When a Siliguri-based online retailer of premium tea, Teabox, shortened the long, tedious process of tea distribution by using technology and algorithms in the entire supply chain, they literally modernised the face of the stagnant, colonial era tea industry, giving it a 21st-century fillip.
Now, after three years of operations – having shipped 35 million cups worth of tea to customers in 95 countries and scooping substantial funding from a few investors, including interim Chairman of Tata Sons Ltd, Ratan Tata – the company is moving towards the next phase of growth. It is now turning into an experiential brand from just a transactional e-commerce company and is creating India’s first global premium tea brand in the process.
While immediate plans include putting a lot of efforts into the company’s Research and Development (R&D) wing and giving a push to the overall marketing approach, distant plans include opening offline stores and entering newer categories like spices.
The first move towards this direction was the launch of TeaPacs, which are the individually packaged bags sealed at the source using a natural nitrogen flush that keeps the tea as fresh as the day the tea was picked. However, the company, which sources teas from over 200 growers and estates in Darjeeling, Assam and Nepal, has been already using vacuum packing to ship its loose leaf in 95 countries.
“We realised that vacuum packaging was not an ideal solution for tea bags, as it would have crushed the leaves affecting the quality and aroma. We spent the last six months in innovating our R&D and finally came out with a process that uses nitrogen flush on tea leaves within 12-14 hours of tea production to provide more convenient, on-the-go option without compromising flavor or freshness,” Founder and CEO of Teabox, Kaushal Dugar, told Indiaretailing Bureau in an exclusive interview.
While this technique has been used in packaging of food items, including potato chips, Teabox claims to be the world’s first company to use a natural nitrogen flush packaging in the beverage market. At launch, Teabox will debut 18 varieties of TeaPacs priced at .
In addition to providing convenience, TeaPacs are company’s aim to widen its consumers base and market reach in the overall tea market, Dugar said.
“Loose leaf as a product category are probably not the most liked form of having a tea, simply because of the efforts you need to invest. Moreover, as per the worldwide statistics, it is only the 5 per cent of the overall tea market. However, With the tea bags, we will be able to cater to the rest of the 85-90 per cent of the market.”
The company, which in June this year closed an undisclosed amount of venture debt from DBS Bank Ltd and a Singapore-based angel investor Cameron Jones – who also happens to be a customer of Teabox – is also making a significant investment in hiring industry talent to scale its expansion and growth.
It recently hired Amit Sharma as Chief Technology Officer and Nicole Naumoff, who is based out of the US, as Senior Vice President – Marketing.
“In addition to strengthening our R&D wing, our primary focus has been on creating brand awareness by using offline and online marketing to make headway. That’s how Naumoff comes into the picture. We have started our marketing approach, not just in terms of online ads but offline advertising like radio, TV among others,” Dugar explained.
“The overall focus for us is to not just being a transactional brand but an experiential brand by creating that awareness amongst consumers over the period of time through large marketing campaigns,” he added.
Premium Tea Consumption Finds Home in ‘HOME’
India is the second largest tea producer in the world and is ranked fourth in terms of tea exports. It produces quality specialty varietals that are as highly regarded as wines from France and whisky from Scotland. Yet, most of the Indians has always drunk humble Chai which is more of a sugar and water.
This, is particularly true for Teabox, who even after being headquartered in India, has found the majority of takers outside its home country with the US being the primary market, in terms of revenue contribution, followed by Russia.
However, Dugar has witnessed an interesting change in India’s premium tea consumption pattern lately.
“When we started three years back, India was neither on our radar nor was among the top ten countries in terms of revenue for us. But today, it is among top three market for us. We are just amazed by an amount acceptability people are having towards these types of products and looking at the pace with which it is growing, we are confident that India might become top two (market) by end of the year,” Dugar said.
The change is largely because of changes in Indian’s shopping behavior, he said. “Lot of Indians these days are well traveled, they have high disposable income, and they don’t mind paying premium where they are able to understand the value or on the flip side when brands are able to articulate the value very clearly to them and I think that’s what shaking-up the trend here.”
However, as if for now, USA will continue to remain at the top followed by Russia, India, Canada and Australia in terms of revenue contribution.
“US contributes 40-45 per cent of our overall revenue while India currently is at 20-22 per cent. But the pace at which India is growing, I expect it to be 30-55 per cent,” he said, without disclosing the exact revenue figures.
The Way Ahead
In an age where both e-commerce majors and offline retailers are trying to find convergence between online, offline world by former opening offline stores and latter moving online, Teabox too is open to the very idea of having a physical presence but says it’s not on its priority list as if for now.
“I think it (omnichannel) suits our product category even more because a lot of people would take decision or have the first impression of a product after tasting. And currently, we can’t get them to taste our product through our website. We are aware of the fact that at some point we would have to get into some sort of experiential stores or putting our product in right locations where we will get the right type of customers. But that is not something that we are going to focus at least for this quarter. Maybe in next three-quarters that will become our focus,” Dugar said.
The plans are also afoot to use Teabox’s business model as a plug and play for innovating other agri-commodities like Spices, which has also remained frozen in time, but just like offline stores, they will also take some time to shape-up.
“Yes, there are similar supply chain challenges in other agri-commodities, with Indian spices being one of the bigger ones. And we as a brand has built the infrastructure and know how to market online or create a brand online, so at some time we can surely cater to spices with spices.com. But that is still three to four years away,” he said.
For now, Dugar’s challenge is to grab a bigger share of India’s $4.8 billion premium tea market, equivalent to 80 million kilograms of premium tea that can be exported out of the country. In the past three years, the company has sold 60,000 kilograms of tea in 94 countries, less than 1 per cent of the market.
“The market is so big and we are not even scratching the surface right now. The plans is to have a bigger share in the tea market before looking at other opportunities,” he concluded.