Tea café chain ChaiPoint brewed its success story by focusing on retail outlets and IOT-based vending machines, primarily in tech parks. Launched in 2010, the company claims it sold close to 0.6 million cups of tea a day in 2020 across all its channels (before the COVID-19), including stores, delivery, dispensers, and the direct-to-consumer business.
Founder Amuleek Singh Bijral started his company as a F&B outlet, ventured into delivery, and launched their own brand of tea on ecommerce channels.
In 2016, he entered the vending machine market and scaled to 3,500 dispensers across the country. Over a decade, he built his brand that generates revenues of Rs 190 crore per year, and saw a 37 percent growth in sales in FY20.
But the going hasn’t been easy for the F&B startup in the time of COVID-19. Only 92 of the 175 ChaiPoint outlets across India are open, and revenues are likely to be hammered.
Amuleek now has a new game plan and is taking Chai Point down a new path: SaaS.
Over the last four years, Amuleek and his 1250-member team, 40 of them in technology, have built the company into a technology business with their AI-based platform called Fountain.
The brand has been experimenting with its SaaS platform with three large F&B companies, providing them an operating system to run their business. It handles everything: from billing to supply chain and inventory and frees up the entrepreneur to focus on customer service and the food.
This initiative – a foray into a SaaS business model – is going to be a big bet for Amuleek.
Why the SaaS foray?
Data reveals the need for technological intervention in the F&B industry.
The sector encompasses 2.2 million restaurants, but most are highly unorganised. Only five percent use any form of end-to-end technology from billing to warehouse management and inventory to vendor management.
“The F&B business is complex; it is practically impossible for an entrepreneur to scale up by managing everything along with the product. We realised that with our knowledge of these systems we can work with entrepreneurs to help them build their business,” Amuleek says.
According to Amuleek, there is no beta version of the product that he can deploy at multiple restaurants, adding that he is taking his time because he believes “such a product can help restaurant owners thrive beyond just that one physical channel of sales they operated with”.
On being asked why the F&B operator chose to take this step, he said software companies routinely sell tools to entrepreneurs, who soon realise that technology becomes an impediment to growth as it “does not understand the complexity of the business”.
“With our product, you tap our knowledge to grow your business,” he says.
Amuleek knows what he is talking about.
During the first three months of the COVID-19 it had reduced his overall business by 60 percent. However, as of August 27, Amuleek claims that the business is back to pre-COVID levels.
“Today, an F&B entrepreneur cannot operate with only one channel of sales. We have gone through this journey. We are now a restaurant, a cloud kitchen, we sell on food tech aggregator platforms, we are a brand with our single-origin teas sold on Amazon, we have the vending machine business built on Android, and we encompass all our supply chain experience to serve these functions with our own software,” Amuleek says.
The F&B business is a dynamic one with cuisines and diet preferences evolving rapidly. The operational complexity is daunting because of external factors. Most businesses have multiple partners and reconciliation of payments can become a nightmare.
The future of F&B is in data, and Amuleek believes that the entrepreneur should be able to focus on the product and customer service instead of managing inventory and worrying about rent escalations.
“It has taken us so much time to tie in all our learnings. Now, we need to share what we have learnt with the industry. Entrepreneurs passionate about the F&B business should not have to deal with software needs and demands. They need a partner,” Amuleek says.
ChaiPoint’s different business streams have led to learnings from its proprietary technology, the Fountain operating system (formerly called Shark). This OS was a point-of-sale system built on top of Android in its vending machines. The tech helped in tracking, placing orders, collecting payments, capturing customer information, and managing the supply chain.
It was only logical that ChaiPoint decided to take this technology to the two million restaurants across India and several more across the world. A small team is building this and meeting clients to understand how they can better the product for the F&B business.
ChaiPoint will soon make the product available at a low cost. The business model will be based on a success metric fee-based model, with outlets paying only when they see impact.
The tech journey
The back story to Amuleek’s technology play goes back a decade to when the company was founded.
Before 2016, ChaiPoint used only Excel sheets. Between 2010 and 2014, it ran manual systems – runners went to each outlet and collected bills for reconciliation, which were then manually put on Excel Sheets.
When the company hit the 20-outlet mark, Amuleek realised they had to move beyond Excel Sheets and focus on technology. He could have brought in technology partners but chose not to.
“We did not want to rush into software. I did not want to buy external software that commanded the shots. I studied the process for six years and wanted the business to define the technology strategy. We built each and every process ourselves,” he says.
Often asked to focus on the core business instead of dabbling in technology, he said he was glad he took the route because “it made us take decisions from the ground up rather than lead our strategy with technology”.
“We were able to build billing, sales, inventory, warehousing, supply chain, and delivery modules, and are now a full-stack F&B technology company,” he states.
This approach to building technology streamlined operations and helped ChaiPoint scale – it grew to 175 stores, opened 120 cloud kitchens, and built a D2C business. Today, all its businesses – be it vending machines, which has 3,500 corporate customers, D2C, restaurants, cloud kitchens, delivery, and sourcing of inputs – are based on consumption data.
Over the last 10 years, Amuleek’s business has gone from Rs 88 crore in FY18 to Rs 138 crore in FY19 to Rs 190 crore now, representing a 37 percent growth in the top line. The company is yet to break even.
The tea startup’s technology enables it to plan its next steps based on consumption and carefully match supply.
This is a tough year for every entrepreneur with experts saying that 40 percent of all F&B businesses will shut down.
“The F&B game is changing fast. We were impacted by demonetisation, GST, and now COVID-19. But, each problem was an opportunity to embark on a digital journey. The pandemic will accelerate this process. F&B players need to embrace a multi-channel strategy and focus on contactless. The only way they can do that is to define their business strategy and embrace technology,” Amuleek says.
ChaiPoint’s Saas product gives the business a single view of sales, supply chain, inventory management, and managing purchases.
The move to intelligent systems
The company’s vending machines, called boxC.in, are IoT-enabled and equip tea and coffee dispensers with smart devices connected to the Cloud. The Fountain platform is a machine learning and AI engine that predicts demand and helps in inventory planning and management of the F&B business.
“Today, our vending systems can make customised coffee or tea. All we have to do is recognise the individual at the vending machine, and we can tailor-make coffee or tea with just an update in the software,” Amuleek says.
While this idea is still on the drawing board, ChaiPoint’s current Android-based machines, 3,500 in number, are already intelligent. The idea while entering the vending business two years ago was to disrupt a market used to premixes.
ChaiPoint’s IoT and AI-based machine is built on Android, where the valve, gear, and pump are controlled by a tab inside the machine.
“If I change the recipe I change it over the applications; there is nothing that I do with mechanical systems. We are able to gauge how people enjoyed their tea and coffee. The machine is software-driven and we have integrated the supply chain for this business based on real-time demand,” he says.
This business model is a vending-as-a-service business where the corporate pays based on the weight of tea leaves or coffee they buy, the volume consumed, a combination, or both. The company also pays a security deposit and a monthly maintenance fee. The asset is owned by Chai Point.
However, a bulk of the company’s revenue comes from its F&B business. Its cloud kitchens have been holding ground amid COVID-19.
During the pandemic, Amuleek has worked with the government of Karnataka to create micro entrepreneurs under the Samriddhi Stores scheme. Eight small businesses are now using the intelligent vending machines.
The startup has raised $34 million from Eight Road, DSG, and Saama Capital.
In a world that’s focused on digitalisation, the bet on technology could be the best way ahead for ChaiPoint.