How Venture Catalysts-backed F5 is disrupting the unorganized tea & snacks segment

For most of us our mornings aren’t complete until we’ve had our morning tea. It’s more than just a beverage and forms an integral part of the popular culture, without which meetings, office spaces, college campuses and even parties won’t be the same. To give you an idea about how loved it is, here’s a fact: The quantity of tea sold in Delhi every day is estimated to be worth over Rs 4,000 crore. From that perspective, tea vendors and their shops are an important part of the local economy. The average tea drinker in India comes from different sections of the society and occupations, and drinks at least two cups every day at such tea stalls. However, a common grouse that most tea drinkers at these shops have is that they lack quality and hygiene.

New Delhi-based startup is now offering office-goers a hygienic and refreshing way of enjoying India’s favourite beverage i.e. tea. The startup is the brainchild of IIM-Lucknow alumni Raghav Arora and Lalit Kumar Agarwal, who founded the startup in 2018. The duo aims to organise and standardise the daily workplace consumption market which is estimated to be over $50 billion in India according to the Economic Survey of India. 

The startup, backed by Venture Catalysts, LetsVentureand Huddle, among other investors, has so far sold over 50 lakh cups of tea, and on an average serves 10,000 cups in a day! Priced at anything between Rs 8-Rs 10 per cup, the tea is way cheaper than what’s on the menu of a premium hotel, where a cup could cost around Rs 100-Rs 250. And, they are currently managing an EBITDA profit even by selling each cup of tea at just Rs 8.

Recipe for success

While F5 started with tea, it has now expanded to cater to all kinds of food requirements of a working individual. 

“New India is digital, aspirational, brand-hungry and at the same time is value-conscious. Our vision is to be a one-stop solution for our users’ daily workplace needs — ranging from tea, coffee, snacks, meals, freshly cut fruits, and juices, among various other items. We want to build a brand for the working Indian population that provides high-quality products at an affordable price. We think this is a big market, and no organized player has so far been able to crack this market,” said Raghav, who has earlier worked with Avendus Capital.  

Raghav says that the business has picked up well, with F5 clocking Rs 3.5 crores in annual recurring revenues despite a complete washout during the lockdowns after the COVID-19 outbreak. “COVID-19 was structurally a significant event that raised the bar for expectations of general hygiene. With lockdown restrictions being eased and vaccines being administered, life is getting back to pre-COVID-19 times. We have been witnessing massive traction on our platform over the past few months. There has been 6x growth post-COVID-19 in the number of our subscribers,” Raghav said, while adding that the platform as of today is selling 900 liters of tea per day with a 70% customer retention rate. 

On the potential of this segment, Raghav said that the food products sold on F5’s platform are FSSAI approved and are hygienic as customers have become more quality conscious in the wake of the pandemic. In the last two years, the company has already garnered 6,000+ users in cities like Delhi and Lucknow. The idea is to standardise the unorganised tea/workplace consumption market across the country. In 2021, F5 expects to have 20,000+ consumers on its platform. 

New model, new targets

“We have so far raised Rs 2.8 crore in a pre-seed round, and as we plan our pan-India expansion, the target is to raise another Rs 5 crore in pre-series A round. This will take us to 20,000+ customers per day, while clocking Rs 10 crore as recurring revenue. But, tea is just the start. Think how these consumers consume other products today — from lunch to breakfast to snacks? We will be rolling out more products for our consumers in a phased manner,” Raghav adds.