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Chaayos plans to expand tea range, open more stores in India

LiveMint logoLiveMint 20-08-2017 Soumya Gupta

Mumbai: Tea cafe chain Chaayos is planning to expand its range of tea-based packaged consumer goods and open more stores, a top company executive said. Chaayos sells its products at its stores as well as online.

Chaayos wants to be deeply penetrated into customers’ tea habits, co-founder and chief executive officer Nitin Saluja, said in a phone interview.

“Right now, you can get chai delivered to your home, and when you want to make chai for yourself at home, we have adrak-tulsi chai, chai masalas, and ready to drink chai mixes,” Saluja said.

The Tiger Global Management LLC-backed company is planning to introduce new products to add to these, by November. “We are launching Chai Pattis to help our patrons enjoy top selling Chaayos Chai at the comfort of their homes,” Saluja said. “These special blends will ease the process of making a cup of chai. Each blend will be full of myriad spices and herbs,” he said.

Chaayos, which has opened 30 stores since inception in 2012, opened 15 more during this financial year, and plans to add 25 more during the rest of the year, Saluja added. The focus will be on Mumbai, Delhi and Chandigarh for now. “Our business works best in clusters,” he said. Chaayos began selling packaged tea leaves, along with tea masalas and premixes around a year and half ago, through its cafes as well as on Amazon India.

“This business is seeing a very high repeat rate, upward of 50% month on month, higher than our café repeat rate (which is at 42% month on month,” Saluja said. Repeat rate is the percentage of customers in a time period that return to a business or to buy a product.

“In our cafes, there are instances of customers walking in just to buy those chai packs and walk out,” Saluja said, adding such a response helped him zero in on this business segment for growth.

Chaayos sources its teas from plantations in Assam and Darjeeling, and then blends them in-house, Saluja said.

Chaayos also plans to sell its packaged goods in organized retail stores like supermarkets“soon”, Saluja said, without specifying a timeline.

Since its launch, packaged products have grown to contribute 5% to Chaayos’ total revenue, Saluja said, without going into the company’s financials. Chaayos had sales of Rs10.5 crore in 2015-16, according to data from the Registrar of Companies.

The café concept in India was pioneered by Café Coffee Day, a publicly traded company that now runs 1,694 cafes. Soon after, Starbucks carried forward the demand for cafes, run as a joint venture between The Starbucks Coffee Co. and Tata Global Beverages Ltd.

Cafes/bars as a market grew 11% year on-year in calendar year 2016, as per data from consumer research firm Euromonitor. “This growth was driven by the increased number of consumers using cafés/bars, both for work meetings, quick lunches and in general venues for social gatherings,” the report said, adding that Coffee Day Enterprises Ltd (the parent company of Café Coffee Day) was the market leader, with 1% share of this combined market by value, as defined by Euromonitor.

Cafes and bars are expected to grow 5% CAGR (compounded annual growth rate) in 2017, Euromonitor said.

“In India, tea consumption is seven times more than coffee, and people consume tea in every place—at home, on the street, and in the office,” said Harminder Sahni, founder and managing director of retail advisory firm Wazir Advisors.

“Cafes like Chai Point and Chaayos are trying to capture all these spaces. I have believed in the tea market for a long time, and companies like these will go far bigger than the likes of Café Coffee Day. Indian consumers don’t need to be educated on tea, as they did with coffee.”

But tackling the packaged tea market may be tricky for cafés that deal in tea, as they may have to compete with established brands. Hindustan Unilever Ltd, India’s largest packaged goods firm, leads the market for branded packaged tea leaves, with a 32% share in 2015, as per data from Euromonitor. Its leading brands are Brooke Bond and Lipton.

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