Problem Statement-

1. Chai Point missed their target of opening retail stores by 15%, so their pace of
expansion was going slow.
2. Introducing Internet based tea dispenser, boxC.in, for their corporate customers

Should Chai Point focus on opening more retail stores, on dispensers for corporate
customers or be an omnichannel player?

Why they got into the market of Chai?

-massive market but lack of any organized players
-Most people drank tea standing at roadside tea vendors (low quality of water, ingredients
used)
-CCD and other sophisticated coffee chains were booming, so in order to replicate the
success

Chai Point: early days

-Pilot stores started in Bengaluru and Pune
-Pune stores didn’t work as 2 cities have different consumer dynamics:
a) B is more fast-moving than Pune and consumer spends are higher
b) choice of real-estate locations also played a role.

Customers expressed their excitement, gratefulness and love for Chai Point’s concept.

They wanted to make this brand for the bottom of the pyramid as India is a lower-middle
income economy; the mass market.

They decided to hire people from IIMs- wanted employees to be creative, innovative and
think out-of-the-box.

Sr. No Date Investment Amount Investment made by

Rs. 3 million (46000 USD) BIJRAL
Feb 2011 Rs 10 million (160,000 USD) Angel Investors- First round
Early 2012 Rs 10 million (160,000 USD) Angel Investors- Second round
May 2014 Rs 92 million (1.4 million) Series A Funding from Saama Capital
Sept 2015 USD 10 mIllion 2nd round of funding

Store Size
A typical store was about 400 square feet, located in a busy commercial area with low
rentals. By January 2012, they opened 10 stores that garnered media attention

Product specifications
100 ml glass of chai for Rs. 15-18

4 pillars: Quality, Hygiene, Cleanliness and Adoption

The brand was attracting young crowd who appreciated what they were doing but were not
particularly proud about being associated with Chai Point- Tea didn’t enjoy the same level of
prestige as coffee did. They wanted to make Chai Point an aspirational brand. They were
keen on retaining the mass market focus by building an affordable brand.
Opportunity to open store at the bustling street- M.G. Road, Bengaluru (shopping,
entertainment, financial hub) by winning government auction. This store soon started
attracting white-collar workers from nearby offices and people using the nearby metro
station. Sales at this store was 20 times the average of other stores.
They then opened a store at the campus of Infosys, and another one at the airport.

Operational Pivots

Changed their target market

Chai Point’s provided a hygienic, affordable market but was not an aspirational brand like
CCD or Starbucks.
So they shifted their offering to the 20% of the market which consisted of white-collar
workers:
1. Higher willingness to pay
2. Value quality hygiene and brand
3. Had 75% of their chai intake during office house

Goal of owning Monday to Friday office hours’ time space for this segment.
New stores- at corporate hubs and high streets and airports.
Stores were designed in a way that modern yet lean to ensure quick service. Since working
people get only around 15 mins.
Increased their product offering- variety of hot and iced teas, milk shakes and food items.
Introduced a range of single serve consumer packaged goods inside stores called ‘Made for
Chai’ (multigrain cookiesm traditional Indian snacks that compliment chai), own brand of
packaged water bottle.

Gradually increased its price to Rs, 30 per 100 ml.

Build brand on environmental friendliness.

Series A funding

Launching a delivery service: Chai on Call

-branded thermos flasks for takeaway
By June 2014, chai on call launched – order chai over the phone, website or app and have it
delivered to their doorstep.
This soon outgrew their takeaway format.

1litre flask and 500 ml flask .

They introduced their own fleet of 75 electric scooters.

Chai@Work
-For corporate Clients- Indians like to have chai even while working
- Indian offices has coffee dispensers that didn’t offer good, freshly brewed tea. Indians
prefer tea that has been brewed on the flame for a while. Instead of a premix blend with
water and tea bag.

They started manufacturing authentic chai dispensers. (kept freshly brewed tea hot for 2
hours) They used high quality tea leaves

Developing Technology
They started off by preparing chai by the cup, they realized that customers didn’t have the
time to lounge around for 15 mins and wait for their order as they had short breaks. So they
started preparing chai In batches and litres, and each batch size was adjusted to the
demand at that particular location. They created recipes based on one litre of chai and
packed exact quantity of ingredients in sachets thus ensuring standardization and
consistency.

Implemented Shark, a cloud-based tech platform

An Omni-Channel Beverage Company

Three channels:
1. Retail Stores
2. Chai on Call (Delivery Service)
3. Chai @ Work (B2B)

Product line expanded to private label snacks “Made for Chai”

By feb 2016 they were selling 50000 cups of chai/day through 50 retail outlets and Chai on
Call. 1000 semi-automatic dispensers across 100 corporate clients.

Facing challenges with Auto dispensers- “would not be able to scale it unless we build a
more automated machine.”

BoxC.in
Value Proposition
IoT enabled, hassle free, intelligent and connected dispenser.
Connected to a cloud platform, 100% transparency is achieved in the billing process.
Fresh and high quality pure ingredients with fresh milk procured daily.
Extremely responsive Command center with a 24 hour turnaround time for any issues.

The cloud platform offers strong customer service capabilities with a CRM dashboard and a
centralised command centre to act on customer issues and data generated by the IOT-enabled
dispensers

Read more at: https://yourstory.com/2016/09/chaipoint-launches-boxc

Why they should go ahead?

 1. Extremely strong brand image and positioning has been achieved by the brand. This
can be seen in the massive growth rates that brand has gone through since its
inception.
2. Network of clients- 1000 semi-automatic dispensers across 100 corporate clients.
They already have a well-established corporate clientele that includes Microsoft, GE
and Infosys to name a few. Thus, they can leverage the industry connections that
they have while launching BoxC.in.
3. Goes in line with their value proposition of making tea accessible to their core target
market- young working professional, while ensuring taste and quality of their
product.
4. According to Exhibit 9, CCD has around 35000 vending machines across the country.
This again shows the massive potential BoxC.in has. They can replicate the success
that coffee vending machines have had in corporate houses within the country.
5. ‘Chai’ is a customary, staple Indian beverage, consumed on a daily basis and
devoured more than any other drink. On an average, it is consumed 2-3 times a day.
The brand’s target market (white collar workers) would not go to the retail outlet this
often. They would restrict it to one, at max two trips to the outlet. But, there would be
no restriction to the number of cups they would consume throughout the day sitting in
office, if the dispenser was not too far from them. Average consumption of tea would
thus increase.
6. Customization is a great strategy to delight customers and make them loyal to your
brand. Since every person has their own way of making tea and unique taste
preferenes, with the IOT enabled dispenser they can make possible infinite
customization at scale. Customers using the touch screen can select their own volume
and quantity of milk and sweetener and the cloud-based dispenser would store their
preferences.
7. Costs of opening more retail outlets would add to their costs in the long run. Rent of
the outlet, salary of employees would be a recurring expense for the brand.
8. The IOT-enabled dispenser keeps track of every chai consumed and allow the
company to track the progress of every dispenser at any location. This insight will be
valuable to better predict demand.

Why they should continue with retail outlets:

 Chai breaks outside office break the monotony of sitting and working within the 4
walls of office. Workers look forward to stepping out in order to get some fresh air,
and a small walk.
 Heavy investment in developing supply chain from scratch and equipping them with
technology.
 They already have established their presence in the top metro cities of the country, in
bustling, commercial areas and these outlets seem to be performing well.

Keeping the above factors in mind, they should opt for an omnichannel strategy wherein their
focus will be on leveraging the success that they have seen in retail outlets and the
distribution of vending machines, and building on it by increasing their value-added services.
It would be advisable for them to take their focus away from adding more retail outlets, and
should currently invest in BoxC.in. This will allow them to stay ahead of the market and
create an interim solution for an existing problem. With the widespread adoption of
technology, offering technology backed products to one’s business model will be lucrative in
the long run. Customers prefer brands that show a positive attitude towards innovation and
tech development.

Parallelly, they should close down retail outlets that are not performing well, so that these
non-performing outlets don’t eat away their funds.

This omnichannel strategy would be an integrative approach of expansion wherein they are
reaching their target market through every possible channel- be it online through Chai on
Call, or offline through retail outlets and vending machines. The vision for the company
should be to make Chai Point’s chai available ‘whenever and wherever the customer wants
it’, thus making Chai synonymous with Chai Point.

Pricing strategy for BoxC.in :

Step 1: Selecting the pricing objective

Objectives for Chai Point:

1. Maximise market share
2. Maximise profitability
3. Aim to be a product- quality leader

Step 2: Determining demand

There is an inverse relation between price and demand. Chai Point needs to estimate
customer demand by carrying out surveys and price experiments. This would be relatively
easy for them as they have already established a customer base.

Step 3: Estimating the costs

Estimate the costs of
The manufacturing cost per machine is Rs.1,05,000.

Step 4: Selecting the pricing method

They are essentially competing on the service and benefits they offer, and not on price.
Hence, they should opt for Perceived-Value pricing wherein they base the price on how the
customer perceives or values the offering. This value is based on factors such as buyer’s
image on the performance of the product, warranty, customer support and lastly company’s
reputation.

Through promotional efforts, Chai Point needs to justify to their customers that by purchasing
the dispenser, their lifetime operating costs will be lower. This will allow them to charge a
premium for the dispenser’s unique benefits and value-added services, its durability,
company’s superior service, and longer warranty in addition to the manufacturing cost of the
product.

Because no competitors exist in the IOT-enabled tea dispenser segment, customers don’t
have any reference price to look for. Chai Point can price their product based on cost to the
customer per cup of chai (which is much lower than other alternatives), thus making product
comparison easier.