Daybreak - Can Zepto’s 10-minute coffee dodge the fate of Starbucks and CCD?

Episode Date: August 3, 2025

India’s coffee scene looks like it is booming with new cafes, trendy menus, and big international names. But the truth behind is that almost no one is making money.And then came along Zepto Cafe, the 10-minute coffee delivery, that wanted to change everything. In early 2025, it was clocking 100,000 daily orders and a $100 million run rate. But just months later dozens of its locations shut down.Why did Zepto, with its speed, scale, and infrastructure, end up like every other coffee brand in India? It all boils down to brutal economics.But if Zepto couldn’t make coffee profitable in India, can anyone?Tune inDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

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In India, coffee has a strange history. It is everywhere on menus, on Instagram photos, on takeaway cups, but there is one thing that it has still not managed to crack. Profits. From Cafe Coffee Day to Starbucks to all these artisanal brands like Blue Tokai, the pattern is the same. There are big launches, but there are also big losses and eventually big closures. Now, Zetto Cafe thought that it could be different because it had something that no other coffee

business had, which is a built-in delivery network. There are hundreds of dark stores. There is a reputation that it has built for itself for speed. And of course, the promise of delivering coffee in 10 minutes. So earlier this year, Zepto Cafe was looking unstoppable. They recorded over 100,000 daily orders in February and a hundred million dollars gross merchandise value run rate. So the CEO was predicting a massive coffee business by the end of this year. But by July, which is last month, the shine started to wear off.

Zepto quietly shut down cafe services in dozens of stores. According to insiders, it is close to 100. The coffee machines meant to change the game are sitting idle. and the 10-minute caffeine dream is fizzling out. Why? This is not just about competition, or even coffee culture for that matter. It came down to something far more brutal, which is the economics of selling coffee in India.

Because here's the thing. India may be one of the largest coffee producers in the world, but people here barely drink it. Per person is just 70 grams a year, while the global average is above 1.3,000. So if Zepto, with its infrastructure and speed and scale, could not make coffee work, can anyone do it? Welcome to Daybreak, a business podcast from the Ken.

I'm your host Nidha Sharma and I don't chase the news cycle. Instead, every day of the week, my colleague Rahil Filippos and I will come to you with one business story that is worth understanding and worth your time. Today is Monday, the 4th of August. The idea of Zepto Cafe began by noticing this. gap in the market. Zumato and Swiggy were taking 30 minutes to an hour to deliver coffee. But cravings are instant, so why not deliver in 10 minutes? Zepto already had hundreds of dark stores for grocery delivery. So the idea of a cafe simply just fit in.

Customer could order milk and bread and a fresh coffee in the same cart. So they started with a tight coffee and snacks menu and then they priced it to undercut rivals. For example, a 500-emort of Vietnamese iced coffee cost 189 at Zepto Cafe, but Blue Tokai was charging $295 for 300m. So the costs were kept deliberately low. Milk, beans and other ingredients came in under $100 per cup. That meant 50 to 60% of margins, at least on paper. They sourced their beans from Bayer's coffee, which is a subsidiary of Ganesh foods. Zepto chose not to go for the premium route, because premium coffee beans in it,

India can go up to anywhere between 2 to 3,000 rupees per kilo. Instead, it went for low premium beans which cost up to 1,000 rupees per kilo. Now, just to give you a better sense, by early 2025, we had seen global coffee prices hit nearly $4.5 per pound before dropping to $3. Also, for equipment, Zepto chose semi-automatic coffee machines, which meant more work for baristas, but also fewer breakdowns than fully automatic ones. In a way, it comes as no surprise that young professionals really liked this model because they were not looking for cafe ambiance, just decent coffee at a lower price. So, orders grew from 30,000 a day to over 100,000 by February 2025.

But then came the pivot. Zepto Cafe's menu exploded from coffee and snacks to now biryani, pizza and frozen meals. Stores naturally needed bigger kitchens, they needed heating equipment, storage, and also staffing jumped from a few baristas to eight-person shifts. At its peak, over 5,000 employees were working for Zepto Cafe across 700 locations. So it was the complexity that kind of wrecked the efficiency. Zepto had around 180 stockkeeping units. Just for comparison, most successful quick service chains operate with 30 to 40 only. Now, without discounts, daily orders slowly started falling to 50,000 to 60,000. These stores started getting under 100 orders a day, which means at an average order

value of 150 rupees, that's just 15,000 rupees daily, and that is far below the revenue of, say, for example, a Starbucks outlet. By the financial year 2024, cafe revenue was only 2 to 3% of Zepto's total over 4,000 cro. revenue. So the shutdown began in July. For more on this, stay tuned. Zepto's story is a part of a much bigger pattern. For example, we know how Cafe Coffee Day introduced Cafe Culture to India 30 years ago. Then came Starbucks, then came Blue Tokai, Third Wave and dozens more. The barrier to entry was quite low, but staying profitable was the hard part. Post-COVID, cafe visits rose to 30 to 40 percent, and younger professionals under 35 started drinking more coffee.

But the scale is still tiny compared to tea, which is 620 grams per person versus coffee is 70 grams. And the main killer is rent. Starbucks, for example, spends as much as $25 lakh rupees a month for prime Mumbai spots, which is 15 to 20% of the cafe revenue. Blue Tokai spends about 15%. Now, Zepto's dark stores were cheaper. 20 to 30,000 rupees per month. But coffee sales could not generate enough volume to cover the costs.

And then there is also the setup. A 1,000 square feet blue tokai costs 85 lakh to 1 croix to open. Espresso machine themselves run up to 2.5 to 5 lakh rupees. Even a small dark store cafe costs as much as 30 lakh rupees to set up. And culturally, premium coffee pricing is still a stretch. Filter coffee in South India costs 15 to 30 rupees only. And that, That makes it hard for many customers to justify 200 rupees a cup. So the result was losses across the board. Arbox India's losses went up five times to 136 crores in two years. Third Wave coffee's losses doubled to 110 crores in the financial year 2024.

Zepto tried to hack this with bigger portions, which is 400 to 500 mL cups instead of 200 200 ml. This really helped Zepto Cafe. But it wasn't enough. because the big structural problems state. Low per capita consumption, price sensitivity and high fixed costs. So, even quick commerce, which looked like a saviour, could not change the math. Blue Tokai's brief tie-up with Swiggy Snack, for example, failed because of the unit economics not working.

And that is the real lesson from Zeptocafe. Even with funding, infrastructure and speed, India's coffee business is still a tough brew. Daybreak is produced from the newsroom of. of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Ken website.

Today's episode was hosted by Snittha Sharma and edited by Rajiv Siyah.