INDIA
Vahdam is one of the leaders in the striking emergence of startups – upstarts may be a more appropriate label – in India that have set new standards of excellence in a tea market that historically has been underserved, fragmented and lacking in productivity and creativity.
In October 2019 it announced new financing of $11 million. This values the firm at around $40 million. Like its main competitor, Teabox, Vahdam is built on an e-commerce platform plus a business model that focuses on eliminating the intermediaries in the supply chain that add delays and lose freshness.
Teabox led this truly transformative mode that relies on building relationships with gardens and customized warehousing. Bala Sarda, Vahdam’s founder, summarizes the inefficiencies of the Indian tea supply chain: “It’s completely broken. The goods go through distributors, then get sold to exporters. Somewhere in the middle, brokers show up, too.
Then an importer imports the tea. It all takes months to get a supply cycle to reach consumers. Unlike wine or whiskey, tea is best when it is fresh. Its ingredients lose flavor with time.” Kaushal Dugar, Teabox’s founder, lists the improvements his own company generated. It radically cut the time to deliver fresh tea to customers that averaged five months: “We acquire the tea [direct from the gardens] within 48 hours of production and ship it to our customers within a week.”
Both firms have built strong international marketing and selling capabilities. Both are targeting physical store additions to their base, with Teabox opening two stores at Mumbai and Bengaluru international airports.
Vahdam plans to use its additional funding to strengthen its international network and set up additional offices in the US and Europe. It already has a strong presence and fulfillment capability on Amazon. Teabox announced estimated additional funding of $5 million in July 2019, adding to its late 2017 $7 million in equity financing. Its aim is total vertical integration internationally through an “omni-channel” experience.
Vahdam and Teabox are upstarts in the sense that each brings something to the market that doesn’t fit existing strategies and structures. Other small tea firms that share these features are transforming tea retailing and hospitality in a market that has mainly been for at-home family consumption. Chai Point and Chaayos are leading examples.
Chaayos’ co-founder (2012), Nitin Saluja, commented in a press article that India consumes 30 cups of tea for every single cup of coffee. His studies showed that there were around 1,500 coffee cafes in India and zero for tea.
Chai Point, Chaayos’s larger upstart rival has 100 locations with revenues of $10 million. Chaayos now has more than stores in India and is expanding. Saluja describes getting tea accepted outside the home was “a daunting” task that took two years of “thorough” research to study consumer preferences and habits. While each of the upstarts has a clearly different identity, they share common features in moving tea outlets closer to tea preferences.
Tea Trails, for example, targets the opposite end of the market from Chaayos, offering high-end exotic teas in “destination cafes” worth visiting. Chai Point is stronger than Chaayos in the corporate market, through on-premise brewing machines (this segment now amounts to 30% of revenues.) Chaayos is expanding home and office delivery (20% of sales.) Behind the differences are the same driving forces of innovation: convenience + variety + personalization + technology leverage.