Chaayos vs Chai Point: Which Chai Startup Is Doing Better?

Craving a perfect cup of chai but wondering which brand to choose? Enter the world of India’s top chai startups- Chaayos vs Chai Point. Both have been making waves in the tea market, but which one is truly leading the way? 

In this article, we’ll break down their performance, comparing revenue, growth, and financial health. If you want to know which chai startup is brewing up the best business, keep reading to find out!

(A) Profile Comparison of Chaayos vs Chai Point

Let’s begin our comparison analysis with the profiles of both the startups-

Note: We have already explained, “Which Chai Startup is leading the race among Chai Lovers?” Go through the articles for more details.

(B) Chaayos: A Journey from Delhi’s Streets to Nationwide Presence

Chaayos started small, but its innovative concept caught on quickly. Today, it boasts over 200 outlets across India, dominating the chai cafe landscape. The brand’s popularity isn’t confined to its physical locations; its strong social media engagement has garnered a significant following, contributing to its impressive $75 million brand value. 

In 2022, Chaayos raised $53 million in Series C funding, led by Alpha Wave Ventures and Tiger Global Management. This influx of capital has fueled its expansion and solidified its reputation as a beloved chai brand.

(B.1) The Unique ‘Meri Wali Chai’ Experience

What makes Chaayos truly special is its commitment to personalization. The idea that every Indian has a unique preference for their chai, often referred to as ‘Meri Wali Chai,’ is at the core of their mission. Whether you fancy a black pepper chai, a soothing rose cardamom blend, or a spicy Mirchi-infused cup, Chaayos cater to all tastes. This dedication to delivering a unique tea experience has played a significant role in its rapid growth.

(B.2) Business Performance: A Closer Look

Over its 11-year journey, Chaayos has expanded its offerings to include a variety of teas, snacks, and beverages, available for dine-in, takeaway, and online ordering. The sale of these products is the primary source of revenue for Chaayos. According to their website, the company currently operates 200 cafes across the country, with plans to double that number in the next few years.

However, with growth comes increased costs. In FY23, the cost of materials consumed by Chaayos accounted for 25% of their overall expenditure. This cost grew by a substantial 62.3%, from Rs.53 crore in FY22 to Rs.86 crore in FY23. Employee benefit costs also rose by 53% to Rs.78 crore in FY23.

(B.3) Managing Rising Costs

The expansion of Chaayos’ cafe network led to higher expenses for rent, advertising, promotional activities, legal fees, and other overheads. These costs surged by 65.4%, reaching Rs.349 crore in FY23, up from Rs.211 crore in FY22. Consequently, Chaayos’ losses increased by 33.8%, from Rs.71 crore in FY22 to Rs.95 crore in FY23. Despite these challenges, the company’s Return on Capital Employed (ROCE) and EBITDA margin showed some improvement, albeit remaining negative at -29% and -27%, respectively. 

On average, Chaayos spent Rs.1.47 to earn a rupee in FY23.

(B.4) Financial Health and Investments

Despite the rising costs and losses, Chaayos remains financially robust. The company had cash and bank balances of Rs.183 crore, with total current assets, including receivables and investments, amounting to Rs.266 crore as of March 2023. To date, Chaayos has raised over $90 million across various funding rounds, achieving a valuation of approximately $240 million. 

As of now, Tiger Global holds the largest stake at 18.68%, followed by Elevation Capital and Alpha Wave. Co-founders Nitin Saluja and Raghav Verma each hold a 10.5% stake in the company.

(B.5) The Road Ahead for Chaayos

Looking ahead, Chaayos aims to continue its expansion, targeting 400 cafes in the coming years. The company is focused on enhancing its personalized tea experience and maintaining its strong connection with customers. As it grows, Chaayos will need to manage its costs effectively to improve profitability and sustain its competitive edge!

(C) Chai Point: Brewing Success One Cup at a Time

Chai Point is not just another tea cafe. It’s a brand that stands out with its unique features, like a separate smoking area and a commitment to delivering chai within 30 minutes. This dedication to customer service has helped it carve a niche in the competitive tea market. Headquartered in Bengaluru, Chai Point has expanded its reach with 16 outlets in Delhi/NCR and aims to extend its presence to Mumbai and more areas in Bangalore, including metro station kiosks.

(C.1) Financial Backbone and Growth

Chai Point’s growth story is bolstered by substantial investments. The company has secured $56.6 million in total funding, with a recent $10 million round highlighting its ongoing expansion efforts. Despite fierce competition, Chai Point has managed to maintain an impressive growth trajectory. In FY21, the company saw an 89% year-on-year growth, and this momentum continued with revenues surpassing Rs.200 crore in FY23.

(C.2) Business Performance Breakdown

Let’s dive into the numbers. Chai Point’s revenue from operations surged by 88.7% to Rs.200 crore in FY23, up from Rs.106 crore in FY22. This impressive growth is a testament to the popularity of its diverse tea offerings and effective business strategies. The company’s primary revenue comes from selling a variety of teas, snacks, and beverages through dine-in, takeaway, and online orders.

Operating over 180 stores across major Indian cities like Mumbai, Chennai, Bengaluru, and Delhi, Chai Point serves both retail customers and corporate clients, with the latter contributing 40% of its income. The cost of procuring materials is the largest expense, accounting for 31% of the total expenditure. This cost rose by 87% to Rs.86 crore in FY23 from Rs.46 crore in FY22, reflecting the company’s scaling efforts.

(C.3) Managing Costs and Reducing Losses

Employee benefits also saw a notable increase of 19.2%, reaching Rs.62 crore in FY23, which includes Rs.5.83 crore allocated for ESOP (Employee Stock Ownership Plan) costs. Additionally, expenses for advertising, promotion, IT, legal fees, rent, and other overheads grew by 43%, totaling Rs.276 crore in FY23 compared to Rs.193 crore in FY22.

Despite the rise in costs, Chai Point has successfully managed to reduce its losses. The company’s losses decreased by 16.67% to Rs.70 crore in FY23 from Rs.84 crore in FY22. While its ROCE (Return on Capital Employed) and EBITDA margins are still negative at -85.1% and -18.9%, respectively, the reduction in losses is a positive sign. 

On a unit level, Chai Point spent Rs 1.38 to earn a rupee in FY23.

(C.4) Investment and Market Position

Chai Point has raised over $60 million through various funding rounds. According to TheKredible, a startup data intelligence platform, Eight Road Ventures is the largest external stakeholder with a 23.36% share, followed by Paragon Partners and Saama Capital. The company competes directly with Chaayos, which reported slightly higher revenues and losses in FY23.

(C.5) The Challenge Ahead

Both Chai Point and its competitors face the challenge of breaking through in the retail business in India. While many aspire to be the “Indian Starbucks,” achieving operational breakeven has proven difficult. Starbucks, with its aspirational brand, has come closest, but expansion costs remain a hurdle. 

For Chai Point, building a strong, aspirational brand is key to improving margins and achieving long-term profitability. Although the company has optimized supply chains and managed employee costs, significant growth with strong margins is necessary for sustained success.

(D) Chaayos vs Chai Point: Which Chai Startup is doing better in terms of Business?

For that, let’s compare the business aspects of both the tea startups side by side-

When comparing Chaayos and Chai Point, two leading chai startups, Chai Point appears to be performing better overall based on key financial metrics. Chai Point holds a higher valuation of $68.8 million compared to Chaayos’ $53 million, indicating greater investor confidence. Although Chaayos earned a higher revenue of Rs. 237 crore in FY23 compared to Chai Point’s Rs. 200 crore, Chai Point’s revenue growth rate of 88.68% surpasses Chaayos’ 75.6%.

In terms of expenses, Chaayos incurred Rs. 349 crore, reflecting a significant increase of 65.4%, whereas Chai Point managed its costs more effectively, with expenses amounting to Rs. 276 crore, which is a 43.01% increase. This efficient cost management helped Chai Point reduce its losses by 16.67% to Rs. 70 crore, whereas Chaayos’ losses increased by 33.8%, reaching Rs. 95 crore. 

Overall, Chai Point’s ability to grow rapidly while managing expenses and reducing losses suggests a more robust financial performance compared to Chaayos, positioning it better in the competitive chai market!