Aparna Desikan & Anand J
IN FIRST FLUSH, TEA STARTUPS AIM FOR PERFECT BREW
BENGALURU/CHENNAI: Bala Sarda grew up around tea — not just because it's the beverage of choice for most Indians, but he was raised in the estates of Darjeeling. where his family has been in the...
"India grew some of the best teas but the industry was dependent on foreign brands to sell their product. I wanted to crack that and create an indigenous brand and take it to the world," says Sarda, 25, who started Vahdam Teas in April 2015. He delivers garden-fresh teas to over 10,000 customers in 76 countries, with the US being the top market. India contributes close to 10% of the total business. While giants such as Tata and Hindustan Unilever sell tea to the majority, startups are trying to create a market, both in India and abroad, for home-grown brands from estates in Darjeeling, Assam and the Nilgiris. These are mostly loose leaf teas, preferred by connoisseurs, and are a premium segment compared to the CTC (crush, tear, curl) tea that a majority of Indian tea drinkers prefer. What sets his 100% online business apart, says Sarda, is the guarantee of delivery in four days. "If you order tea today, it's most likely what we send you was harvested less than a week ago," says Sarda. "By eliminating middlemen, we are not only able to make available garden fresh high quality teas at lower prices, but are also able to retain all earnings in the region where these teas are grown." Vahdam Teas has raised Rs 4.4 crore ($650,000) from early-stage investment firm Fireside Ventures' Kanwaljit Singh, Mumbai Angels and Singapore Angel Network. Serial entrepreneur K Ganesh says the opportunity to create Indian brands is huge and the space is wide open. "These are regularly consumed products and create a brand loyalty that will stay for years," says Ganesh, who has invested in food-delivery startup Freshmenu through his firm GrowthStory and made a personal angel investment in beverage startup DropKaffe. "There is a dearth of Indian brands in the food and beverage segment." He's quick to point out that these are not food-tech startups, but startups enabled by technology. "Ultimately, technology will not help them serve good food and beverages," he says. Nitin Saluja, co-founder of Delhi-based Chaayos, says technology is the backbone of the company but they can't be labelled food-tech. "We look at serving the customer and how we can make them give us repeat orders," he says. Saluja explains that technology helps them personalise offerings, reduce wastage and predict demand cycles. "Our core business is chai." More than 80% of its customers are walk-ins and the rest order online. Chaayos, he says, it is making operational profits and is not looking to raise further funding. The company, which was founded in 2012 and has 33 outlets, is expanding its retail network in Mumbai. It raised $5 million from New York-based hedge fund Tiger Global, has seen sales triple in the last four years. What's interesting about this segment is that most of the startups seem quite cautious, unlike their counterparts in other sectors. Most seem to restrict themselves to a few cities and are focussing on growing and establishing a strong identity and footprint in every city they enter. Chai Point, which is also operationally profitable, has about 100 stores in eight cities and offers varieties of hot and cold chai with snacks. "We have a same store growth of 20% and our total growth is 100%,"says Amuleek Singh, co-founder, Chai Point, which also has an app to take delivery orders. About 60% of the company's revenue comes from retail stores, 30% from corporate service and 10% from the delivery business. Singh, who graduated from Harvard Business School, set up Chai Point in 2010 sensing potential in the huge number of tea drinkers in the country. The company has launched BoxC, an internet-enabled tea dispensing machine that uses natural tea leaves. "The end-consumer gets access to our brand of tea in all ways possible," says Singh. Recently, the startup raised $ 10 million from Eight Roads Ventures, DSG Partners and existing partner Saama Capital. For Suresh Radhakrishnan of Chai King, the business of tea is a numbers game. He's adopted a hybrid model with retail outlets, corporate clients and mobile kiosks. "With corporates, we see high volumes but thin margins. With retail, it is vice versa. This business is different because it cannot be driven by technology. Customer acquisition still involves traditional methods," he says. Ratan Tata-backed Teabox, which sells branded premium tea and accessories to the growing population of connoisseurs, uses customised software to map customers' tastes and habits. "Based on the answers to a set of questions, we send a sample of three teas to the customer, and then ship the one he or she chooses," says Kaushal Dugar, founder, Teabox. The startup has shipped close to 40 million cups of tea to 110 countries. Investor and entrepreneur Ganesh says beverage startups aren't the usual kind that attract venture capitalists. "They won't give you hockey stick growth because there is city sensitivity," he says, explaining that the coffee consumed in Karnataka is different from the way Tamil Nadu drinks it, just as Kochi enjoys its tea differently from New Delhi. "You need a strategy for each city and cannot go to 10 cities with a $100 million cheque.".