Daybreak - Chaayos is doing everything to be the anti-Starbucks

Episode Date: December 23, 2024

For most Indians, a cup of good chai is a comfort that’s accessible. Coffee chains, on the other hand, are mostly premium. And it all adds up when one considers the fact that Indians consume 20 cups of tea for every cup of coffee. But we live in a time when opulence and luxury makes us go google eyed. In the Indian consumer market, premiumisation is no longer a choice. Even chai cafes chains don’t really have an option but to take the premium path.But Chaayos, the largest tea cafe chain in India, has decided not to go where the wind blows. And Nitin Saluja, the 40-year-old founder of Chaayos, says that this decision is actually based on its customers.Over the last two years, nearly 200 of them have clearly indicated their unanimous opinion to the company: don’t become like Starbucks.Tune in.** This episode was first published on 18 July 2024Daybreak 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.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcast, you've probably heard me. My interruptions, my analogies and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the Sietamination. secret-source stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of

multi-camera shoots in professional studios, laborious editing and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. For most Indians, a good cup of chai is comfort. It is accessible, which is why it is hard to think of chai or tea as something that is

associated with luxury or something that is premium. Coffee, on the other hand, to quite an extent, can be like Starbucks, right? which also kind of explains why Indians consume 20 cups of tea for every one cup of coffee. But we live in a time when opulence and luxury make us all go googly-eyed. I may or may not be referencing a certain wedding that took place in Mumbai recently. So at a time like this, in the Indian consumer market, premiumization is no longer just a choice. Even tri-cafe chains don't really have an option but to take the premium

path. But the largest tea cafe chain in India has chosen not to go where the wind blows. And Nitin Saluja, the 40-year-old founder of Chayos, says that this decision is actually based on its customers. Over the last two years, nearly 200 of them have clearly indicated their unanimous opinion to the company. Do not become like Starbucks. Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Dharma. and I don't chase the new cycle. Instead, every day of the week, my colleague Rahal Philposa and I

will come to you with one business story that is worth understanding and worth your time. When Chayu started back in 2012, customer feedback was at the center of all its activities. But over time, with a million other things to worry about, it became kind of secondary. And then, in 2022, about a decade after its launch, Chaios managed to get $53 million in its sense.

CVC funding. But Saluja was still frustrated because the company had still not achieved profitability. It still hasn't, but it is closed, by the way. So in a meeting after the funding round, Saluja did something that left many surprised. At the time, Jaya had around 180 outlets across the country. Post-funding, the plan was to add another 150 outlets by March 2023. But Saluja halved that target. Even his colleagues were taken aback because his money was four times more than what it had received in the last funding round. People began doubting his intentions. But when my colleague Ronak Kumar Gunjan asked him about it, here is what Saluja told him. And I'm quoting, it was pure frustration that stemmed from the scenario where every few quarters you start thinking

that money in the bank will soon run out. And then you're back on that treadmill where you start doing growth-only activities to impress the next investor. We didn't want to lead that kind of life anymore. End quote. So in the months after the funding, Chaios became even more conscious. It targeted two more things. It reduced its marketing spends by 80% and also cut down its discounting by 50%. Saluja told us that the company is spending its lowest ever on marketing

and has gotten rid of all the frequent discounts that it used to offer until mid-2020. Another thing that Chaios did was to return to its customer insights. Instead of third party, Saluja actually hired five certified customer insight professionals to conduct surveys. As of now, they are coaching five other Chaios executives from across verticals like operations, training and new product development. The founders are also a part of this team.

Now, talking about Chios and customer insights, wait, I will tell you what. they learned from it in the next segment. Chayos asked a bunch of what-if questions to its 200 customers. And that made it take the road less taken. In the world of chai or tea cafes, I mean. It decided not to go premium. Because these insights helped it reach two key takeaways. One, in most cases, its customer base overlapped with that of fancy cafes.

And two, the purpose of the visit becomes the ultimate deciding factor for choosing one cafe over the other. For formal meetups, people like to choose cafes like Starbucks. But for casual conversations, they frequented Chaios. And that is because, as per Chio's user insights, customers felt more at ease at its outlets than they did at Porsche or Premium Cafes. According to Chios, the tea cafe's goal is not to be premium. Instead, it wants to be preferred as many times as possible.

which is why it focuses on keeping it simple and making small changes, if any, to keep customers comfortable. The idea is obviously to drive more footfall here. And that brings me to a fun fact that I had no clue about before doing this episode. In its early days, Chayos wanted to speed up table turnover. So it installed uncomfortable iron chairs which drove many customers away. And that is when it learned that in this business, Comfort is just as important as the offerings.

Anyway, now, because it has chosen not to go premium, Chaios has to make up for it with more footfall. Presently, an ideal Chaius customer visits its outlets three to four times in a month. Saluja wants to take this count to 10 in the next one year. But for this, Chios will have to compete with its coffee counterparts. And meanwhile, its direct competitors like Chai Point and others are going premium.

Also, another important thing to note here is that Chaios food is more popular than its actual chai. I mean, food at Chaios has more recall value. This is why exploring the B2B or business to business segment may help it. Chai Point is doing it. Chaios also wants to provide tea vending machines for corporates. Like Anurag Bhamiditapati, the co-founder of roast tea, a B2C tea cafe told us The whole existence and premise of a chai company is proven if it can solve the problem of a good cup of chai at the corporate workplace.

In fact, he went a step further and said that cafe should be the secondary focus for brand building. Maybe that is something that the Chaios' insights team should look at next. Daybreak is produced from the newsroom 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 Sniqdha Sharma and edited by Rajiv Siyah.