How modern Chai Player's can overtake Cafe Biz

Indians love to start their day with a cup of tea. And this has given a tough competition to the café chains today where we can see a number of ‘Tea’ players entering the space with the concepts of ‘Meri Wali Chai’ or ‘Aam Papad’ chai. According to a report by ASSOCHAM, India is the second largest producer of tea after China, with six lakh hectares under cultivation in different parts of the country, producing about 950 million kilograms of tea each year. The Indian tea industry is likely to reach a turnover of 33,000 crores by 2015 up from clocking a CAGR of 15 per cent.

About 203.86 million kg tea is exported from India which brings about US $ 413 million as foreign exchange for the country per annum. Tea industry is a crucial source of revenue for the country. Being a labour intensive industry, it plays a vital role in employment generation and a larger chunk is involved in tea cultivation.

“Tea is a healthier beverage as compared to coffee as the caffeine which is present in coffee is extremely high whereas tea has antioxidant which is good for people. Similarly, there are lot of benefits tea has compared to coffee. Now, people are realising and becoming aware, which leads them to switch over to tea”, shared Uday Mathur, co-founder, Tea Trails India.

Current Scenario

“Coffee, in India, is still considered a choice. Tea, on the other hand, is a habit. I believe overall familiarity and comfort with tea's flavour and more knowledge about the product over coffee, along with the perceived accessibility of premium tea at economical rates, makes tea a winner in the urban Indian market,” said Amit Jain, MD, CHA Palace.

Many coffee chains like Australian coffee chain Gloria Jean's coffee has closed its stores in India, Di Bella has returned back to India, Costa Coffee has closed many of its stores, CCD and Mocha, the home grown brands are focusing on their growth in tier-II and III cities while Tea players are catching the investors’ attention. Players like Chaayos, Tea Trail, Chai Point, and Cha Bar have already entered the brand club. Therefore, tea industry seems to overtake the coffee chains and boost its consumption capturing the nerves of growing Indians.

Marketing Strategies

Tea is one of the most competitive and challenging market to survive in terms of production and competition. As a result, many tea chains do not go with the basic formula of tea with water, milk, sugar or few additives like cardamom and ginger. Today, they got alternative in the technique like ‘Masala Chai’ or Green tea (‘Kahwah’) which is an antioxidant and helps to prevent cancer, lower cholesterol levels and aid in digestion and weight loss.

Adding on the same lines, Raghav Verma, Co-Founder, Chaayos shared, “In terms of marketing is concerned, we are much focused on being active on digital forums and continuously run interesting digital initiatives. Radio is a medium that has got us a lot of brand recognition over the last couple of months where we have run exciting branding campaigns.” “Our offering is our ‘culture in a cup ’ proposition we have attempted to elevate the Cha experience here and distil signature blends from the most premiere tea plantations in India to captivate the palates of Indian and international consumers, at a strategically economical price point”, added Amit.

Growth Prospects

Since the tea chains is increasing rapidly in India and many premium variants and flavours came out on the market for the customers. The growth is expected to grow at the pace of 15 per cent annually. “Indian tea is among the finest in the world owing to strong geographical indications, heavy investments by big players in tea processing units and continuous innovation. We're one of the world's largest consumers of tea, consuming about three-fourth of our total produce locally. Changing lifestyles of people and increasing health awareness is also boosting sales for green tea and its many variants. Equal parts energy-booster and stress-reliever, tea has been a part of the Indian diet for centuries and current trends indicate, it will continue to be so for a long time to come”, said Amit.

Chaayos, which currently has nine cafes in the NCR, is also looking to raise $5 million for its expansion in the future. “The consumption of chai in India is 10x that of coffee. Chai is our native beverage and coffee (cappuccinos and lattes in particular) is something that we have acquired over the last decade. There are amazing growth prospects for a chai cafe because as compared to almost 3,000 outlets for coffee, there are less than 100 for chai. Also, from our experience, we have seen that chai is the beverage that people prefer and it was just a matter of time that this market came into its own,” pointed Raghav.