A decade ago, Shivam Shahi returned to Delhi after his studies in Canada looking for a business opportunity that served India’s vast and growing population, but nothing was quite clicking.
“It was more like I want to do something, but not a job—just like a normal 23, 24-year-old kid,” Shahi recalls. He would often meet his friends at cafés to discuss ideas. Though his initial endeavours didn’t work out as he had hoped, Shahi says that cafés had become a constant part of his life as they were the cheapest option available at the time.
“Obviously sitting in a cafe, the first thing you will see is that no matter what, people are coming to this place,” Shahi says, adding that his train of thought was already shifting from tech to consumer brands.
Right Place, Right Time
The stars seemed to align for Shahi, who says that the Indian coffee industry wasn’t huge back then and it was likely that as the average income ticked up amid bullish projections for India’s economy, coffee consumption would also go up quickly.
While the idea for a consumer-facing coffee business was swirling in Shahi’s mind, he happened to connect with Matt Chitharanjan over LinkedIn. Shahi says that they were on the same page from the get-go.
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“I would say from the first meeting only, the clarity of thought was so good, and then he’s a product person, so he knew coffee better than anyone else,” Shahi says. “Then we started figuring out like what needs to be done, what is missing in India, what can be built around.”
In 2013, Chitharanjan and his partner, Namrata Asthana, had founded Blue Tokai in Delhi and began selling roasted coffee beans online. Shahi joined them in 2016. Within just a couple of years, the brand had grown to have a growing offline presence through flea markets, raising seed funding and opening its first cafe-cum-roasteries in Delhi and Mumbai.
Betting On Beans
When quizzed about what he views as the brand’s unique selling point, Shahi is quick to reply “quality and transparency.”
“No one was focusing on providing a better quality coffee, which in more technical words is called as a specialty coffee,” Shahi explains. “So we were the first to start this in India and went to the farmers and started studying about the type or the quality of beans which India grows.”
The entrepreneurs found that at the time, all the good-quality coffee was being exported, and what was left for domestic use was only “decent-grade commodity coffee.”
“Then we spoke to the farmers and explained what we are trying to build. They were also shocked, like who are these people in India, they want to sell speciality coffee,” Shahi recounts. “And they said, ‘there’s no demand,’ it will not sell. We tied up with two farms, brought some samples, roasted it, and started selling online.”
The bet clearly paid off for Blue Tokai, which today has more than 80 outlets, including those in cities like Bengaluru, Hyderabad, Kolkata, Chandigarh, Mohali and Pune. It also counts firms like A91 Partners, Anicut Capital, 8i Ventures, DSP Blackrock, Negen Capital, Mauryan Capital and White Whale Ventures as key investors. In its most recent round, the company was valued at around ₹650 crore, as per media reports.
Shahi adds that the growth is unlikely to slow down anytime soon either. “Specialty coffee in a developed country is more than 50% of the market share. In India, I would say it’s still 3-4%. So there lies a huge scope,” he points out. he also mentions that the number of companies coming into the category in India bodes well for the overall health of the industry.
Changing The Channel
Once the company had things figured out in terms of teaming up with farmers and selling specialty coffee directly to consumers, it shifted its attention towards the physical spaces in which people consumed their products.
“We started realising like you can’t make people consume coffee digitally, right?” Shahi notes. He says that the company tested out the café concept on a small scale at first before expanding rapidly in the following couple of years and surprisingly growing the number of cafés even further during the COVID-19 pandemic.
Shahi says the pandemic wasn’t a speed bump for the business. “People were willing to come to the neighbourhood cafe because most of our cafes are in a residential neighbourhood. You can walk 50 meters and you can grab a cup of coffee and that’s how we have positioned ourselves,” he says. He adds that the brand’s core values of quality and transparency helped reassure people of their health and safety.
The café business now acts as a top-of-the-funnel business for the company, Shahi says, drawing in more customers and nudging them towards the non-cafe side of the business, such as home-brewing and business-to-business products, as well. Shahi says the business is very close to breaking even.
From Chandni Chowk To Tokyo?
Blue Tokai’s ambitions didn’t end with its success in India. In 2021, the company entered the Japanese market, seeing an opportunity to recreate the demand as they did in India.
“Japan doesn’t grow coffee,” Shahi explains. “Plus, per capita coffee consumption-wise, they are the fastest growing in terms of consumption pattern when it comes to coffee.” Shahi says that Indian coffee has its own unique attractiveness and can compete with other international varieties.
Indian coffee is shade-grown and more sustainable, Shahi says. “And with the presence which we have in India, and the story behind the brand and the transparency and the quality, we started this experiment to try to take Indian coffee to a global platform because, quantitatively and qualitatively both, it can sit at par with any other country famous for coffee.”
He says that the business is finding its rhythm in the country but will need time to prove itself. “It’s working out for now. We are on a good path. And I think like any retail business cannot be built in like six months or a year. So it’s going to take its own sweet time. But the build-up is really good in Japan,” Shahi says.
Shahi is clear that building a business is all about the execution beyond ideation. “Generally, people know what they’re building and why they’re building. But how they’re building is something which needs to be well thought out because I would say the success is from how you’re building it up.”
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