After the ecommerce boom, it’s the IoT and AI that have rocked the startup ecosystem in India. However, not many entrepreneurs have thought of blending the two in a cup of tea or coffee!
Amuleek Singh Bijral, Founder and CEO of Chai Point which runs retail stores and a delivery chain network under Mountain Trail Foods Pvt Ltd, decided to make technologies like IoT and AI an inherent part of his startup way back in 2011-2012.
“I say, let the world go to hell, but I should always have my tea.” ~ Fyodor Dostoyevsky
India is the seventh largest coffee and the second largest tea producer in the world. Interestingly, 83% of Indians consume tea instead of coffee. For the remaining 17% Indians, there are a number of coffee retail outlets and restaurant chains such as Cafe Coffee Day, Barista, Costa Coffee, Starbucks, Cafe Mocha and Georgia. However, there was hardly any tea-specific restaurant and retail chain for the rest of the 83% consumers until 2012.
By the time 2012 came, besides Chai Point which was founded in 2010 as a small retail pilot project in Bengaluru, Cafe Coffee Day had successfully hit the IPO and many entrepreneurs started giving a serious thought to creating a ‘Cafe Coffee Day’ like retail store for the Indian tea segment too.
In 2012, Kaushal Dugar started Teabox in Darjeeling; Raghav Verma and Nitin Saluja set up Chaayos in Gurugram, Parvez Gupta in Siliguri launched Udyan tea. While Teabox is backed by RNT Associates, Chaayos has successfully raised funding from Tiger Global.
In the following years, came Tpot Cafe, Tea Trails and Chai Thela, and more. However, Chai Point with its unique technology blend remained a prominent player in the market.
A Harvard alumnus, a former country manager in the information and security company RSA and a former Microsoft executive, Amuleek realised way back in 2010 that consumer brands could be hugely important in the Indian market in the near future.
The notion of how technology can help shape the brand excited us
After going through all the large category solutions, it was the unavailability of a desi, high tech tea retail chain in India that stuck in Amuleek’s mind for its further perusal. He adds, “Chai is consumed in India almost 15 times more than coffee. Now, it’s almost a $30 Bn market, which is poised to hit the $60 Bn mark by 2020.”
It was a treasure trove of delights for Amuleek to explore the market opportunities over tea. Eventually, he realised that the tea market is largely unaddressed and that there were the same old brands available across the market at that point in time.
He says, “Nobody was interested in the standardisation of tea, unlike coffee. By the time we consume tea, the freshness has already gone as most of the tea packets that consumers buy are usually around nine-month-old.”
On the contrary, in case of coffee, there are standard infographics addressing the combination of milk and coffee that forms latte, cappuccino, etc. On this obvious but rather bias distinction, Amuleek says, “In case of tea, there is no standardisation available. Everyone makes tea, as per his or her own taste and belief. Also, no tea brands were bothered to educate the customer at the last mile.”
And this is where Amuleek saw a big opportunity. For him, the logical step was to start with retail stores, which he began with offering fresh and proper packaging. Fast forward to 2018, the startup has 91 stores, which will hit a century in the next few months.
With 90+ stores, BoxC and packaged tea blends, Chai Point is currently the largest hot delivery beverage chain in the country. Another tea cafe retail, Chaayos currently has 50+ stores.
Luckily, for Amuleek, funding wasn’t an issue. “By the time we launched, stores were having big revival. While Dominos had already gone for IPO, CCD was also about to go for an IPO. This boosted our confidence as well as that of the investors in the business. Then, as we were demonstrating the technology behind the entire chain, Series A happened.”
Having closed its Series B funding in 2015 and a total fundraise of $14 Mn, Amuleek expects to close Series C funding this year.
From Tea Stores To Founding A Tea Ecosystem
“As we started with the stores, we soon realised how quickly customers’ lifestyle was changing. We had to evolve further,” quips Amuleek convincingly.
Chai Point did a survey among 2,000 customers, and interestingly, it revealed that over 55% of the customers consumed tea in offices, while roughly 72% consumed tea outside the home. Collectively, over 30% of the consumers had tea four times a day.
“We realised that we needed to cater to a larger segment. And, it is not just about selling tea blends and dispensers, but providing an end-to-end solution,” says Amuleek.
It is not just about selling tea blends and dispensers, but providing an end-to-end solution.
Looking at the wide variety of customers and their preferences, Chai Point has gradually added multiple channels to meet customer requirements since then.
- Stores: to cater to orders booked on Zomato, Swiggy and other food delivery platform as well as independent demands.
- Chai On Call (CoC): Customers can buy hot tea sachets directly from Chai Point website or app.
- BoxC: A tea and coffee dispensing machine integrated with IoT and AI to serve customers in their offices.
- CPG: Freshly packaged tea sachets for everyone.
BoxC And SHARK: Blending IoT And AI In Chai
While tea retail stores were already gaining some traction and there are a number of tea-blending machines available in the market, what made Chai Point team to come up its own blending machine?
Sandesh C, COO, Chai Point explains, “Most of the available tea or coffee dispensing machines found in offices are not IoT enabled. The machines don’t actually make the beverage, but simply mix water and milk. While it’s the user that uses tea bags, they end up sometimes using 2-3 bags for a single cup. This not only downplays the efficiency but also causes acidity.”
BoxC is an IoT-enabled automated tea and coffee dispenser for producing tea via tea leaves and not with tea bags and the tea tastes just like the tea prepared at home. It has two versions: one that is hardware automated and the other which is software automated.
BoxC: The Hardware
Chai Point has designed and developed two tea dispensing machines: V1 and V2. The company has partnered with a third company to manufacture these machines as per the requirements.
- The dispensing machine is capable of making masala tea, lemon, ginger and cardamom tea using tea leaves.
- V1 machines have higher throughput. To keep the form factor intact, instead of having separate water and milk tanks in the machine, the duo is connected through inlet pipes. Sugar is mixed outside, depending on the choice. The machine makes use of fresh milk.
- Unlike V1, V2 was developed last year by Chai Point and has got a large touchscreen powered with Android platform. This allows customisation and freedom to make tea as per the consumer’s choice.
- V2 machines also have facilities to brew filter coffee. The machine has been designed keeping the scant spaces of office pantries in mind. The machine has a smaller form factor that meets a number of requirements for tea, coffee and other hot milk and water-based beverages.
BoxC: The Software
- BoxC machine’s Internet connectivity, which is assured through a sim slot provided inside the machine.
- The touchscreen dashboard provides a number of details such as tea or coffee health, time to refill the inlets so that there is no need to open the container to see how much tea or coffee is left.
- It provides all the necessary information such as how many cups have been consumed since the last reset and it even allows users to alter the tea and milk volume and density per cup (even cup volume can be personalised) with an option to customise brewing temperature as well as time.
- The machine sends an update to the server every five minutes.
- But even if for some reason, it is unable to send the data to the server, it has got enough storage to maintain the entire record and send it later, once the connection is back.
“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 of time, AI provides details about consumer behaviour 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.”
The IoT aspect further helps the user to determine if there is any blockage in the machine. The machine has got sensors and in case of any blockage, it sends signals demanding maintenance requirements.
Sandesh says, “With V1, it was more about the challenge to get the hardware right. With V2, we infused the software with the hardware to make it work seamlessly.” “We don’t sell the machine. The machine is part and parcel of an annual contract that we offer. This is because we also want to ensure the right service such as the timely supply of inputs via Chai Point’s tea blends and maintenance of the dispensers around it,” informs Sandesh.
He further explained that the beauty of the machine lies in providing the utmost hygiene throughout the tea-making process. “The tea waste is disposed through the pipe and it doesn’t get collected in the machine. The machine has got auto-flush facilities where hot water flows across the machine and self-cleans it,” explains Sandesh.
We have already applied for a patent for the hardware as well as the software versions of BoxC
In the V2 machine, one can easily select the areas which they want to clean. Since the water and milk are fed through inlet pipes, there is no issue regarding capacity as such.
The size of the machine, thus, does not depend upon how many teacups one requires on a daily basis. The company has also taken care of small things in the design, such as adequate space for small as well as large cups.
“We have already applied for a patent for the hardware as well as the software versions of BoxC,” says Sudesh.
SHARK: The Operational Brain Behind BoxC And Chai Point
The entire data is stored in the cloud. Chai Point has developed an in-house SHARK platform on AWS which is the backbone of its entire operations. It collects and feeds the data to the app, website, etc. The platform has also been integrated with food delivery sites such as Zomato, Swiggy, etc.
SHARK takes care of all aspects of sales, delivery orders, IoT-enabled solutions for BoxC and products being sold on multiple channels. The platform is also helpful to integrate AI for the cost optimisation, efficient operation and smooth backend operation.
The machine is also connected to the phones of office boys through the app called ‘call of duty’. The machine automatically sends notifications regarding the type of tea or the quantity of tea and milk left for refilling. The machine tracks the records of every cup spending and updates the server memory. Hence, there is a complete transparency in terms of consumption.
Sandesh says, “The data also helps in the further customisation of flavours.”
SHARK automatically collates feedback from different sources which gets stored in an excel sheet which help the team to understand the market. Even if a small component of the machine is not live or functional, SHARK helps the maintenance team know that.
“Currently, the revenue model is distributed 60:40 between the stores and BoxC. However, BoxC is catching up,” Amuleek shared.
Chai Point: What Comes Next After Brewing Tea?
“There is a host of solutions such as serving breakfast along with Chai, adding ice tea facility to the dispensers, bringing wallet-based dispensers in the market and more like that on which we are working to integrate with our offerings,” says Amuleek.
For the startup, this is just the beginning. “We are excited by ice tea as another possible offering,” he adds. The company is currently working on the ice tea dispensing facility.
The startup is also working on a wallet-based dispensing machine which can be independently installed at airports, hospitals, malls and other public places. As per Amuleek, its prototype would be ready this year.
And that’s not enough! The Chai Point team is also working on machines of smaller form factor that could be independently installed at homes for personal uses. The prototype is expected to be ready within the next one year.
Besides deepening its presence in existing cities, some of the other cities that are very much on the company’s radar for expansion are Chennai, Ahmedabad and Kolkata.
At present, Chai Point has around 1 Mn priority loyalty-based customers. However, the total number of customers extends to 5 Mn.
When asked whether Chai Point is planning to follow a franchise Model, Amuleek averred, “In India, franchise paths can degrade the brand value. That’s why we haven’t adopted this model. As the environment is changing, so is our brand. It is extremely important to have the entire control in your hand rather than in franchises.”
The company has partnered with one tea estate in Nilgiri and four tea state estates in Assam for fresh deliveries of tea leaves. While CCD has already become a household name in the metros, Chai Point might have the potential to go beyond the metros, to penetrate the tea-buds in every house in the country.
Besides offering tea, Chai Point also intends to become a software company by offering independent SHARK solutions to smaller retail and restaurant chains across India.
Given that India is such a large and vast market, as far as tea consumption is concerned, a mere presence of few tea retail chains is not about competing with each other but encashing the untapped opportunity, especially since the penetration of organised tea retail chain stores is still very low in the country. The challenge for Chai Point is to meet the burgeoning demand, without compromising on quality and cost-effectiveness. How the upcoming IoT-enabled wallet-based dispensers meet the heat, Inc42 will continue to report from ground zero!