India is a country traditionally and deeply rooted in its love for tea or ‘chai’. Tea consumers exist in bulk and every part of the country. Their demands are supplemented by ‘Chai ki Dukans’ or Tea shops in every nook and corner. So, with such intense love for tea, how does any other beverage enter the market, let alone make its mark? Yet, Coffee has found a strong foothold in the country. Coffee became a rising commodity in the country and several foreign brands took advantage of this situation to grow the coffee market. But amidst them all, a new Indian brand stands tall – Blue Tokai.
Blue Tokai has disrupted the Indian coffee market by challenging the existing norms and creating a new kind of demand in consumers’ minds. So, how did this local Indian brand achieve such stratospheric success? What footsteps did they follow to carve their path in an already tough and competitive coffee environment? And finally, what business lessons can be learned from their expansion story? Let’s dig deep.
India’s coffee industry is the sixth-largest in the world, with an estimated revenue generation of $1.09 billion i.e. roughly 921 crores INR. It has only recently risen from being at a valuation of 450 crores INR and the eighth-largest coffee industry in the world. This is a huge shift in Indians’ beverage consumption patterns, albeit in bigger cities. While Blue Tokai contributed to this growth, their entry wasn’t via a usual path.
Blue Tokai was founded by Matt Chitharanjan and his wife Namrata Asthana inside a small roaster in their humble Delhi home. It was like a mom-and-pop store, where they supplied coffee to interested local customers. Their rise from there is owed to several factors, least of which wasn’t Matt’s deep-seated love and obsession for good, premium coffee.
Matt Chitharanjan was born to Indian parents in the US, where he also grew up. Naturally, given the coffee obsession of the United States, Matt grew up drinking good-quality coffee and developed a special taste for it. When he came to India and tasted the coffee here, he felt something was amiss.
To understand Matt’s feelings, one must first comprehend the various levels of coffee consumption. The growth of coffee since the 1800s has been a steady one in the world; more rapidly in the Western world. The first and second waves of coffee consumption are acquiring a taste for caffeine followed by adding more innovations to it. The latter was done by big brands like Starbucks in the 1970s. There is also a third wave, which only happened in the 21st century.
With the rise in coffee’s popularity, customers started demanding specialized coffee, suited to their palates. This was the third wave which had already spread in the US in the 2010s. But India hadn’t yet reached that level. This is what Matt saw as an opportunity to create something unique and niche.
To create his product, Matt contacted several coffee farmers from South Indian states and proposed his plan. As Kerala, Karnataka, and Tamil Nadu constitute around 95% of India’s coffee production, Matt spent time convincing someone from there. After a lot of attempts, he finally found some response.
Matt’s offer was simple. He wanted to brew his product with 100% pure Arabica Coffee beans, which are considered the technically superior ones, and provide the farmers with better rates than their existing traders. Not only that, but he would also put their estate’s name on his coffee products, giving them recognition for their work. Even more so, Matt and his team promised to teach them how to make special high-quality coffee. He wasn’t just offering them a trade deal, but instead a long-term partnership.
While a lot of farmers were reluctant at first, few finally budged to the offer. Soon after, Blue Tokai’s mass production was underway with a flair. They started doing things their way such as roasting their coffee only after a customer had placed an order. While this has become a common norm now, no other brand was doing it at the time.
Selling specialty coffee is also a risk that many foreign brands didn’t want to take initially. Regular coffee only becomes a specialty after crossing 80 out of 100 points on the SCAA scale, regulated by the US. While the cost of production was high, there was no guarantee of high sales in the Indian market at the time. This is why big brands like Starbucks and Barista opted for commodity coffee since it can be brewed at a much lesser cost.
Blue Tokai studied the market and consumption pattern better and was confident about their specialty coffee finding its niche. Matt and his wife built Blue Tokai on a single philosophy – “If you love something as a customer and it’s not available, go ahead and be the first one to create it.” They did exactly that.
While this was enough to enter the market, Blue Tokai didn’t stop. They kept growing at an exponential rate. One of the other factors that helped them achieve that was their intent. Blue Tokai didn’t just want to grow their coffee brand and take care of their business. They want to increase coffee production in the country and give it back to the farmers. Indian coffee farmers own only 10 hectares of land on average, and they heavily rely on traders to cover their costs and gain profits.
Therefore, when Blue Tokai opted for this generous gesture, this was huge for the farmers. It resonated with a lot of people, not the least of which were the Gen-Z people. The current generation of young men and women care immensely about social causes and making a positive impact. Blue Tokai’s social purpose, in this case, bolstered their popularity even further.
They even made their products customer-friendly, where one can easily filter a Blue Tokai coffee without buying any extra equipment, but with a ‘Chai Channi’ i.e. tea-filtering sieve. They also launched many new lines of products that meted out the accessibility issues of Indian consumers.
Lastly, Blue Tokai has smartly cracked the cafe market in India. Matt once said in an interview that Shanghai alone has 10,000 cafes whereas the totality of cafes in India ranges between 4000-5000. This dearth of cafes is something that caught Matt’s attention. But he approached the cafe market differently.
Blue Tokai is aware of its premium-quality coffee which can be pricy for the Indian mass. Therefore, they didn’t attempt to make it for large masses and open up stores in every single town, even when they were growing. They targeted big Indian cities and only focused on providing the same quality coffee throughout all their stores. This not only helped them acquire more customers but also retain the existing ones.
It may have looked like a slow growth, but the rise was still a steady one. Today, Blue Tokai has more than 100 stores in the nation and aims to open 80 more in the coming years. Their net annual revenue is more than 130 crores. Matt spoke about it himself, that they aren’t looking to expand at any cost. Instead, the focus is on growing the company in the right way. More than 2200 people are working in the company at the moment, and with their healthy work atmosphere, it is only rising.
With extreme patience that involved cold calls to clients, word-of-mouth marketing, value proposition, and customer experience, Blue Tokai has built its empire. If this article interests you, and you wish to learn more about marketing and growing an international business, head on to the MBA ESG page → https://www.mba-esg.in/apply/international-business/.
