Tech-savvy investors are fueling retail innovation in tea.
A case in point is India’s Chai Point, a tea retail chain with deep roots in technology that is experimenting with customization at scale.
The company, founded in 2010, now sells 300,000 cups of tea daily at more than 100 outlets, hundreds of offices, and from BoxC.in vending machines. Chai on Call has become a popular 30-minute delivery service accounting for 20 percent of sales and the company’s loyalty program was recently upgraded to identify one million members on sight.
In April Chai Point raised $20 million from investors in a third funding round that will likely lead to profitability. The company operates in eight cities and generated $8.2 million in 2017. The firm is valued at $30 million.
Unlike coffee, which is brewed to standard recipes and customized with additions like milk, sweeteners, and flavoring, “everyone makes tea, as per his or her own taste and belief,” says Chai Point co-founder and CEO Amuleek Singh Biral. The former Microsoft executive and Harvard alumnus reasoned that with the internet of things (IoT), variety and convenience could be engineered into loose leaf brewers enabling infinite customization at scale. He also demonstrated that applying artificial intelligence to recognize loyalty program customers at the counter would be quicker and less awkward than asking for their phone numbers.
Approximately 72 percent of the tea served in India is consumed outside the home with 55 percent of that in offices. Biral studied the tea-drinking habits of Indian office workers to discover 30 percent drink tea four times a day. Chai on Call flasks, delivered in 30 minutes, are now common in South India offices. Chai Point’s BoxC tea and coffee dispensing machines are installed in 2,000 locations. Customers using a touch screen can vary volume, the quantity of milk and sweetener. Cloud-based software remembers their preferences.
“We have blended IoT and AI in the machine. While IoT helps us and the client to know the exact number of cups consumed over a given period, AI provides details about consumer behavior i.e. which tea – ginger, masala, green or black tea – consumers prefer to consume. This, in turn, helps us keep our next set of fresh refills ready for the machines. This is a unique way to forecast the demand,” according to the company.
Brewers dispense masala, lemon, ginger and cardamom chai blends made with fresh milk. BoxC.in equipment at offices and in tech parks generated 40 percent of the company’s revenue last year, mainly from white-collar workers. Sales from smart vending machines that retain the preferences of customers are growing at 100 percent per year.
The BoxC equipment is not for sale, it is a service available with a one-year contract. Chai Point services the equipment, restocks water, sweetener, and milk, and removes waste leaves. The operating software is cloud-based and alerts the service team of malfunctions and before stocks are depleted.
Investing in multi-channel retail is costly due to heavy investment in developing a supply chain from scratch and equipping its venture with the latest in technology.
“Losses for us have been a huge function of investments across all our channels. In 2018, we are confident of profitability and are solidly on a path of rapidly decreasing losses,” Biral wrote in VCCircle.
Currently only hot tea is on offer, but Biral is developing iced tea dispensers. He is also marketing the SHARK software used to collect data from customer orders via app and website. The result is cost optimization, efficient operation and equipment maintenance.