Why this investment banker decided to brew up a business in the bottled iced tea segment
Delhi-based Brewhouse manufactures brewed iced tea; the startup has tied up with cafes, restaurants and hotels, and is now aiming a pan-India presence.
A hot cup of tea gets many conversations started at roadside tapris, highway nukkads, or elite cafes. But what if you prefer your cuppa cold? IIM-Calcutta graduate and investment banker Siddharth Jain felt the iced tea option was lacking in India, especially when he compared the scenario to markets in Asia, Europe and the US.
“I tried looking at chai bars and tea vending machines but settled on bottled iced tea because I felt that there was a gap. People are moving to healthier beverages, but when we talk about bottled beverage options, there are few varieties of iced tea in the market,” Siddharth says. This led to the founding of Brewhouse Ice Tea in May 2017 in Delhi.
The startup had Dheeraj Jain of Redcliffe Capital as one of the initial investors; in November 2017, Singapore Exchange-listed global FMCG company Food Empire invested $600,000 in the company. This is reportedly the only investment by Food Empire in the consumer-facing segment in India. In September last year, Brewhouse raised an additional $2 million in funding.
According to Siddharth, the reason Brewhouse stood out was because the concept of real brews in a bottled ice tea form was rarely experimented with in India. He felt this was much needed as tea contributes to 8 percent of the total beverage market. “So, after carbonated drinks and juices, there’s iced tea.”
However, there are larger brands in the space, including Nestle’s Lipton and Kerala-based startup Eten Craft. Other beverage biggies such as Pepsi and Coca-Cola are also said to be looking at the space.
Unlike in the US, where close to 80-85 percent of tea consumption is in the form of iced tea, the consumption pattern still gravitates towards hot beverages in India. According to a Mintel report, India is the largest consumer of packaged tea; we are believed to have consumed 678,200 tonnes of packaged tea in 2017.
The herbal and iced tea segment, while nascent, is believed to be growing at 14 percent year-on-year. So what sets Brewhouse apart when larger players are keenly considering the space?
“The difference in our brand is real, brewed tea. It means we take high quality, real tea leaves, brew them on-site, and bottle the liquid. We don’t use concentrates. This gives you the natural taste of tea,” Siddharth says.
Siddharth says being a tea drinking country, the 30-member Brewhouse team understands the taste of tea and iced tea.
Choosing the Nilgiris
For sourcing, Siddharth tried over 100 types of teas from different tea gardens of India, especially the Nilgiris, because his own research showed Nilgiri tea was better for iced tea. “It is lighter, does not get dense in bottled air, can be flavoured more easily, and doesn’t get cloudy,” he says.
He initially experimented with recipes off the internet, testing them out on a group of family and friends. He worked on the products at a small office kitchen and collaborated with a small design agency for packaging and branding.
“We tested sugar levels and finally decided not to make it too sweet. We showcased the product to friends, families, and a few retailers, who suggested that going with glass bottles was a good idea. Glass bottles give long shelf life; you don’t need to add any preservatives,” Siddharth says.
The manufacturing conundrum
“I had the product ready but did not have the manufacturing setup. I had worked with an F&B manufacturer in Pune, but they couldn’t make it in the right way. I couldn’t get the right quality,” Siddharth says.
That is when he met angel investor Dheeraj Jain. Dheeraj loved the product and said that they would first make 2,000 bottles on their own and see how things went.
“I said we would have to make at least 5,000 bottles. He said let us give it to one client and see. It was through him I met Kabir (Singh) who runs the Burger Singh chain. He said give me something within a month. The next day he asked me to give 10 cases; I had the material (bottles, cartons etc), so we could make the 10 cases. Then he asked for 50 pieces. So it literally started like that; we made the first 100 cases in our office kitchen.”
After the initial funding, the team set up a manufacturing setup on the outskirts of Delhi, with a total investment of Rs 1 crore.
Manufacturing remained a challenge due to the lack of manufacturing infrastructure. Siddharth says there aren’t many good third-party manufacturers, unlike in other developed markets. This also meant a lot of equipment needed to be imported. When Food Empire invested in Brewhouse, the startup was also able to take the company’s manufacturing support and help.
Tie-ups and future plans
In 2017, they looked at the B2B market catering to the HORECA (Hotels, Restaurants and Catering) segment. Starting with Burger Singh, they have added other restaurant chains in Delhi. After cracking that market, they moved into the retail segment with four SKUs. They charge a markup of 20 percent.
Brewhouse began operations in Delhi and launched in other cities in the last couple of months. “We now are in about 2,000 points of sales across India, of which 1,000 are in Delhi,” Siddharth says.
In Chennai, Brewhouse has about 130 counters; there are about 100+ counters in Bengaluru. Jaipur and Chandigarh have about 100 counters each while Mumbai has between 60 and 70. These are across different retail outlets. Brewhouse continues to look at retail and B2B tie-ups.
Speaking on future plans, Siddharth says, “Iced tea as a product goes very well with all kinds of food. So we are there in burger chains, pizza chains, kebab chains, Chinese outlets etc. That's always going to be a big plus for us. We are in a few 5-star hotels, including Le Meridian and Pride Plaza in Delhi. We are close to sealing a few more deals.”
“We are looking at expanding to different cities and doing pan-India distribution. We also want to come up with new variants and pack sizes, which will be more affordable. This will help us expand the market,” Siddharth says.