A bunch of entrepreneurs are using e-commerce to promote freshness, taste and artisanal coffee as replacement for the boring instant stuff

Matt Chitharanjan settles down on a bag of beans. He doesn’t really have much of a choice in this air-conditioned room on the first floor, because it’s packed with sacks and sacks of beans. Coffee beans.

On the ground floor, shutters down at the moment, is a café in the process of construction, set to open soon.

The proprietor of Blue Tokai, one of India’s new online retail coffee ventures, is taking what would seem like the next logical step, opening a café in Mumbai, at the Laxmi Woollen Mills Estate in Mahalaxmi.

He says the café-cum-roastery—they have one in New Delhi already—will allow him to introduce customers to his coffee and help logistically as a storage space for distribution in western India—Mumbai in particular—where a large number of his customers reside.

Blue Tokai is just one of the many entrepreneurial ventures that have bloomed in the past four or five years in the business of coffee. These ventures are sourcing coffee beans directly from the farms, roasting them and selling them online. The high-quality coffee they source was up until now being exported, by estate owners of rich fields in Coorg, Chickmagalur, the Nilgiris and other parts of south India, saving the poorer quality for blends and instant coffee.

Some of these new companies, many retailing online, include The Indian Bean, Flying Squirrel, Seven Beans, The Coffee Company, Black Baza and Estate Craft. Some existing sellers have expanded in scope, like Halli Berri, Kerala’s Riverine and Goa’s Sussegado. Some others, like Vero, sell espresso capsules with machines and Café Rio also does instant coffee.

Each of these new entrepreneurs believe they are doing something slightly different from the other, each trying to find a foothold in a country where coffee seems to be making a strong pitch for mug space.

Many have made their way into shelves in retail stores such as Godrej Nature’s Basket, Food Hall and Westside, and in restaurants and cafés like Indigo Deli in Mumbai and Yogi-sthaan in Bengaluru. Their combined hope is a customer would take that leap of faith, buy a bag and allow the taste to do the rest—i.e., get them to switch from instant coffee to a more brooding variety.

There is no clear indication as to why so many companies would start at the same time with broadly the same ideas. But the growth of e-commerce and global exposure may have something to do with it.

Ashish D’Abreo, one of the founding partners at Flying Squirrel, calls this India’s third wave of coffee, albeit a decade behind the US, where coffee became more of a niche product, like wine, than a commodity. The American third wave brought with it artisanal brands like Blue Bottle, Intelligentsia and Stumptown Coffee Roasters, small-scale coffee sellers more interested in freshness, free trade, organic products and sustainability while providing an alternative to the omnipresent Starbucks.

Brotherhood of brews

There is a common thread that runs through many of these ventures, including international experience and, oddly enough, a background in advertising.

Kunal Ross, one of the partners at The Indian Bean, had a bit of a head start over his friend Chitharanjan. The former lived in Dubai, the latter grew up in the US. Ross has worked in advertising, as has D’Abreo and Sanjoy Gupta of Estate Craft. All of them loved coffee but could not find the taste they wanted in India. They spotted a gap in the market and decided to filter it.

These new-age coffee barons speak of their own specialties. Flying Squirrel, so named after the estate’s most frequently seen visitor, the Malabar squirrel, grows its own coffee on one of the partners’ 160-acre farm in Polibetta, Coorg. Blue Tokai does its own roasting, while The Indian Bean does not. D’Abreo of Flying Squirrel, too, believes in the café concept—they are going to open one in Bengaluru soon—while Ross is not sold on the idea.

Blue Tokai identifies the estates from which it sources the coffee on its packaging, for transparency. Seven Beans brings together Indian growers with Italian roasters. Black Baza’s ambition is to improve biodiversity, while Estate Craft is a single-estate coffee. Vero sources the beans and makes capsules in-house.

There is a friendly competition among growers, says Chitharanjan, and so is the case with sellers. The potential market is so large that there is no need for conflict. “There is a possibility that a number of us would drop out, but in this case, it would be one in 10,” says Ross. “Especially in metros, there is no scope for us to fail because it’s a big enough market.”

Their growth has been encouraging, but the figures are also a reflection of the newness of the business and that all of them have started from scratch. Absolute figures are difficult to come by, but Bengaluru-based Flying Squirrel has grown at 15-20% month-on-month, Mumbai-based Indian Bean at 300-400% year-on-year and New Delhi-based Blue Tokai has doubled every year, according to their respective proprietors. Venture capital firm Snow Leopard Ventures invested in Blue Tokai last year.

For others, like Dhruv Kochhar, founder of Vero, the expectation is simple. Coffee pods are a €12 billion business in the Western European coffee market alone, and logically, it should be the next thing to happen in India. “The capsule business will be like Apple in bringing change here,” he says.

Consumption-sales conundrum

At a farmers’ market in Phoenix Mills, Mumbai, over a recent weekend, budding entrepreneurs and traders braved the scorching sun to set up stands in the central courtyard, market their wares and encourage people to try. Flying Squirrel, Estate Craft and Vero had their stalls here. As did Chado, a tea company with so many varieties that they printed a booklet to list them out.

While tea consumption grew at a steady rate of 2% annually for the period 2008-13, coffee grew at 5%, says Bidisha Nagaraj, group president (marketing), Café Coffee Day, quoting a Technopak March 2015 report. “Coffee is becoming more of a fashion statement among the young and upwardly mobile in India,” she adds.

India is predominantly a tea-drinking country, with coffee restricted to the instant variety, except in the south. For a long time, the idea of brewing a cup, either by grinding the beans or using the powder in a French press or filter, has seemed tedious and time-consuming, maybe a little pretentious and perhaps even a bit intimidating.

Keshav Dev, proprietor of one of New Delhi’s long-standing coffee stores Devan’s, disagrees with Nagaraj a bit, based in his own sales. He says people prefer going to a café rather than brewing at home. Though the number of buyers haven’t really increased over the years, according to Dev, they have fallen into a demographic: Expatriates, those who have returned to India after having lived abroad, those who travel abroad frequently and the more “mature”.

That also explains why online sales for many of these companies have been higher in Mumbai, New Delhi and Bengaluru than in other places. Urban centres, with greater Internet penetration and better-connected courier services, are naturally faster at adapting to new businesses.

Café online

Cafés could become significant for the future of coffee sellers because they give instant exposure, greater visibility and allow consumers to try something before buying. But then, they are also cost-intensive, which would be difficult for the newbie entrepreneurs who work on tight budgets.

At Di Bella, a coffee chain, the air is filled with the pungent, burnt smell of brew as Ross sets up work meetings on a regular weekday afternoon. Expensive, sophisticated machines gurgle in the background, while a few customers line up at this mini outlet inside a large retail store in Bandra, Mumbai. It’s still the summer holidays—which means anxious parents trying to hold on to a mug while trying to restrain their agile children.

It is chains like these that Ross and the others are taking on, though it’s not yet a level playing field. Their “mass-produced, over-roasted, over-priced” brew—“coffee without spirit or characteristics,” D’Abreo says—drove these young entrepreneurs to start their own business for an alternative.

Ironically, it is chains like Di Bella, Starbucks and Café Coffee Day, among others, that have helped them in creating awareness. Chitharanjan explains how Starbucks’s entry into any market, made after careful research, timed correctly, causes the market to “explode”.

On whether cafes would help or not, on one side we have Dev, Chitharanjan and D’Abreo, and on the other we have Ross, who wants to stay in the online business.

Most people go to cafés to mingle and socialize in a sanitized ambience, maybe eat something, rather than to specifically consume coffee, he believes.

Chitharanjan says, “If you have to grow the market, and I don’t feel online coffee sales are going to take off hugely for some time, at least with cafés you can curate the experience.”

It’s something the Blue Tokai proprietor wants to try, as does D’Abreo, whose café will come up in Koramangala, Bengaluru, in a couple of months. To get the young and “upwardly mobile”, Dev is planning to open one as soon as his son, Siddhant Keshav, returns from his training in Vienna as a barista.

Is coffee sexier?

Coffee remains a more frequently used conversation starter than tea. You are more likely to hear someone say “let’s have coffee” than “let’s have tea”. It’s sexier, probably because of caffeine’s addictive nature and because of reported health hazards, which makes it evil and therefore more desirable.

It’s aspirational, Ross says, because there is an element of snob value attached. “These are people who are romanced by the idea of being able to brew their own and be proud of it,” says D’Abreo over the phone.

There is more of a process to making coffee at home, with or without an electrical gadget, (unless it’s instant coffee, or unless you are Tamil, with faith in stainless steel) than there is to tea, giving it an added mystique.

“It’s a richness of drinking experience, that hugging sort of aroma that coffee gives you…” says D’Abreo. “There can not be that richness in a cup of tea. It does not smell the house.”

The new breed are focused on freshness and their beans are roasted two or three times in a week, so that the bag of beans or powder you get at home has not been roasted more than a few days ago. Since coffee loses a part of its mojo in about two weeks, this becomes their calling card.

Speed of delivery is the next big step, because “if it takes five days to get you, it leaves a sour taste in people’s mouth”, says Chitharanjan.

Most of these “third-wave” coffee sellers consider education and awareness as among their responsibilities, which shows on their websites, with links to information on how to brew, gadgets to buy, etc. The Flying Squirrel sells brewing equipment and coffee kits; Blue Tokai retails grinders. They present fascinating histories of the evolution and trade of coffee, of sustainability and ethical practices.

In the end, there is also fierce ambition. “We want to be the Blue Bottle of India,” says D’Abreo.

To tea or not to tea

For Chaayos founder Nitin Saluja, the logic is really simple: Indians drink tea, so the business idea is in tea. Ahead of the opening of Chaayos’s 23rd branch in Powai, close to the Indian Institute of Technology in Mumbai, which makes it part nostalgic and part redemptive for the former student, Saluja debunks the theory that coffee is more alluring than tea.

He puts his money where his mouth is: the nearly four-year-old company has opened 18 stores in the space of a year, all in New Delhi and Mumbai—a breakneck pace. They have a 1-800 telephone number, a busy website and an app.

He explains why this business makes sense. “We are a country of chai drinkers. We have been consuming it forever. It’s a 30:1 in ratio to coffee. It was a no-brainer.”

Saluja says customers do not visit cafés for coffee, but for the ambience. “I don’t think coffee is any sexier. I think the ambience is sexy. Being a tea-drinking nation, we are not able to understand the nuances of coffee. It’s something cultural, if you were to think that it would grow over a period of time, it will take a long time. Tea can provide the notes that’s sexy.”

Chaayos is among few specialized outlets for tea, at least in Mumbai. The Taj Mahal Tea House at an old, refurbished bungalow in Bandra and Tea Trails in Fort are among the others, besides one-off stores like San-Cha. As Chaayos continues to expand and other forces start working, like Chado, tea will grow way beyond the roadside stall or tapri format. But it hasn’t been driving new conversations the way coffee has.

There’s much consolidation to happen in the coming years in the coffee business. Chitharanjan says their working capital requirement is exceeding the money they generate because they need to buy their entire year’s supply at once.

Shipping is a nightmare, he adds. He is concerned about plantations, because there is a narrow band across the world where coffee is grown and temperatures are rising. So, growers have to go higher and higher in altitude to discover new areas for growing coffee.

It’s the reason why Black Baza founder Arshiya Bose’s focus is on conservation of forests, wildlife and water, and on how growers deal with climate change.

Ross names logistics and getting a national wholesale partner as his challenges.

What brews in the future remains intriguing, but like Indian wine was more than a decade ago, Indian coffee is poised at an interesting juncture. Though alcohol has “other things to go with it”, the parallels are easy to draw: there’s discovery, there’s history and there a few brave warriors trying to blend the two.

“Sit down, enjoy, smell and taste the different things we have put in an effort to create, but unlike wine, don’t drink for the high,” says D’Abreo. “It offers much more than the effect of alcohol. There is so much more to coffee… fruitiness, sweetness, saltiness, bitterness, the smell of wet earth, blueberry, strawberry…”

“It evokes all five sensory systems,” elaborates Nagaraj. “It is more than just a beverage. It’s a state of mind.”

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source: http://www.mintonsunday.livemint.com / Livemint.com / Home> Big Story / by Arun Janardhanan / Sunday – June 19th, 2016