Chai Point’s growth ambition rides on vending machines

Tea cafe chain Chai Point is betting on vending machines to power its growth into the largest tea and coffee retailer in India.

Chai Point plans to launch tea and coffee vending machines targeting three sets of clientele grouped under myChaipersonal, myChai boxC and myChai bean to cup.

MyChai personal vending machines will be installed at bakeries and myChai boxC at corporate offices. myChai bean to cup machines will dispense western coffees like cappuccino, americano and macchiato.

“We have already installed over 4,000 vending machines and we aim to install 30,000 vending machines under each of these categories in the next three-four years,” founder and CEO Amuleek Bijral told Moneycontrol.

“We see ourselves as a beverage platform and aspire to be one of the biggest tea and coffee beverage platforms. We want to make sure that predictable, high-quality tea and coffee are accessible to customers. That means that we have to reach customers through various channels,” Birjal added.

Beyond retail

Chai Point, which started in 2010 as a quick service restaurant serving tea, has been through some tumultuous times in the wake of the COVID-19 pandemic, like most cafe chains and eateries.

The business-to-business (B2B) segment, which provided vending machines to corporate clients, was disrupted by office closures and offline retail stores were hit by closures.

As the company emerges from the pandemic, it has homed in on four avenues of growth. Chai Point’s retail business, including deliveries, contributes 60 percent of its sales. The corporate business makes up 30 percent, and the direct-to-consumer segment and MyChai platform account for 5 percent each.

According to filings with the Ministry of Corporate Affairs, Chai Point posted operating revenue of Rs 56 crore in the financial year 2021, a drop of over 70 percent from Rs 189 crore reported in FY20.

The company is eying Rs 700 crore from the vending machine business alone in the next two-three years.

“We have realised that in a country like India, building a consumer brand around tea and coffee cannot be just a retail channel play,” said Bijral.

“We don't want to be bracketed by thinking that stores are the only approach or vending machine is the only approach,” he added.

The bakery business is an immense opportunity, said Bijral. India had about 1 million independent bakeries that want to offer tea and coffee to their customers.

“We are targeting only 3 percent of this pie at the moment,” he said.

Coffee in the mix

Chai Point will sell products like tea leaves and coffee beans required to make the beverages using its machines.

According to Bijral, the company recovers the cost of its machine in 8-10 months.

“Our business model is the consumables that go behind powering the machine, the same business model that we have deployed in our office channel, where again, we don't sell the machine but deploy the machine as a service,” he added.

The company has also started serving coffee through these machines and will also be selling machines for dispensing western coffee, a pivot from its Unique Selling Proposition was “freshly brewed tea.”

According to Bijral, the company’s target group of white-collar workers prefers to drink coffee as well as tea, and so it is now offering the beverage.

The company started by introducing filter coffee about four years ago and now offers western brews too.

Chai Point competes with QSR chains such as Chaayos and Chai Thela.

Chaayos recently raised $45 million in a Series C funding round led by Alpha Wave Ventures. Chai Thela was acquired by South Asian Enterprises last year. Chai Point, too, raised an undisclosed amount of funding from InCred Capital earlier this year.