected to a router.

In January 2016, Chai Point introduced IoT-enabled tea dispensers. These machines track the amount of tea consumed from the cloud. But is that a problem that needs solving? Offices typically have CCD dispensers. The office staff keeps an eye on the coffee powder, which when it runs out, replenishes. If it isn’t broken then why fix it?

“Yes, we completely needed it. You see, at scale, you need to be on top of the game. Know when the tea leaves are running out. If the dispenser needs servicing, we can decrease the servicing time,” he explains. But that can be sorted by a simple email or a phone call. Right? “When customers get used to our tea, it is commoditized. It becomes like electricity. You don’t miss it until you don’t have it,” he says.

While Bijral won’t admit that business is slow at the stores, the dispensers brought in the much-needed volume. It helped Chai Point reach revenue of Rs 39 crore in FY16 with a loss of Rs 20.4 crore, according to filings at the Ministry of Corporate Affairs (MCA).

Increasing the numbers

Currently, Chai Point sells almost 200,000 cups a day across all its businesses. And 50% of the revenue is brought in from the two B2B arms—delivery and dispensing machines. The average order value of the tea sold at the storefront is about Rs 110 for a 110ml cup. It is dispensed in offices at Rs 8-10 for an 80ml cup. This he says is his moat, which will help him achieve his next goal. Bijral wants to increase those revenue numbers to Rs 100 crore in FY18.

The way forward, encouraged by the success in Chennai, is to go from eight cities to 12, with Pune and Hyderabad next on the list. Chai Point also plans to rely on dispensers to enter these new markets. He insists that there are no other pan-India tea companies in India, and it gives him an advantage.

But there is competition, and the most of significant of them are Chaayos.

It will be fair to say that competition from Chaayos is strong. But Bijral argues that the catchment for Chai Point and Chaayos is different. While Chai Point targets the mid-level white-collar market, Chaayos tries to capture the 21-34 age group, who have just started their first job. “Almost 50% of our customers have between Rs 5 lakh to Rs 25 lakh a year in household income,” says Nitin Saluja, co-founder, and CEO of Chaayos.

 

Leave a Comment