Why Did Investors Pour 20 Million in Chai Point's Cup? The Founder Gives 5 Reasons

Singh said that he would allot a substantial part of the fund raise proceeds to creating a strong F&B product line for walk ins as well as delivery segment

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Amuleek Singh is a happy man today. Counted among the first players to have understood the potential in selling the second most-consumed beverage in India to a technology-friendly, new-age Indian society, the founder of tea-based beverages company Chai Point has now raised Series-C funding of $20 million.

Chai Point

Quite popular among office goers in India, Chai Point has penetrated in the middle-class working segment quickly since its inception in 2010. With 97 stores already running across India, Singh now aims to open another 40 – 50 with the fresh funds.

In an exclusive chat with Entrepreneur, Singh said that he would allot a substantial part of the fund raise proceeds towards creating a strong F&B product line created not only for walk ins but delivery segment also.

Being an early entrant could be an advantage but the Chai café and sale segment in India is huge with other significant players such as Chaayos, Teapot and Udyan Tea. Singh believes growth will happen for all players because of the sheer size of the Chai market, which is pegged to grow to be $60 billion in the next 5 years.

Singh believes the consumption story of India is quite exciting for the investors. "We are in a category, which is not devoid of investors' interest. I don't remember a specific incident but we know that investors who will invest in consumer oriented business will do their due diligence of the team's execution capabilities," Singh said.

In a conversation, Singh detailed 5 strengths of the company that helped Chai Point raise funds and will work towards beating competition; below are some excerpts from the interview.

  • Team

We have built a strong team as we are in an execution-oriented business where our capability to execute the business is one of the key drivers for our growth.

The new investor coming on board is not only betting on what we have achieved so far but on the team that will execute the business in the future and grow the company more strongly.

Secondly, we are lucky to be in the product category, which is INR 1.5 lakh crore market but has been neglected so far.

We are the largest player but only a fraction of this large opportunity, which is growing at 20 – 25 per cent. This is also one of the reasons that all our existing investors also participated in this round and invested more than the expected amount.

  • Multi-channel approach

Multi-channel approach has been a huge part of our business. We see omni-channel strategy not just as fancy term but a way to reach our customers in as many ways possible and to be available to them at their convenience.

That is why our business growth is balanced between walk ins the stores, delivery, through dispenser boxC.in and our food products. All this is targeted to delight our target group, which are white-collared professionals.

  • Early investment focus in tech

We were early investors in the tech piece of our business, as we believe sound tech will hold our omni-channel strategy together. Shark, which is a cloud based AWS system, runs our entire operations from supply chain to sales at stores to dispensers and delivery. This has also helped us scale up faster in our segment.

  • Environment sustainability

We were the first ones to move to bagasse-based packaging, sugarcane based cutlery. Our job in this department is just at its beginning but we will also be sensitive to our environment. A company of our size should actively work towards increasing our green footprint.

When we were planning to launch our iced tea, we held it off to first figure out how can we handle glass bottles. Surely it is more expensive than plastic and there is always a worry about breaking it, but we decided to get this right first before launching iced teas.

Going forward, you will see us using more alternate methods to keep on reducing the waste generated.

  • Chai as a category

Chai as a category is very large. Per capital consumption is around 4 cups per person per day, which mean 500 billion cups of chai is consumed annually. The category in itself offers immense growth opportunities thus attracting marquee investors.

Paragon Partners participated in the funding along with existing investors including Saama Capital, DSG and Eight Roads, the private equity arm of Fidelity India.

Singh believes much work is left to be done. "We have laid a strong foundation and we are going to build strongly over it," Singh said.