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India’s residents are never far from a cup of tea but tea shops with large selections common to the West are rare.
Chaayos (chai house) is a small Gurgaon-based café chain with big plans. The firm operates eight cafes near New Delhi where it intends to add 15 to 17 stores as well as 25 new locations in Bangalore, Mumbai and Pune during the next 18 months.
“Despite the fact that we are a tea drinking nation, I realized that there were hardly any tea chains in the country. All we had were coffee chains,” co-founder Nitin Saluja told Live Mint. “We want to transform and own the chai drinking experience on all occasions in a customer’s lifetime,” Saluja added. Teas are brewed fresh and often customized in thousands of combinations. There are 25 chai selections including ginger chai, Paani Kum Chai along with regional favorites like Kashmiri Kahwa.
The $6 million expansion includes plans to develop a mobile order application that will extend its current delivery options. Saluja, a graduate of the Indian Institute of Technology (IIT)-Mumbai and IIT-Delhi graduate Raghav Verma launched the venture in November 2012.
The capital requirements for launching a full-service café in India are quite different than in the West. Shops can be built out for INRs150,000 ($1,800) which gives an idea of how far $6 million can go. The company was funded by angel investor Zishaan Hayath at Powai Lake Ventures in 2014 which provided $325,000 in startup expenses.
Saluja said the company earns 45% of its revenue from food sales and is operating profitably at the store level with 250 walk-ins per day per store. Shipments of signature blends like Tulsi Adrak and Masala Chai average 1,500 boxes a month. Gross margins can reach 70%, he said. The company expects to gross about $160,000 during the current fiscal year.
Right now the company is making 100 deliveries a day with delivery company Grofers which offers “chai on demand” services. Saluja also hopes to sell on Amazon.in and Snapdeal as well as online grocer Bigbasket.
India’s office of consumer surveys (NSSO) reported a median increase of 44% in consumption of leaf tea for the top 19 states including Karnataka, Tamil Nadu, Haryana and Kerala during the period 2004-05 to 2011-12. Coffee consumption increased 31% during the same period according to NSSO which found that states with the highest per capital coffee consumption, such as Kerala, also reported the highest per capita tea consumption.
Café Coffee Day, India’s largest coffee chain, also sells tea as does Starbucks and British-based Costa Coffee.