Chai Kings raised USD 3 Mn from AVT Group

Chennai’s famed tea retail chain Chai Kings has raised INR 24 Cr (USD 3 Mn) from AV Thomas & Co., eponymous for its tea estates for over a century. The company plans to double its store network in the coming year, while staying EBITDA positive at the store level

Chai Kings was founded by former colleagues Balaji Sadagopan and Jahabar Sadique in 2016. The chain currently operates 59 outlets, of which 51 are in Chennai. With the new funds, the company plans to open stores in the neighbouring states leveraging its popular brand recall.

The company is estimated to have a revenue of INR 50 Cr pa and is said to be making positive cash flows at the cafe level. With the opening of new stores, the company expects to exceed INR 100 Cr in revenues in the coming fiscal while continuing to stay EBITDA positive.

According to the company, over 60% of its revenue is derived from beverages while the rest is from food and snacks. Going forward, the company also plans to sell white-labeled snacks, which could account up to 12% of its sales.

The Chennai Angels had invested USD 1 Mn in the venture in 2020, just before the Covid-19 meltdown began, and is said to have made a partial exit, even as the new investors onboard the chain as financial partners.

The brand created an impeccable digital footprint during the 2020 lockdown, reaching consumers at their doorsteps with their innovative marketing techniques, coupled with snacks and robustly packaged tea in flasks.

Combo offers of tea with snacks had elicited huge interest from consumers during the WFH and School from Home period that lasted for over a year during FY 20-21.

Editor’s Note

F&B retail has been among the toughest to remain profitable at scale. Except Barista Coffee, one of India’s earliest cafe chains since late 90s, no other player has turned profitable at the business level over the last 2.5 decades.

Early entrants like Cafe Coffee Day,, Coffee Bean and Tea Leaf, Costa Coffee and Starbucks have all been in the negative forever.

Tea retail chains such as Chai Point, Chayos among others have scaled across the country but are yet to become PAT positive.

Though India prefers to drink tea as the first morning beverage at home predominantly, the coffee and cafe culture has been on the rise for the last 2 decades, thanks to aspirational Indians who are well travelled worldwide, as well as being exposed to global trends.

While beverages such as coffee and cold brews offer attractive margins of over 70%, the store overheads including rent and staff costs as well as steep Capex coupled with their upkeep and maintenance and food wastage, pulls down profitability.

There are an estimated 2,700+ branded coffee and tea outlets across India currently.