New cafés hawk high-end chai
Relatively well-off Indians now have more options to enjoy their favourite steeped beverage in a relaxed environment.
That sweet and milky tea concoction called chai is getting an image makeover in India. Driving the change is the other beverage: coffee.
Rising incomes and demand for a refined experience transcending chai are spawning posh tea lounges in the nation’s biggest cities, a transformation mirroring 15 years of coffee revolution that brought Starbucks in 2012. Entrepreneurs are pooling their savings to set up these tea houses, inspired by the $175-million (U.S.) initial public offering planned by the parent of Cafe Coffee Day, a chain backed by KKR & Co.
Tea is a bigger opportunity than coffee because consumption of the leaf-based beverage beats its rival 30 cups to one, says Nitin Saluja, who runs 12 tea outlets under the name “Chaayos” in and around New Delhi. Euromonitor International data show per capita spending on tea in the second-most populous country was $1.70 a year in 2014, versus $18 in the U.K., showing potential for upselling a premium version of the drink.
“If at all any company becomes the Starbucks of India one day, it will be a chai company,” said Saluja, 32, who started his chain in 2012 after quitting a management consultancy job in the U.S. “The reason why Starbucks became so huge in the U.S. is that they started serving a beverage that was already popular in America, but in a better way. . . That is the opportunity we are tapping into.”
The ventures are seeking to elevate chai’s price while introducing middle-class Indians to finer teas in a more relaxed environment: a cup of Japanese Sencha, or Mumbai’s favourite “cutting chai,” which is otherwise drunk during a rushed break from work amid the hustle and bustle of crowded sidewalks.
Even though India is the world’s biggest consumer of tea after China because of sheer population, the annual per capita consumption is among the lowest. The state-run Tea Board of India’s figure is about 800 grams (1.8 pounds) compared with two kilograms in the U.K. and one kilogram in neighbouring Sri Lanka.
“People’s awareness has increased and tea intake has been steadily growing in India,” said retail consultant Ruchi Sally. “Simply opening a place for people to hang out won’t work, because you already have Starbucks and other coffee shops. You need to have a good value proposition.”
Saluja hit upon the idea of setting up Chaayos about three years ago when his craving for a decent cup of Indian chai after breakfast in Houston went unsatisfied. He quit his job and started off with his total savings of two million rupees ($30,400), he says. He has plans for 50 stores by May 2016. Tea Trails is another chain that started off in December 2013 with eight operational stores, two of them franchises. Uday Mathur, a co-founder and director of Zone8 Tea World Pvt., the company that runs Tea Trails, says he has plans to scale that up to 500 stores in about four years.
“We will still be only scratching the surface at that point,” said Mathur.