Tea Cafes expand; start home deliveries

By: |
October 26, 2020 7:03 AM

Given the low footfall, QSRs like Chaayos and Chai Point have added more food items in their menus for delivery

Experts say these chains are “stepping away from their core offering”.Experts say these chains are “stepping away from their core offering”.

Social distancing has thrown a spanner in the works for tea cafés that were originally built around the concept of ‘catching up’. Given the low footfall, QSRs like Chaayos and Chai Point have added more food items in their menus for delivery, and are ramping up their packaged food offerings.

According to a Zomato report released in August, dining was operating at 8-10% of the pre-Covid level, while food delivery was clocking 75-80% of pre-Covid GMV. The food services industry has been making the most of home deliveries to recover the loss in business from dine-in; however, experts say, it hasn’t worked well for tea cafés. “Their core offering is ‘a fresh cup of tea’, which loses effectiveness when delivered to homes,” says Pinakiranjan Mishra, partner and national leader, consumer products and retail, EY India. The fact that tea is an oft-consumed beverage in homes is another challenge.

Beyond beverages

Tea café chains have tied up with e-commerce platforms to deliver items from their expanded food menu. Chai Point’s menu, for example, now includes ‘all-day breakfast’ options like parathas. “Time-strapped consumers are looking for food items that are filling, and hence, we have launched 12 more products,” says Amuleek Singh Bijral, co-founder and CEO, Chai Point.

The company has enabled consumers to place orders on WhatsApp. For deliveries, it has tied up with Dunzo, Shadowfax and other regional players. The effort is to “try and create an alternate discovery channel”, says Bijral.

Meanwhile, Chaayos has added street foods such as vada pav and pav bhaji to its menu. “There has been an increased demand for hygienic street food, as consumers are unable to venture out, and we want to tap that,” says Raghav Verma, co-founder, Chaayos. The company, which would receive a mix of residential and corporate orders in pre-Covid times, has lately seen a rise in order volumes from residential areas.

Both the QSRs are also betting on packaged foods. Chai Point used to offer packaged tea and snacks at its outlets pre-Covid, but now it is retailing these products through its own website. Besides tea packs, snacks such as khakra, cookies, and ingredients used to make tea, such as jaggery, honey and natural sweeteners are being sold on the platform.

Chaayos is now offering instant tea mixes, in addition to tea packs and snacks. It has tied up with e-commerce platforms — Amazon, Flipkart, Big Basket, Grofers and Milkbasket — to sell these.

Not their cup of tea?

Experts say these chains are “stepping away from their core offering”; the only leverage they have is the brand awareness they enjoy. “There are very few synergies between a café and a packaged foods business that these companies can tap,” says Devangshu Dutta, chief executive, Third Eyesight.

Entering the packaged tea and snacks categories puts them in direct competition with the big FMCG brands — Lay’s and Uncle Chipps in the snack category and Tata Tea’s and HUL’s tea brands in the packaged tea segment, for example.

Keeping their pricing in the mid-premium to premium range, experts say, would help these companies recover delivery costs and create a differentiated positioning. That seems to be the strategy adopted by the QSRs. A 250 gm pack of Chai Point’s Assam tea, for instance, is priced at Rs 199, slightly higher than HUL’s Red Label, which is priced at Rs 145. Chaayos’ pricing is more premium — Rs 298 for a 200 gm pack of masala tea.

These companies may be looking at this alternative revenue stream only for the short term, say experts, until footfalls return to the pre-Covid level. A long-term strategy, after all, would require higher investments in distribution and marketing.

Read Also: Why brands need to pivot and transform through innovation to stay relevant

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