How Blue Tokai is Brewing a Coffee Revolution in India

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Salutations, Olio aficionados! 👋

Happy Hump Day and welcome to the 92nd edition of Weekly Olio - your trusted source for giggles, wisdom, and a dash of intrigue, courtesy of our tantalizing thought piece (yes, buckle up for Publisher's Parmesan). 🧀

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The Quote󠀢 💭

The Tweet 🐦

August 15 is Indian Independence Day. But in truth it took several more decades for India to get truly independent from socialism. Now that day is here.

The Infographic 💹

Holding other things constant, if a country increases its share of global GDP by two percentage points, its share in Olympic medals increases by three points. The best thing a government can do for winning Olympic medals is economic growth.

The Short Read 📝

Global Chips Battle Intensifies With $81 Billion Subsidy Surge - by Bloomberg

Semiconductors have been hot for quite some time now. In an attempt to shut out China and maintain its technological advantage, the West is leaving no stone unturned. US and EU have already committed almost $81B in subsidies to crank out the next generation of chips. This is akin to the space war between the USA and the USSR during the Cold War.

And this is just the beginning - government’s worldwide have earmarked more than $380B to push manufacturing of new-age chips. These subsidies have clearly marked the fault line in the trade-wars between China and the US and have also given a lifeline to struggling firms like Intel - once the king of the semiconductor universe. And it is not just the developed countries - countries like India have committed to invest upwards of $10B in setting up semiconductors manufacturing locally. The chip war is building up to be an intense fight.

The Long Read 📜

The Folly of Certainty - by Howard Marks

This week, we are back with another memo from one of our favourite authors - Howard Marks, the co-founder and co-chairman of Oaktree Capital Management. In this memo, he takes an often repeated but easily ignored topic of certainty and forecasts.

We live in a world that is complex beyond imagination - and the complexity has only increased with time. In such a complex system, it is almost impossible for a macro-forecaster to take into account all the known variables that'll affect the future and also make concessions for the random influences that are likely to impact the future. If the variables themselves are not know with 100% certainty, how can the forecast be accurate or even useful? Yet, investors, economists and politicians continue to predict the future as if they are certain.

Publisher’s Parmesan 🧀

How Blue Tokai is Brewing a Coffee Revolution in India

When it comes to coffee culture in India, few names are as iconic as Blue Tokai. Valued at an impressive ₹650 crores (~$80 million), this company is not just another coffee chain; it’s a revolution in a cup. With over ₹130 crores (~$15 million) in annual revenue, Blue Tokai is disrupting India's massive ₹4,000 crore (~$480 million) coffee industry, carving a niche for itself in a market that has been historically dominated by giants like Starbucks and Café Coffee Day (CCD).

Before we delve into how Blue Tokai has managed to capture the hearts of Indian coffee lovers, it's important to understand just how much the world, and indeed India, loves coffee.

Coffee is the second most consumed beverage globally, only behind water. It's one of the top 10 traded commodities in the world, standing tall alongside crude oil, gold, and copper. The love for coffee is so ingrained in human culture that, historically, in certain Arab cultures, a woman could divorce her husband if he didn’t share her passion for coffee. That’s how serious people are about their brew. 😅😅

This global affection for coffee is divided into what experts call the “three waves of coffee,” each wave representing a significant shift in how people consume and appreciate this beloved beverage.

The Three Waves of Coffee

1. The First Wave: The first wave of coffee began in the 1800s when coffee was commoditized. At this stage, the focus was on making coffee accessible to the masses, and instant coffee became the norm. Brands didn’t matter much; people were just starting to appreciate the kick of caffeine.

2. The Second Wave: Fast forward 170 years, and the second wave ushered in a transformation led by giants like Starbucks. This period saw coffee becoming not just a drink but an experience. Cafes started offering a place to relax, work, and socialize, with innovative drinks like Frappuccinos broadening coffee's appeal to a larger audience.

3. The Third Wave: The third wave brought about a shift towards coffee connoisseurship. People began caring about the origins of their coffee, the freshness of the beans, the roast profile, and how their coffee was brewed. This wave gave rise to the concept of “specialty coffee,” which refers to coffee that scores 80+ points on a 100-point scale as per the Specialty Coffee Association of America (SCAA).

India’s Slow Adoption and Blue Tokai’s Emergence

Despite its rich history and culture, India has been a slow adopter of these coffee waves. Even in 2011, when the world was well into the third wave, India was still primarily in the second wave—dominated by café culture. The market was split into two broad categories:

- Instant Coffee: This category, dominated by brands like Bru and Nescafé, catered to home consumption and controlled over 70% of India's instant coffee market.

- Cafés: The café category was led by Café Coffee Day (CCD), which had around 50% market share with more than 1,200 outlets across India. Starbucks entered the scene in 2012, offering a premium coffee experience, but specialty coffee was still largely inaccessible.

The Birth of Blue Tokai

This is where Blue Tokai enters the picture. Founded by Matt Chitharanjan, who was born and raised in the US, Blue Tokai was born out of Matt’s dissatisfaction with the coffee available in India when he moved here in 2011. Despite India being one of the world’s top coffee producers, Matt found that the local coffee scene lacked quality and depth.

Motivated by his passion for high-quality coffee, Matt and his wife Namrata began their journey by roasting coffee beans at home in Delhi. What started as a small home roastery has now grown into a brand with over 100 outlets across India, offering Indian consumers their first taste of specialty coffee.

Product Depth

One of Blue Tokai's key strengths lies in its product depth. From the very beginning, Matt, a self-proclaimed coffee nerd, set high standards for their product. Blue Tokai only uses 100% pure Arabica coffee beans, known for their superior flavor profile. But it’s not just about the beans; the roasting process is equally important.

Blue Tokai revolutionized the Indian market by roasting beans only after a customer placed an order. This ensured that customers received freshly roasted coffee, delivered within a four-week window to maintain optimal flavor. Such an approach was unheard of in India at the time and set Blue Tokai apart from other brands.

Moreover, Blue Tokai didn’t just stop at roasting. They meticulously selected the best farms in India, focusing on those in Karnataka, Kerala, and Tamil Nadu—the three states that produce over 96% of India’s coffee. By working directly with farmers, Blue Tokai ensured a steady supply of high-quality beans while offering farmers better prices and recognition.

Building Relationships

Another factor behind Blue Tokai’s success is its focus on building strong relationships—not just with customers but also with suppliers. The company has built a loyal customer base by being transparent about its processes and empowering the farmers who grow their coffee.

In India, where 90% of coffee farmers are smallholders with less than 10 hectares of land, Blue Tokai’s approach has been a game-changer. By adding the names of the estates where the coffee is grown on every pack, Blue Tokai has given farmers visibility and recognition they never had before. This transparency and focus on long-term partnerships have resonated with a young, socially-conscious customer base.

Moreover, Blue Tokai has invested heavily in educating its customers. Through detailed resources on their website and simple brewing guides, they’ve demystified specialty coffee for the average Indian consumer. Their efforts to popularize the use of everyday household items like chai strainers for brewing coffee have further lowered the barriers to entry, making specialty coffee accessible to a wider audience.

Smart Scaling Strategies

While product quality and customer relationships are crucial, Blue Tokai’s success also hinges on its smart expansion strategy. Unlike many coffee brands that aim for rapid expansion, Blue Tokai has focused on a top-down penetration strategy, targeting only tier-one cities. This deliberate positioning as a premium brand has helped maintain its image and appeal.

Additionally, Blue Tokai’s cafes, though fewer in number compared to other chains, play a strategic role. They not only serve as a physical touchpoint for customer acquisition and retention but also contribute significantly to the company’s revenue. Currently, cafes account for 66% of Blue Tokai’s revenue, and the company plans to add 80 new stores each year.

Moreover, Blue Tokai’s expansion into the B2B space has also been a significant growth driver. Supplying coffee to corporate clients, who value high-quality coffee for their employees and clients, now contributes to 50% of the company’s coffee revenue outside its cafes.

Conclusion

Blue Tokai’s journey from a small home roastery to a ₹650 crore company is a testament to the power of passion, quality, and smart business strategies. By focusing on product depth, building strong relationships, and scaling smartly, Blue Tokai has not only disrupted the Indian coffee market but has also set new standards for what coffee culture can be in India.

As they continue to grow, Blue Tokai is not just selling coffee; they’re brewing a revolution, one cup at a time.

Olio Jobs 💼

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We’ll be back in your inbox 2 PM IST next Wednesday. Till then, have a productive week!

Peeyush and Mohit

Disclaimer: The views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group or individual.