Coffee drinkers crave cafe-like coffee at home, startups brew a perfect cup

Shut cafes and work from home led to an increase in in-home coffee consumption. But consumers are now looking beyond traditional instant coffee.

Remember the Dalgona coffee trend from last year? Everybody seemed to be making it during the first wave of the COVID pandemic. While it seemed like it was an experiment out of sheer boredom, for many, it could also be out of a need for a better coffee experience.

Apart from some parts of South India, where people enjoy their freshly brewed filter coffee at home, most parts of the country drink coffee either at cafes, or in offices. During the COVID-induced lockdowns, cafes were shut and people were no longer going to their offices, where they got their daily coffee from the vending machines. This led to an increase in in-home coffee consumption.

Brands like Nescafe, Bru, Sunbean and Tata Coffee gave people their instant coffee fix. And, iD’s instant filter coffee liquid gave people a taste of Udupi restaurant coffee at home.

New-age startups seem to greatly benefit from this rising demand. A plethora of brands, like Rage Coffee, Dope Coffee, Beanly Coffee, Caffe Birraio, Levista and Lavazza, are now selling coffee online. Some popular cafes, like Third Wave Coffee, Roastery Coffee House, Toffee Coffee Roasters and Kaffa Cerrado, also launched coffee products for sale.

These brands not only catered to people’s taste buds, but also provided convenience, as their coffee can be ordered from social media pages and it is delivered home. They also sell coffee in different formats.

For example, Blue Tokai sells single-serve Easy Pour sachets and Cold Brew bags. Sleepy Owl sells brew bags, and Bevzilla sells instant coffee cubes. Country Bean Coffee sells spreads, including a Dalgona-flavoured one.

Specialty coffee has become a raging trend, with many brands offering it. Country Bean has flavours like hazelnut, caramel, vanilla and cocoa mint. Blue Tokai, a leader in this new-age coffee space, provides a range - its Hoysala Estate coffee comes in plum toffee and blackberry flavours, and Harley Estate comes in guava, pineapple and green apple flavours.

“Coffee has thousands of flavours and aroma compounds. In fact, six to 10 times the amount that wine has. These aren't added flavours, but inherent characteristics of the coffee itself. Once you've trained your palate to taste them, then you can start to identify these flavour notes,” says Matt Chitharanjan, co-founder, Blue Tokai.

Launched in 2013, Blue Tokai’s growth has been synchronous with the country’s artisanal coffee culture. During the pandemic, the brand witnessed 3x growth and now sells around 300 tonnes of coffee in a year.

Sixteen Grams Coffee brings together coffee from different brands onto one platform. Sheena Khurana, co-founder of this specialty coffee marketplace, says that people are now experimenting with their coffee and ordering a new flavour every time they go out.

“Sometimes, people get bored of the coffee. It doesn't stay constant and, sometimes, the roasting batch is different and the taste changes. So, they do not stick to one coffee for a very long time. Specialty coffees have also become a preferred gifting choice now,” she adds.

Many are now shifting from instant coffee to freshly brewed coffee for enhanced taste. “People are more aware now. They don’t want the basic instant coffee and are moving towards freshly roasted coffee. In the last two years, I've seen massive growth of coffee roasters and it’s only going to grow in future. There will be at least 100 roasters by the end of this year, or the early half of next year,” Khurana predicts.

Apart from selling artisanal coffee, Blue Tokai also has cafes in seven cities. Its cafes are also witnessing an increasing desire for non-dairy beverages. People have already consumed more milk alternatives in its cafes in the first eight months of this year, than they did all of last year.

“People are increasingly appreciating more black coffee, because they want to avoid milk and sugar. And, people are also looking for more dairy alternatives,” Chitharanjan mentions.

These brands also tend to have a higher price point, compared to the regular coffee brands. For example, Blue Tokai’s roasted and ground coffee comes at a price of Rs 450-500 for 250 grams. Nescafe sells its classic instant coffee at Rs 500 for 200 grams. Bru sells its instant coffee at Rs 180 for 100 grams. Instant coffee only needs 2 grams per cup while brewed coffee requires 12 grams.

Chitharanjan says that though his consumers are not really price sensitive, Blue Tokai has tried to keep its coffee as affordable as possible.

“The price is significantly more than commodity coffee. But we try not to charge an exorbitant amount because we want to make good quality coffee accessible. We don't typically run a lot of discounting. That's not really part of our strategy. The coffee prices in our cafes are significantly cheaper than Starbucks,” he reveals.

Khurana mentions that 20 per cent of her customers are price sensitive, but 80 per cent are not. “Our target audience lies in the 25-34 age group. Most of them are working in corporate companies and earn good salaries. So, they don't shy away from spending on good quality coffee,” she adds.

Unlike the traditional brands that advertise massively, these new-age brands have very small marketing spends and advertise mostly on digital platforms.

Sleepy Owl Coffee, another new-age brand that was launched in 2016 as a direct-to-consumer cold brew coffee brand, has witnessed a 6x growth. What started from a two-bedroom apartment in Delhi, now claims to have sold more than six million cups of coffee.

Its three ‘silent’ ads went viral last month for their simple messaging. The ads mention that the company spent only Rs 55.15 on them. Ajai Thandi, co-founder, Sleepy Owl Coffee, says the brand has an in-house advertising team and doesn't work with any agency. Its marketing spends are 20-25 per cent of the revenue.

“We focus only on digital, as the return on investment (RoI) for a brand like ours on traditional, is not the best,” says Thandi.

Rage Coffee, a three-year-old coffee startup, also grew 10x during the pandemic. They recently raised $5 million as part of its Series A funding round and Bharat Sethi, founder and chief executive officer, plans to use a part of it for marketing purposes.

"We have raised this funding mainly for marketing and distribution. We are going to double down our efforts on all our social media and digital channels. We also advertise at the point of sales where we are present in offline stores," he said.

Sethi said that they have a unique position when it comes to digital marketing as they have 'built a community of Ragers which no other coffee brand has been able to do.'

Pre-COVID, Blue Tokai would do several events and festivals, but now, it limits itself to advertising on social media. Currently, it spends only five per cent of its revenue on marketing.

“Our consumer base is very comfortable, digitally. So, we feel the best way to reach out to them is by focusing our efforts on digital channels. The advantage with that is it's very straightforward to track the RoI on your marketing spends. With traditional marketing, that becomes a bit of a gray area. And, we prefer to be more (analytically) focused with our marketing,” Chitharanjan says.

Though most of these brands started out with direct-to-consumer sales, many are now getting into retail. While earlier, the coffee section in supermarkets would only have the likes of Nescafe and Bru, they are slowly making space for startups like Country Bean and Korebi.

Sleepy Owl Coffee has already been in the retail space for the last three years in Delhi and Mumbai. This year, it plans to expand aggressively, and Bengaluru will be its next target.

Blue Tokai will also be entering retail distribution soon. It is developing new products, like canned ready-to-drink coffee in flavoured and non-flavoured variants, and Nespresso compatible capsules. It will also be introducing new biodegradable packaging. With that, it will also look to spend more on traditional marketing.

With vaccinations picking up and lockdowns coming to an end, people are now once again heading out of their homes. How will this change the coffee consumption trends?

Chitharanjan is optimistic that people will continue to brew their coffee at home. “We expect many people to continue brewing and enjoying their coffee at home, even once things normalise. For those who started making coffee at home, they’ll get used to that flavour and experience,” he says.

While consumers are looking for convenience and buying products that are ready to drink, at the same time, they are also willing to invest in equipment to make coffee at home. Most of these new-age brands have started offering brewing equipment and grinders on their platforms.

Khurana says that equipment sales on her platform have increased by 40 per cent. She reports that at one point, all the Aeropress were sold out and they were not available anywhere in the country.

Blue Tokai sells brewing equipment, like French Press, Aeropress, Espresso Machine, etc. The products start from Rs 150 (for a pack of 40 filter paper) and go up to Rs 2.4 lakh (for an Espresso Machine).

“The cost of making your coffee at home with equipment is going to be significantly cheaper than going to a cafe. There, you will be paying Rs 150 for a cup of coffee, but at home, the cost per cup comes down to Rs 20-30. If you are a regular coffee drinker, the equipment will pay for itself fairly quickly,” mentions Chitharanjan.

However, Thandi says that only a small percentage of people are using these equipment, as it is a time-consuming process. While merchandise is a part of the brand, the company largely sells tumblers, pitchers, ceramic mugs and frother.

“We identified that the biggest pain point in coffee consumption is the fact that no one is making it simple for someone to have a good cup of coffee. The biggest asset in people’s life is their time,” he adds.

Despite being the fifth-largest producer of coffee in the world, India does not have as much consumption. These new-age brands are developing a generation of coffee drinkers in a tea-loving country.