How Chai Point is leading the $10 Billion Indian Tea Market

How about diving a bit into History

The demand for Chai or Tea is crazy high in India. Have you ever wondered why and when did this affinity towards Tea begun? History suggests that we were brewing tea since 750 BCE. Then, Tea was a special beverage meant only for special occasions. Only after the British colonized India, we started consuming tea on a regular basis. The British promoted large plantations of Tea for them to export it to the world. When the demand for tea overseas, they sold it to the locals at a discounted rate. And that’s how Tea caught on to our everyday lives.

Tea or Chai is an integral part of our lives. Chai stalls are everywhere. Tea stalls is the spot where people get together, meet each other, discuss ideas, politics and have fun. This Indian Chai market is really huge, it is estimated to be around $10 Billion. Tata Group, one of the big players in the country tried venturing into the Chai Industry a decade back but they were unsuccessful. Surprisingly after that, people started moving towards Coffee instead. Several coffee chains such as Cafe Coffee Day, Barista, etc started to boom. Interestingly, a survey on reddit during 2012 states that 89% percent of Indians prefer Tea over Coffee (Reference). With the demand for Tea still intact, it served as a market ready to be capitalized by innovative companies. Not too long after, new players started entering the Chai Market. Young minds with innovative approaches and unique strategies stepped into the game.

ChaiPoint

ChaiPoint is one of the fore-runners in the Indian Chai Market Scene with clever strategies and innovations. I recently stayed at Bangalore for a week-long program called OutOfBox organized at NASSCOM for StartUps (NASSCOM). There I came across ChaiPoint. The Outlet looked really welcoming and was pristine, I didn’t miss the chance to have a good cup of Chai.

Previously in the program, I interacted with Mr.Vijetha Sastry and had the chance to be mentored about startups and career. He suggested me to do some case studies on Startups, understand their business and how things work to get a better idea of the Startup scene. He suggested that it might also give a competitive edge over others in the league. All these thoughts popped up, and in no time I made a decision to do a case study on ChaiPoint!

which I did, and that’s what you are reading it right now.

Here’s my observation, Chai Point is very similar to other Tea Stalls, they sell Tea. They did one different thing, they built a brand. Present youngsters are more attracted towards Branded items, and they are capitalizing well on it. ChaiPoint isn’t a company which makes a lot of experiments with Chai and come up with new inventions. They sell what they can serve better, but that doesnt mean they lack innovation. They innovate in branding and packaging. They have very appealing and attractive designs. The heat retaining flask is one of the most interesting innovations by ChaiPoint, they are made out of Cardboard like material. The Flask can retain the heat for up to an hour. I was curious, how could a cardbord carton store heat for an hour? So I researched a little bit, this idea is inspired from a Pharmaceutical industry application, where the Blood Plasma is stored in a similar material which can retain heat for a certain period of time.

Src: JustDial

Basically, Chai Point is a very organized Chai Seller. They have more than 100 outlets at 8 cities and employes more than 600 employees. They have an amazing technology experts to build solutions to make management and organizing easy and efficient. They built their own Cloud based Software Platform called Shark. The Shark integrates every stakeholders and activities of ChatPoint starting form Point of Sales, Supply Chain, Employee management, Delivery System to Auditing. They also provide eWallet service to their customers. They have a mobile application, through which the customers can order Chai!

Strategies of ChaiPoint

ChaiPoint have devised some clear set of strategies to stay ahead in the competition. I’m listing out some of them which I could observe

1. Very Limited Varieties of Chai: They only have 4 core varieties of Chai.
2. The location of the Outlet: The real estate is located at the anchor points such as School,College Joints or Corporate Parks.
3. ChaiPoint at Work: Chai at work is the main business of Chai Point. They serve Chai to corporates and other medium sized companies. They serve by either having a small stores within the office, or heat-retaining disposable flasks or through large dispensers.
4. Standing Table: They know most of their customers are from corporate background, and they do not have more time to spend. So, all the ChaiPoint outlets have Standing Tables and no chairs where they can have a quick chat, while they brew the Chai quickly.
5. Understand demand: As all the transactions are cloud based, they do run data analysis and predict the future demand to provide better services to the customers. They also use analysis to monitor real time performance of each outlets.
6. Consistancy of Chai: This is the major thing that differentiates ChaiPoint from other competitors. The SupplyChain team has full control over the raw materials supplied to each outlets, and they seriously consider the consistency of the Chai’s across every outlets.

Innovations:

Innovation should be at the heart of a company, and ChaiPoint is no exception to it. They are more towards clean and sustainable development.

1. They modified their dispensers to consume less electricity, and be energy efficient. This can save a lot of money at for the companies where these are installed in.
2. Heat Retaining Flask and Chai Cups.(previously explained)
3. Shark — A Cloud based Software Platform(previously explained)
4. Baggase Packaging: Baggase is the fibrous matter that remains after sugarcane stalks are crushed to extract their juice. This is completely bio-degradable.
5. boxC.in — an IoT based Chai and Coffee Dispenser. They provide insights, and transparency.
6. They have 80 Electric scooters, they deliver the Chai for the corporates or companies through these clean energy vehicle.

Competitions:

Whenever a Case Study is done on a company, we should also understand the competitors, and their performance.

Chaayos, Infinitea and Chaipatty are the direct competitors of ChaiPoint.

Chaayos, is created to be the Starbucks in India for Chai. They recently raised money from their investors, immediately after ChaiPoint raised $10 Million. Chaayos and ChaiPoint are now facing head to head in the Chai market competition. Chaayos provides lots of variety to customers. They have 12 basic ingredients, and the customers can customize their chai by using different combinations of these in thier chai. Their slogan itself says, Experimenting with Chai. One of their best performing outlets earned over INR 1 Crore as annual revenue. They are now experimenting with their business operations, by having an outlet open 24x7 at Gurgaun. The outlet is now recieving good response from the customers. One of the biggest challenge which they are facing is to maintain the consistency of chai. The taste of the Chai varies from outlet to outlet, as they are brewed by different Chai-Masters. They are figuring out a way to solve this problem.

Infinitea is a first of a kind tea room set up in 2003 under a unique retail-restaurant concept with the objective of introducing people to the best of teas and its culture. Infinitea has plush surroundings, and they target people who are willing to afford more money.

Chaipatty is also a direct competitor of ChaiPoint, where they have pricing strategy similar to Chaayos and ChaiPoint. Unlike Chaayos and ChaiPoint, their focus is not on selling Chai but on events such as salsa, photography and art sales in their stores. They are just 3 outlets of Chaipatty at Bangalore, and they are in no hurry to expand faster.

I have recently found an article stating that Tata is trying to reventure into the Chai Marketspace. Read more about it here

This article is a Case study written from the author’s perspective. People are free to have their own views and we respect their stand. Feel free to comment your views in the comments section.