Chai Point is remaking its brand. Reason: Covid-19

For Amuleek Singh Bijral, the second wave of the pandemic was out of the blue.

“Frankly, it did catch us by surprise. We didn’t anticipate the wave. People were cautious but the intensity of the wave and the kind of hysteria it created among consumers was sort of unexpected,” the co-founder and chief executive of Chai Point tells Fortune India.

The grandiose plans of “serving a great cup of tea round the clock” suffered another blow.

By 2020-end, the tea cafe chain, operated by Mountain Trail Foods, was preparing to start a new life. The virus had left the entire food and beverage industry bleeding. The decade-old Chai Point, which reported nearly ₹190 crore in revenues in FY20, had taken a severe hit. The day-to-day operations of the company, which was working towards an Ebitda-positive quarter just before the pandemic hit the country, were nearly paralysed. But then, green shoots were sprouting up towards the end of the year: people had begun going back to work, meeting up friends and families, ordering home-delivery of food and beverages more frequently. The economic engine of the country was back on the rail. A semblance of calm had returned.

Chai Point was making a strong comeback in the country, predominantly a tea-drinking nation which boasts of having several marquee tea-brands. “On a like-to-like basis, our retail stores were close to 80%. Some of the stores in the large corporate parks were, of course, stuck. Our retail business was back. Our vending business was back by around 50%. Our delivery business had grown significantly. We were 120% of our pre-Covid-19 levels,” says Singh. It had pioneered concepts like IOT-enabled vending machines and facial recognition-led billing to cut down waiting time.

Then came the second wave.

The top management went into a huddle. It decided to build a package-product portfolio around Chai Point as a brand. The basic idea was to capitalise on the ongoing work-from-home trend kickstarted by the pandemic.

“We figured out that even though it is an omnichannel brand, with stores, delivery, and vending, there was one big bucket of omnichannel that was still open for us: that was to find a place in the kitchen cabinet of the customer,” says Singh.

Chai Point launched in March 2021 a series of what they claim are the best instant chai products anywhere in the world. The products included cardamom/ginger/masala chai. It plans to launch 15 more products fundamentally around the vision `chai made at home’ under the packaged product portfolio.

“We are launching 15 more products, out of which seven are getting launched by end-July and eight more in another two months. We are extending the instant chai range, with healthy ayurvedic herbs, and multi-grain organic cookies. We are also looking to launch some Indian snacks popular across the country that go with the chai experience. So, our packaged products portfolio will have about 30-odd products centred around chai and coffee,” says Singh.

In pandemic times, the packaged product portfolio is indeed a growth engine for Chai Point.

Today, the package business, non-existent before Covid-19, is growing at a rate of 30%-35% month-on-month.

“Some of the chai products were available as part of the retail experience as store merchandise. Covid taught us that we need to take the view away from a merchandise angle to a hardcore utility essential’s angle and make sure it is present inside the kitchen cabinet of the customer,” says Singh.

The company has also decided to aggressively ramp up its food and other beverage portfolio with products like Peppy Paranthas, Buddy Buns, and Enchante cold beverages. As the pandemic continued to force professionals to work from home, Chai Point saw a spike in tea orders, especially towards evenings. Snacks that go well with chai also saw a robust demand.

While fresh food and chai are delivered from the existing retail stores, packaged products are retailed across its website and major e-tailers such as Amazon, Flipkart, and Big Basket.

Since its beginning, the company knew well that a chai business will be successful if it is an omnichannel brand along with providing a customer experience. “We ventured into vending, delivery and now, packaging, because we firmly believe that as a brand, we have to provide the customer an arms-length opportunity to pick our products. So, if the customer is at home, how will he get his tea? If he is in the office, he can go to the pantry and get a quick cup of chai. And if he is in the boardroom, he can get his chai served. When walking around, one can step into a neighbourhood store and get chai,” says the co-promoter.

But the year 2020 has been pretty tough for Chai Point. The pandemic messed up its revenues badly. From ₹190 crore in FY20, revenues plunged to ₹70 crore in FY21. “This year we expect to show over 120% -150% year-on-year recovery but it depends on how the market recovers.”

Singh hopes to go past the revenue levels of FY20 in three years, by FY23.

“We have redesigned our corporate structure now to make it profitable at a much lower base. Our goal is to make the next round of fundraising our final round. We hope that it will take us through the goal post. We are working backwards to see the company go public and get listed in the next three to four years. We believe the company can reach a revenue base of close to ₹900-1,000 crore in four years,” says a confident Singh.

He is hesitant to project a firm scenario for the business revenues in the immediate future, especially for the store business which is dependent on walk-ins. “The delivery part of our business will grow 30-40% in FY22 over last year. We are looking at a 30% growth month-on-month in the packaged products business, but the base is small.”

Any plans for fresh fundraising and listing?

“We believe Q1 or Q2 of FY23 will be a good time for us to evaluate and raise some money when the markets have recovered. Also, investors would value us appropriately, then. We are looking at an Ebitda performance of anywhere between ₹125- ₹150 crore as a trigger point for a brand like ours to list. We reach that kind of a milestone at a revenue base of around ₹700- ₹750 crore,” says Singh. So far, the company raised around $33 million.

Pre-Covid, Chai Point had 169 stores. During the pandemic, it shut some, but also opened some new stores, keeping net count the same. Out of these, close to 100 are open now. Close to 65 are in airports or corporate parks that are inactive. Likewise, we have around 4,000 vending machines installed at healthcare companies, media companies, critical tech and pharma companies, and such. In March, 1,000 customer sites were open. Currently, only 350-400 sites are functional because of the lockdown restrictions. The company has around 1,200 people working with it, including the frontline employees.

“On the delivery part of the business, pre-Covid-19, we were doing delivery from 120 locations and now, 78 locations. But in revenue terms, our delivery business has grown 120%. The delivery volumes have grown per store basis. On the packaged products part, we have grown 10x in terms of sales over a year-ago, arguably on a small base. We are confident that the brand is getting more and more recall and expect to grow at a consistent rate of 30-40% for the next several quarters.”

For Chai Point, life revolves around tea. “We believe this powerful and large beverage never got the attention it deserved. Our brand exists because we wanted to organise the highly fragmented, low customer experience around chai into a tight branded experience,” says Singh.

Chai Point will continue to strive to give tea its right place among the white-collar crowd. “We want customers to have a world-class experience across any of our channels vis-à-vis any coffee brand like Starbucks. On delivery, walk-in, takeaway and vending, we want to make sure that the customer’s experience around our set of products, anchored around chai, is second to none. We look up to Starbucks as an inspiration for that, for sure. I don’t think there is any other brand that comes to our mind in terms of customer experience other than Starbucks. Despite being a 50-year-old entity, Starbucks is a young and aspirational brand,” he adds.