CHAI POINT

5C Analysis

Company:

Chai point is a café chain with a focus on Tea. Chai Point has grown very quickly to become
a very powerful brand which serves tea with over 3,00,000 cups [2] sold every day in India.
Their offerings include Iced Chai, Ginger Chai, Masala Chai, Dum Chai, shakes etc [2].

It is physically present in eight cities- Delhi, Bangalore, Noida, Gurgaon, Pune, Mumbai,
Chennai, Hyderabad [2]- at retail locations, airports, business parks and malls. In addition to
retail stores, they provide delivery services branded “Chai on Call” and office dispensers
backed by the cloud based beverages service platform “BoxC.in” targeted at corporates [7].
The IoT enabled “BoxC” 100% automatic dispensers ensure that professionals get high
quality tea and coffee at their workplace [9]. This platform allows for high degree of billing
and consumption transparency to corporate customers as well as seamless refills.

Chai Point also has SHARK, a cloud based platform which allows for fast and smooth
integration of billing and tracking across all Chai Point outlets, through mobile
payment and Wi-Fi based setups [7] .

To know about the company, the SWOT Analysis framework has been used. The results are
mostly based on interviews with consumers, interview with collaborators along with various
web sources mentioned in the references.

Strengths:
 Prioritea Mobile Wallet: the service was launched in 2016 and was effective in
mobilization of demand. The features of the services are such that they offer 5%
cashback by adding money in the wallet and 9% cashback by paying through the
wallet [2].
 Monthly Loyalty programme: launched in 2016, the programme offers 2% cashback
on every purchase till monthly purchase is below Rs.250, 4% cashback on every
purchase after the monthly purchase has exceeded Rs.250 and free drink on every
Rs.500 spent per month [2].
 Doorstep delivery of Chai: Chai Point is known for its ginger tea, dum tea and masala
tea.
Weakness:
 Chai Point lacks variety in types of tea compared to its other competitors, especially
Chaayos. [14]
 Lack of Brand Resonance among Customers, especially compared to that enjoyed by
Café Coffee Day or Starbucks[Appendix]

Threats:
 Competition from coffee brands like café coffee day, starbucks etc once they start to
focus more on the tea industry
 Chances of competition in future because of the relatively low investment required to
open stores [1]

Opportunity:
 Relatively low saturation of organized players in the tea industry compared to the
coffee industry; especially in a country where tea consumption outstrips coffee
consumption 10 to 1. [3]
 Rapidly increasing middle class with increasing disposable income [17]

Competitors:

Chai Point's primary competitors are Chaayos, Chaipatty Teafe, and Udyan Tea [13] . Its
secondary competitors are local ubiquitous tea stalls across every street in India which
offer tea at relatively lower price than the primary competitors. The competition of
Chai Point has been heating up as coffee is taking a strong hold among the younger
audience [12] and corporate employees. Entry of Global chain retailers like Barista, The
Coffee Bean, Starbucks etc. has attracted regular coffee goers, celebrities and business
people to visit coffee shops [12] . In companies which have space constraints, corporate
employees use cafés as their meeting place. Chai Point has huge opportunity to tap
into the massive tea market and increase their presence all over India. However, it is
highly likely that it will face threats from the leading coffee retailers and existing
other tea competitors in the market.

Chai Point appears to be trying to differentiate itself with various features. Chai Point
has a Green Initiative: Chai Point joined the Green revolution by using electric
scooters for its chai delivery, partnering with Ampere vehicle Pvt. limited and Hero
Electric. The delivery fleet has approximately 60 scooters [11] and this is called the
Green-T- Brigade, brought into effective action in Bangalore and likely to be deployed
in Chennai and Mumbai in the near future.

Chai Point has launched “BoxC.in” [7] which is India’s first cloud based platform for
beverage services. It includes automatic IoT enabled dispensers. The command centre
makes it possible for the maintenance and repair team of chai point to get live
monitoring information from IOT enabled dispensers, and this ensures a timely
delivery and refill service. Chai Point also uses SHARK [7] , a cloud based platform
which allows amalgamation of billing and tracking at its outlets across India. This
software also predicts the future demand by integrating suppliers and warehouse with
the point of sales.
Customers :

Chai Point uses a healthy and hygienic brewing process which is appreciated by tea
connoisseurs. The tea leaves are sourced from their partner estates in Assam, Nilgiris
and Darjeeling [10] . It has a 4-stage filtration process and is prepared with sulphur free
sugar for health and flavour. Major offerings from them are Dum Chai, Lemon Chai,
Masala Chai, Green Chai, Ginger Chai, Ice teas, milk shakes [16] etc.

The major target segment of Chai point is the working professional, upper middle-
class people who demand high quality tea. [1] Chai Point has always concentrated on
delivering consistent quality of Chai that were delivered in heat retaining flasks [15]
which are made in India. It has also services like “Chai at work” for corporate
companies. They have set up full-fledged mini stores at corporate parks to provide
high quality tea to their target customer base. Apart from the beverages, they also
serve goods that are complimentary to tea. Chai point also has mobile android [14] and
iOS apps along with prepaid and rewards platform for customers to avail discounts
and benefits across all their stores [2] .

Context

The tea market in India has a very high percentage [6] share in the overall Hot Drink market. It
has 61.2% [6] market share (447,800 Tonnes [6]) in terms of total volume of retail and food-
service (731,200 Tonnes [6]). In this tea has a market share of 91.16% [6] (130000 Tonnes [6]) in
food-service segment (142600 Tonnes [6]). This shows the healthy market condition for selling
tea. A large percentage of the tea bought in the food-service category is sold by small tea
sellers and their data is not captured in the formal food-service segment [6]. This shows that
there is a huge potential for Chai point to penetrate the informal segment.

With the projected high growth of Indian economy, consumers are likely to become more
sophisticated and demanding in their product preferences [6]. Also as their disposal income
level rises along with growing focus on quality and hygiene, people are likely to shift from
the informal tea market to formal tea market [6]. Demonetization also played a significant role
in this shift due to the currency shortage across the country [6]. All these factors will help Chai
Point to increase their market share.

Outlets like Chai Point will benefit from GST as the net sales tax rate on selling tea is 18% [18]
which is lower than earlier in many states now; viz. 20.1% (5.6% service tax + 14.5% VAT)
in Karnataka [8]. Reduction in the tax rate will lower the selling price of tea which will help in
attracting more customer towards tea outlets [6].

Collaborators
Being a tea seller, Chai Point has tea farmers as their major collaborators. They source tea
from the tea estates of Assam, Darjeeling and the Nilgiris [10].

Along with tea, Chai Point serves products like Mathri, Gud Chana, Cake Rusk, Masala
Peanuts, Quinoa Puff, Multigrain biscuits, and Cornflakes Mix [10]. For these items, they have
Unibic as their cookie partner and Maiyas as their Restaurant partner [1].

Chai Point has penetration in 8 cities and along with their own delivery fleet of 60 [11] electric
scooters, they have collaboration with food ordering apps like Swiggy, Food Panda and
Zomato [1].

STP Analysis

Segmentation:

Geographic Segmentation:

India is a tea driven country. Almost all the states of India prefer tea over coffee [6]. With a
very little penetration of branded food service in Hot beverage market, large percentage of tea
is sold by small tea sellers in India, Chai Point has a huge potential to penetrate this market
all over India.

Chai point has stores at Delhi, Bangalore, Mumbai, Noida, Gurgaon, Pune, Chennai and
Hyderabad [2]. Chai Point is targeting White collar workers [1]. All these cities have high
population density and a high number of white collar workers [4].

Demographic segmentation:

In India, there is no major difference in the consumption pattern of tea between male and
female [6]. People from all income group like to have tea. Irrespective of education level and
occupation, people prefer tea over coffee. As it is a premium brand, Chai point is targeting
high income group mostly in the big cities.

Chai point is advertising only on the online platform and attracting customers using internet.

Based on age group, mostly 30-40 aged people prefer to buy tea from Chai point.
Age Group: [Appendix]
<20 10%
20-30 30%
30-40 40%
40+ 20%
*Approximates suggested by Employees

Behavioural Segmentation:
Tea is an important part of Indian lifestyle. Most of the people are regular drinker of tea and
have around 2 cups of tea daily. Even with the increasing popularity of coffee, more than
50% of the population drink tea.

In India, people usually make tea in their home and even when they don’t make it, people
prefer to go outside and buy tea in an outlet or small tea shop rather than order it online.

Around 67% of the people in the big cities know about the Chai Point brand and more than
40% like to buy iced tea among the offered products.

Most of the people coming to Chai point are one-time users. Repeat customers are mostly
working professionals.
Repeat Customers: 20%, especially working professionals.
One-time customers: 75%
Non – tea customers: 5% (Appendix)
*Approximates suggested by Employees

Needs based:
Even though the coffee market is extremely small compared to the tea market in India, the
organized coffee market has been saturated with players like Café Coffee Day, Starbucks,
Barista etc [3]. However, until recently, there has been a dearth of players in the organized tea
market. Chai point has taken advantage of this situation.

With the increasing disposable income, people are moving towards formal food service sector
in hot beverage market like restaurants, bakery, tea & coffee shops. In food service market for
tea, most of the customers have not developed any loyalty towards any brand and they keep
on switching between various tea outlets, restaurants and bakery.

People are willing to pay high price for hot beverages mostly for the ambience.

Segment Identification:
The employees suggested that the retail customers could be divided into 3 major segments:
Students, Working professionals and Households.

Attractiveness:
The attractiveness of various segments can be considered as follows;
Students: Uncertain, as suggested by employees.
Working professionals: High
Working professionals are a major revenue driver for Chai Point, with approximately ~50%
of customers being part of that segment. (Appendix)
Households: High
Chai Point has specific delivery-only stores in areas such as BTM Bangalore, where most of
sales are to households (Appendix)

Value proposition:
Students:
To attract students, Chai Point carries milk shakes and ice teas at relatively cheap rates
compared to the major coffee chains.
Working professionals:
The most important requirement for the working professional appears to be high quality tea,
with a major preference for ginger tea and green tea. The “BoxC” IoT enabled dispensers also
target this segment, along with the prioritea wallet & reward program.
Households:
The major value proposition for households appears to be the quick delivery of tea in
disposable heat retaining flasks. This is further helped by the collaboration with Swiggy.

Targeting:

Chai Point appears to be following a strategy of Multiple Segment Specialization, with focus
on the working professional and households, as evidenced by the tea dispensers and special
home delivery locations [appendix] respectively
The overriding segment target that Chai Point has is that of “upper working-class Indians [5]”

The products used to target the various segments include:

Students: Shakes, iced tea, etc.
Professionals: Tea in retail locations, delivery of tea, automatic dispensers in offices.
Households: Tea on delivery, Introduction of tea leaves to be brewed at home.

Positioning:

Points Of Parity:
Fast Service: Along with other players i.e. Chaayos, Teabox [13] etc in the tea market Chai
Point also provides quick customer delivery service with "Chai on Call" [2].

Points Of Differentiation:
Specialization in tea: Chai Point is one of the few brands which specializes in tea, which is
the bestselling hot beverage in India [6]
India specific snacks- Chai Point is providing Indian specific snacks like Mathri, Cake Rusk,
Masala Peanuts, Quinoa Puff, Multigrain biscuits, Gud Chana and Cornflakes Mix which no
other competitor including Chayoos provides [10] [16].
Disposable flasks- Chai Point deliver tea in disposable heat retaining flasks to the customers.

Branding:

Chai Point enjoys a Niche/Momentum position in the Universe of Brand Performance with
low brand strength but high potential. Chai Point should focus on building its brand and
strengthening itself in the organized tea market.
In the Ansoff Product Matrix, Chai Point is in a position with an established product and an
established market. It must try to achieve Market Penetration and garner market share from
its competitors.

Recommendations:

Chai Point should improve the quality of their snacks [Appendix]. It will help them to improve
their stores sale considerably as people tends to buy tea with snacks as a complementary item.

Many people are not able to relate to the brand "Chai Point". Chai Point should improve their
marketing to increase their branding. Youtube Ads can be used as a cost-effective method to
achieve this

References:
1.http://www.thehindubusinessline.com/companies/chai-point-to-invest-15-crore-to-open-60-
stores/article8975013.ece
2. https://chaipoint.com
3. https://www.cnbc.com/2015/12/01/tea-still-top-beverage-in-india-despite-cafe-coffee-days-
rising-coffee-culture.html
4. http://www.financialexpress.com/archive/white-collar-jobs-focused-in-7-cities/66688/
5. http://timesofindia.indiatimes.com/business/india-business/Why-local-brands-like-
Wildcraft-Chai-Point-and-Chumbak-are-trying-to-score-big-with-desi-
consumers/articleshow/50913209.cms
6. Hot drinks in India, Industry overview, 27th April 2017:- Article from Eurocenter
7.https://chaipoint.com/technology.html
8. "Know the charges, taxes on your restaurant bill to avoid being overcharged." The
Economic Times. N.p., n.d. Web. 06 Aug. 2017.
9. https://www.indianweb2.com/2016/07/28/chai-point-launches-cloud-based-beverage-
services-platform-boxc/
10. https://chaipoint.com/about.html
11.https://yourstory.com/2016/01/chai-point-electric-bikes/
12.http://www.rncos.com/Market-Analysis-Reports/Indian-Coffee-Chain-Market-Outlook-
2022-IM881.htm
13.http://www.businessalligators.com/best-leading-chai-startups-india/
14.https://chaipoint.com/prioritea-wallet.html
15.http://economictimes.indiatimes.com/small-biz/startups/chai-point-to-launch-uni-350ml-
variant-of-delivery-flask/articleshow/50628096.cms
16.https://www.zomato.com/bangalore/chai-point-mg-road/menu#tabtop
17. https://www.weforum.org/agenda/2016/11/6-surprising-facts-about-india-s-exploding-
middle-class/
18. https://www.chaayos.com

Appendix:

Interview 1:
Employees at Retail Location:

Age Groups of Customers (Approximate):

<20 10%
20-30 30%
30-40 40%
40+ 20%

 3 Types of customers: Students, Working Professionals, Families

 Majority of In- Store sales are to Working professionals
 Large amount of revenue from Home delivery, unwilling to specify a percentage
 About 20% are regulars, 75% are not regulars, 5% buy other items such as water bottles
 Among the repeat customers, majority are working professionals
 Ginger tea and Green tea are the best sellers
 Student customers prefer milk shakes and ice tea, working professionals prefer tea,
families also go for tea

Interview 2:
Employee at Home Delivery only Location:

 Majority of sales are to households

 A large number of orders come from “Swiggy”, a delivery partner
 A large number of home orders are repeat orders
 Brew tea just like it would be brewed at home

Interview 3:
Customer:
 Like the taste of chai point
 Coffee person, but go for tea occasionally
 Goes only to Chai Point for tea
 Aware that Café Coffee Day has tea, but do not want to try tea there
Interview 4:
Family:
 Excellent quality of tea
 Goes to chai point every time they go the mall
 Goes to Café Coffee Day for tea, but prefer Chai Point
 Prefer Tea over coffee
 Prefers Ginger tea over other types of tea
 One tea daily

Interview 5:
 Not a tea person
 Comes to Chai Point only for the banana cake
 Friend recommended banana cake from Chai Point

Interview 6:
 Works in the mall itself
 Two teas daily from chai point
 Prefers Chai Point over local chaiwallah because of hygiene, convenience
 Not a coffee person, does not really go to Café coffee Day
 Did not know Café Coffee day serves tea

Interview 7:
 Excellent Quality of Tea at Chai Point
 Snacks should be improved
 Prices have been raised recently, has caused some consternation
 Recommends that Chai Point come up with new varieties of Tea