Daybreak - Wind's blowing towards all things luxe in India. But Chaayos isn't going there

Episode Date: July 17, 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.Daybreak 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.P.S. – Check out the first episode of Two by Two, where the speakers discuss the rivalry between Flipkart and Phonepe, on Spotify, Apple or YouTube!

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, 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 Ramon 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 secret sauce 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 Podcasts 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 Nathan Saluja, the 40-year-old founder of Chaios, 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 Dha Sharma, and I Don't Chase the New Cycle. Instead, every day of the week, my colleague Rahal Philpoles and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 18th of July.

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 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, Chaiu 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 Rona 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 decision. 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 part of this team. Now, talking about Chaios and customer insights, wait, I will tell you what they learned from it in the next segment.

I'm excited to be back in the studio. Yeah, I'm excited too, but actually kind of nervous. Okay, fine, let's do it. Hi, I'm Rohin Dharma Kumar and I'm here with my colleague and co-host Praveen Gopal Krishna. Hello, hello, hello. And we're the co-hosts of a brand new, weekly business podcast from the Ken called

2 by 2. Yep, like a 2 by 2 matrix. Totally unrelated but we are also both MBAs. But a little more relevant is the fact that we are actually business journalists first. So the way this podcast started is that Rohan and I kept having all of these conversations about business. We kept talking about people, companies and I'm really not kidding. So whenever we would do this, we had tons of ideas

and we had questions and patterns and after some time we just started thinking why is no one else talking about it? I'm going to give you an example. We've been talking about Walmarts to well adopted children, phone pay and Flipkart and how they're making some big strides in new markets.

But importantly, in each other's markets. Flipkart has built a UPI app and PhonePay has built a grocery delivery app. It's kind of like both. Both of them are giant ships silently straying from their courses and we wanted to find out at what point might they collide. There are several stories like this. Like, why has all the meaning gone out of work? Or whether Zomato is overvalued.

And which VCs have burnt money the most effectively? And because we are MBAs, we kept putting them into a two-by-two matrix. Because that's really the simplest way to do. describe trade-offs, incentives and outcomes. With this podcast, we actually want to break all the rules. There is no script, no explainers, no answers, only pressing questions, hidden connections, and unexpected predictions. And it's not just us.

Every episode is going to have diverse and sharp guests and experts who not just raise questions about the biggest companies, people and trends, but also help us get some answers. We are incredibly excited for 2x2. Our first premium subscriber-only podcast from the kin. But hey, here's the thing. Our first full episode is now out for free. We discuss the tussle between phone pay and flip card, while one of them may have an advantage over the other,

and where Walmart really wants them both to end up. You can find it anywhere you get your podcast. There are links in the bio, or just type 2x2. TWO by TWO in your search bar and you'll find it. We publish every single Thursday morning with a business story that we think is both interesting, pressing and also a little exciting. That's at least what we are trying to do and our promise. I was 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. 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, Chios 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, Chios has to make up for it with more footfall.

Presently, an ideal Chio's 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, Chaios 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 Chios has more recall value.

This is why exploring the B2B or business to business segment may help it. Chai Point is doing it. Chayos also wants to provide tea vending machines for corporates. Like Anurag Bhamidi Tapati, the co-founder of Roast Tea, a B2B2C 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 cafes should be the secondary focus for brand building. Maybe that's a step further. is something that the Chaios Insights team should look at next?

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on top of the Ken website. Today's episode was hosted by Snickda Sharma and edited by Rajiv Siyah.