Abhijeet Anand, founder and chief executive officer of AbCoffee talks about the changing lifestyles of Indians; the future of coffee in the chai-loving country, and the best model suited to serve coffee to Indians
Coffeehouse chains have been mushrooming throughout India over the years as a host of global brands and Indian upstarts are trying to convert millions of tea-drinking Indians to coffee connoisseurs. AbCoffee has modelled itself on China’s grab-on-the-go upstart Luckin Coffee, which is giving Starbucks a run for its money in the Middle Kingdom. AbCoffee is based on an asset-light coffee counters model, which the company plans to replicate into 10,000 coffee counters in the next decade. Abhijeet Anand, founder and chief executive officer of AbCoffee talks about the changing lifestyles of Indians; the future of coffee IN the chai-loving country, and the best model suited to serve coffee to Indians. Edited excerpts:
From an engineer working for an oil company to selling coffee, how did this happen?
What do engineers do? They solve problems. But coffee happened as an accident. When I was in Europe, I got converted from a chai-drinking person into a coffee person. When I came back to India after a couple of years, I realized there was a huge gap in the coffee market. Oil is the largest traded commodity in the world. Coffee is the second. Oil runs nations. Coffee runs people who run those nations. So, I found it a natural transition.
You said it is an engineer’s job to solve things. What are you solving now with your venture?
When I came back to India, I spent almost Rs25,000 a month on just coffee…An average cup of coffee in India costs Rs 250 and I drink coffee twice or thrice a day. I realized I was spending the same amount of money here that I would spend in Europe on a beverage.
India is the fifth-largest coffee producer and the seventh-largest exporter of coffee in the world. Still, coffee is expensive here. It should have been much cheaper in terms of income parity level. When I delved deeper, I uncovered that coffee is placed in the luxury segment. You need to reach somewhere to drink coffee; pay a premium to have it.
But your model is grab-and-go, similar to Luckin Coffee in China…
While doing my research, I did come across Luckin Coffee, which has done an incredible job in China. India and China have both been tea-drinking countries for centuries. Naturally, the same trend is now catching up in India, where coffee consumption is growing at a rapid pace, thanks to globalization, GDP growth, and the young crowd being coffee-first people.
There are a lot of similarities in how Luckin has done it in China. However, we believe the Luckin model, the American model, or the British model doesn’t work in India. It must be an Indianized model.
What is the Indian model?
Where did Indian community building happen in the last four decades? Chai tapris (tea sellers)—places where you get your cup of tea in less than a minute. It is already boiling. They pour it to you in a cup. It is quick to serve, at a reasonable price. And what do you do there? You have a chitchat. You spend five to 15 minutes, depending on the time you have on hand. It is an office break, evening chai, and morning chai that keeps you on the go. The model is grab, stay, go. Chai tapris or chai joints are not co-working spaces. They are community building, chitchat break places.
Tell me a coffee alternative to that. There is none. You have to go to a mall or a high street. Sometimes you don’t find space. Sometimes there is a queue… there are a lot of issues. You spend 10-15 minutes to get a cup of coffee. Coffee is an instant-consumption beverage. That is where we come in.
We are coffee on the go. Efficient model of serving coffee in one-and-half minutes. Market pricing is one-third. Coffee quality is one of the best that is grown in the country. We do speciality grades. Combine all these three factors into tiny outlets and we become your go-to coffee shop.
Luckin is Luckin partly because of the technology it uses to serve coffee on the go. What technology are you bringing?
The model we are in is a playbook model. It just cannot happen without technology. There are simple ways to order coffee. The first is to go to the store the conventional way. The second is to order from aggregators like Swiggy or Zomato, which is again, a conventional way. The third way is to visit our website Abcoffee.in, enter your location, and you will find all the outlets near you listed. Select whichever is on your way and pre-order your coffee. It gets ready before you arrive. We have several outlets where people are driving through the lane. They order before they enter the lane, and they grab it.
In that case, you need a lot of stores.
Absolutely. The target is 150 this year. You need about 10,000 AbCoffee points in the country in the next decade.
Since your model is coffee through counters, you don’t need much space. Is that where you are saving money and passing the benefit on to the consumers?
See, cost is just one thing, but it is not loyalty. Cost does not bring you back. What brings you back is the right quality, the right price, and consistency. When I was surveying the market in 2021, I realized the same gap I mentioned earlier, plus the gap that the generation today is of coffee-first people.
So, do you mean coffee has a great future in India?
Oh, incredible! What changed in China was the fast GDP growth. People are slogging more hours and helping the economy grow. What’s happening in India today, is a similar phenomenon. Unlike China, India is much deeper into tier one, tier two, tier three, and tier four cities and towns. The differentiation among the tiers here is much broader. However, the spending capacity is there. But the value for money proposition also changes. If you go to Guwahati or Patna, a person has a lot of money to spend, but s/he will spend on value.
This is unlike in larger cities, where there are other factors, which affect the purchase of the products. There is a lot of consumerism… consumption happening in the cities. I believe India will have its own way. One fundamental change that has happened in the last five to seven years is a perception change—Earlier, we used to praise and glorify international brands. Today, there is a proud feeling about indigenous brands.
Lately, the coffee chain business in India has been stirring up. Starbucks is ramping up. Tim Hortons is aggressive. There are a lot of homegrown coffee chains mushrooming….
If I look at the numbers, coffee is growing at less than 1.5% year-on-year, globally. In India, it is growing at 12%. Tell me a reason. If an international chain has to grow, where will it grow? There is one place in the world and that is India.
You conducted a survey before entering the space. What did your survey reveal?
It showed that the coffee market is growing above 20% for our kind of price points.
