Getting the right blend: Chaayos seeks to scale up by McDonaldinising tea

The tea chain follows a simple rule of thumb - customise if you want to rule

Last week’s trending hashtag #MyRahulBose- Moment — which documented Indians en masse sharing their experiences of paying extra for stuff, mainly food — reaffirmed how price sensitive this market is. Having tasted initial success in selling the costlier, glammed up avatar of the ubiquitous chai and looking to scale up now, tea café chain Chaayos has its work cut out.

The Tiger Global Management-backed chain is on the cusp of entering a new territory in Bengaluru and is aiming to increase its current store count of 60 five-fold over the next five years. To scale up, the company is banking on a strategy of building models which can work across various kinds of real estate, using technology-enabled assessment to identify newer locations and offering customised ambience and timing, according to consumer profile and preference.

“We want to ensure that wherever we are present and whichever time of the day it is, the customer experience is right whether it is at an airport or a mall or the high-street. Around 90 per cent of the customers (currently in Delhi-NCR, Mumbai and Chandigarh) are registered under the loyalty programme and knowing their preferences allows us to serve them at all touchpoints well,” says Raghav Verma, co-founder, Chaayos.

While they have gone for large stores at strategic locations, Chaayos has kept the menus consistent all through and plan to do so even when it enters a southern territory, Bengaluru, by the end of this quarter. “The customisation in tea is at a level that it covers all the possible permutations and combinations and the taste references that the people in the country. For food, we have tried to pick up the comfort food and street food from all over India and give it a modern format and platform,” says Verma.

That has kept the menu steady with occasional additions. For example, this monsoon, the company has added a new brew aptly titled Barsaat waali chai and Mac and Cheese pasta to the mix, says Ajit Kumar Shrivasatva, store manager of an outlet in Noida’s Logix Mall, on the outskirts of Delhi. He says while light snacks or accompaniments such as bun maska or samosa matar chat or poha comprise the bulk, the meals category comprising parathas or items like pao bhaji make up 4-5 per cent of the total daily sales. He credits the loyalty programmes, which offer incentives on repeat purchases, in ensuring higher customer retention.

The same-store sales growth rate for last year was estimated to be 30 per cent; the one spearheaded by Shrivastava is clocking in 25 currently. In nearby Mall of India, which also has a Chai Point outlet, Chaayos had to open a second outlet to manage peak hour (4-7 pm) rush. “We assess the competition, the possible footfall and revenue using the primary data, say how many households are there, some kind of primary income data, competition metrics which helps us generate a score for each shortlisted location basis which we prioritise the revenue it can generate and decide the maximum rent that we can pay,” says Verma.

Siddharth Shekhar Singh, an associate professor of marketing at the Indian School of Business (ISB), Hyderabad, attributes the opportunity primarily to the gap that outlets like Chaayos have filled in a tea loving country like India and feels players who fill the gap can only grow. “This was an unmet need — where the middle class could sip tea in a Starbucks-like environment but the menu is completely Indianised — and it struck a chord,” he says.

Verma adds that ambience and convenience are vital to their strategy and it’s also where the localisation element kicks in. “For example, our outlet in Connaught Place in Delhi has a theme which is very Indian and is high on colour and energy; or take the ones in Delhi Aerocity or the Mumbai International Airport have been made with travel and chai themes in mind.”

Similarly, he adds, that despite the usual timings of 7 am to 11 pm, seven outlets in the Delhi-NCR region run round the clock. “We have one in Central Plaza in Gurugram where you will see the place packed to capacity on Friday night running up to the early hours of Saturday. These are people who are either working in the nearby areas in the late shift or coming back from a party and looking for a place to hang out — we have been able to customise our outlet as a modern chai adda that appeals to people.”

According to National Restaurant Association of India’s India Food Services Report 2019, the food service sector was pegged at Rs 4.24 trillion in 2018-19 and had grown at a rate of 11 per cent in the three preceding years. The café segment under this had a market size of Rs 9,370 crore and the average spend per person was Rs 75-400 per visit. Most of the items on Chaayos’ menu fall under the price range and thus offer decent value for money, believe experts.

“Chai Point has a simple strategy where they offer good chai at a good price and are not very experimental with food. Chaayos, on the other hand, has gone on to adapt larger stores, more well-trained staff and has a more creative menu. But scalability can become an issue because the margins can shrink due to more trained staff and the complexities at the kitchen level especially when the market remains constant,” says Harminder Sahni, founder and managing director of Wazir Advisors.

What works for Chaayos is it is highly functional, middle-of-the-rung store which offers you decent food without the prices being too high but there are other chains who are experimenting in terms of food like offering non-veg which may also be a draw for some, says N Chandramouli, CEO, TRA.

ISB’s Singh also talks about the future roadmap: “For now, brands can even copy each other and grow but as consolidation happens, they will have to look for a distinct identity. Some may go for a specialisation in south Indian cuisine while some may go for a fusion but somehow they will have to provide extra value to the targeted segment.”

McDonaldinising tea

Formula for success

• Standard menu
• Timings vary according to location
• Research and continuous product development
• Focus on customers dining in rather than order-in