Over the past year we have commented on and invested into the rise of roughly a million super rich Indians (super rich not just by Indian standard but also by Western standards). We call such Indians octopi – see https://marcellus.in/blogs/the-octopus-ascends-the-rise-of-crazy-rich-indians/

One by-product of the rise of the octopi is that niche high value products are increasingly now ‘Made in India’ rather than being imported from Europe. Premium coffee is one such high value product – a booming industry in artisanal coffee has emerged in post-Pandemic India and Monami Gogoi’s article captures the point of view of the key players in this nascent industry.

The Shah Rukh Khan of the coffee industry in India is a man from Wisconsin: “Matt Chitharanjan – who was born and brought up in Wisconsin – knows that had he started his coffee company in the United States, he would not have been at the centre of India’s coffee show.

A canny businessman, he laid the foundation for Blue Tokai Coffee Roasters in Delhi with his wife Namrata and their third business partner Shivam Shahi. That was in 2013. Today, Blue Tokai has close to 110 outlets across 10 Indian states, along with a roastery and pop-up store in Japan.

“For the first three years, I used to roast all the coffee in the company,” he says.

Now, he lets the “people who are far, far better” than him at roasting do the job. He never stops pushing his love for coffee and his brand at panel discussions, podcasts and events.

“The stage that India is [now at] there’s the opportunity to create really interesting and distinct brands that do things in ways that weren’t being done in this country before and build something interesting and meaningful,” says Chitharanjan, whose favourite drink is an Americano.”

With barriers to entry being fairly low (which office worker doesn’t fantasize about leaving it all behind to open a café in Ladakh or Kalimpong), others have followed in Blue Tokai’s wake: “While Blue Tokai was spreading its wings in northern India, another coffee cup was brewing and bubbling in Bengaluru. A year earlier in 2012, two school friends and coffee lovers – Ashish D’Abreo and Tej Thammaiah – along with entrepreneur and restaurateur Phalgun Chindanand, started Flying Squirrel. Like Blue Tokai, they sold coffee beans and grounds online as well as in their dedicated cafes….

Chitharanjan and D’Abreo have attached credibility to the commodities and brands they’ve birthed. The same is true for Arshiya Bose of Black Baza Coffee and Rahul Reddy of Subko Coffee, who are at the forefront of their brands and have made their personality and passion the face of their business.”

Interestingly, all of these entrepreneurs’ quotes suggest that they are knowingly selling aspiration and upward mobility dressed up in a cup of coffee: “The beverage is a marker of economic mobility and urban India’s way of flaunting its hard-earned aspirations. Coffee is the cooler, hipper drink.

“The downside of tea is that it is cheaper and readily available. So there is no aspiration associated with having a cup of chai,” says Chitharanjan.

Even back in the day, Nescafe’s iconic ‘The taste that gets you started up’ campaign was about aspiration and independence. Now, it’s also about luxury.

Chitharanjan sees it as the natural progression of a society that is becoming wealthier. The Blue Tokai founder relates it to a combination of factors, including young people experiencing life abroad, returning home and then “wanting to replicate” things they are seeing in other countries.

“With India becoming more affluent as a country, people are starting to trade up from older commodity brands to more premium, specialised artisanal, locally produced brands,” says Chitharanjan. He’s quick to add that this is not something unique to the coffee industry. It applies to spirits, beer, meats and many other consumption categories.”

And we all now know, aspiration is no longer confined to the residents of Greater Kailash, Bandra and Koramangala which in turn means that the target market is potentially huge: “Industry experts such as Matt Chitharanjan, the CEO and co-founder of Blue Tokai Coffee, and Ashish D’Abreo, founding member of Flying Squirrel and Maverick and Farmer, note that this phenomenon isn’t limited to Delhi, Mumbai, and Bengaluru. It has percolated to Nagpur, Varanasi, and Indore, as well as other Tier-1 and Tier-2 cities.

The potential of the market is such that some say India’s coffee revolution hasn’t even begun yet.

“Many people draw a parallel that India is going to become the next China. Right? China has almost 1 lakh cafes. India right now is sitting at only 5,000. So that just shows you the scope for growth within coffee that can happen between where we’re at now and what it can look like a decade from now,” says Chitharanjan.”

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Note: the above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India as a provider of Portfolio Management Services. Marcellus Investment Managers is also regulated in the United States as an Investment Advisor.

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