Teabox, an exclusive online retailer of fine teas, is set to be one of the most vertically integrated players tapping into a global market demand that exceeds US $60 billion
I’ve just sat down to talk to Kaushal Dugar, founder, Teabox, an exclusive online retailer of fine teas. I’m feeling particularly triumphant as my morning’s cup of milky masala chai was what I would consider close to perfect. We begin talking and Dugar states, “It’s amazing how people in India drink chai and think that is good tea! I wouldn’t touch the tea that’s available in the mass market here with a barge pole.” (I rephrase his sentiment to make it more print friendly). This is such a resounding reality check to the way I start each morning as tea does for me what coffee does for the rest of south India. I prod further on what he considers a good cuppa and Dugar is insistent on the fact that tea is best only at its freshest. That’s why his company has braved a change and done away with distribution intermediaries to deliver the freshest tea to its end-consumers. It’s a change that has challenged the way the tea industry has functioned for decades in India and Dugar is best positioned to fully comprehend its magnitude. He grew up in Siliguri, West Bengal, surrounded by luscious tea plantations and his growing years served as an education in understanding tea as his family business dealt with tea plantation supplies. Life took its course and Dugar went to Singapore to pursue an undergraduate degree and, subsequently, worked in the corporate finance sector. But the urge to start a business of his own brought him back home in 2010. “I began by working in tea export to understand valuation and identify pain points that could lead to a viable business idea. One of my first observations was that this industry has not changed in 150 years, things are done the same way since the British, and the cycle of production to consumption takes up to six months with five to six intermediaries in operation,” he says. Dugar adds that his business idea began taking shape around the thought of sourcing and exporting fresh tea to the end-consumer and the only way to achieve this was to cut out the intermediaries.
Going fresh online
In 2012, Dugar created Darjeelingteaexpress.com, an online portal that exported Darjeeling tea worldwide. Production, post production and packaging was set up in Siliguri and the end result got fantastic feedback from consumers. “Our process begins with sourcing the tea, bringing it into our sourcing centres within 24 hours, sending it into cold storage within 48 hours, and this ensures least amount of deterioration,” he explains. With such respect accorded to the sensitivities of tea, Dugar and his team, have managed to package fine teas that are appreciated world over. Sensing a great opportunity in this space, Dugar extended the business idea to include several other varieties of tea and in 2014, Teabox.com came into being. The two year wait was due to Dugar’s search for an able e-commerce partner who could help the company reach its potential consumers on a global scale. “Accel Partners came onboard with a round of seed funding (US $1 million) in 2014 and this led us to the right e-commerce partner,” says Dugar. Today, it ships to over 80 countries worldwide including the U.S., the U.K., Russia and the traditional tea drinking markets such as China. When it first began shipping tea the end-consumer had to wait up to 25 days to taste the product while now, partnering with local logistics providers has cut short the wait to anywhere between six days and eight days. Teabox opened its Bengaluru office the same year and currently, it houses the technology, sales and marketing teams, with an overall strength of 35 people. In March 2015, Teabox received its Series A worth US $6 million in a round led by JAFCO Asia. The other investors were Keystone Group, Dragoneer Investment Group and existing investors Accel Partners. These funds will help Teabox expand its global reach to include markets such as Japan and Korea and create local marketing teams in these regions to build business. A portion of the funds will also go towards setting up cold storage facilities at Siliguri, Coonoor and Guwahati.
Speaking of the company’s funding story, Dugar shares, “The global market size for tea exceeds US $60 billion and to tap into this, our scalable business model and my domain knowledge were quite attractive to venture capitalists.” Dugar is also quick to add that his investment partners have invested more than just their money in the venture by providing the company valuable guidance and access to resources that have helped it scale.
Bringing in the new
I quiz Dugar on the challenges he faced while establishing Teabox and he admits that conquering the old mindset was most trying. “It took me over two years to convince producers of the worldwide potential of the Internet,” he recalls. While that took its time, setting up a global e-commerce venture in Siliguri where the availability of talent is limited, also proved difficult. He attributes the first few hires to luck and as the word and business spread, Dugar managed to ramp his team to include a wide talent pool. “Our research and development head was previously a product manager at Starbucks, Seattle and our shared passion for tea brought her here,” he says. Hiring for the office in Bengaluru was much easier as by then the company had access to its investing partners’ network.
Another significant challenge for Dugar and his team to surmount was that their business model didn’t allow for touch, smell or taste of their product. The team won over its consumers with painstaking descriptions of its teas that included details on the body, the aroma, the date the tea leaves were plucked, the specialty of the plantation it was grown in and much more. “This detailed description of our teas was comforting enough for consumers to give us a first shot. Post that, it’s more than half the battle won, given that we have over 70 per cent repeat orders,” chuckles Dugar. Teabox has also created starter kits which allow consumers to sample four different varieties at one go.
What truly sets Teabox apart is that it uses technology as an enabler and does so very effectively. It recently launched an algorithm-based personalised tea service where a consumer takes a survey and the computer matches his/her attributes to that of a tea and delivers a match with an accuracy rate of over 35 per cent. By the third order placement that rate zooms up to 90 per cent. “We have a pending patent on this invention and I’m sure it will generate a lot of curiosity amongst consumers,” says a confident Dugar.
As he looks to the future, Dugar states that he is toying with the idea of setting up little kiosks offline, just to create a Teabox experience. His choice of locations, however, will be his primary markets; he’s eyeing San Fransisco, New York, London, Tokyo and Singapore. “The pricing on our teas starts at Rs. 7,000 and goes up to Rs. 1.5 lakh and I’m not sure Indians are ready to fork out that kind of money for a cup of tea,” he opines. Dugar does see a difference in the Indian mindset, especially the upwardly mobile with an exposure to refined tastes, and is hopeful that tastes will change sooner than later. Till then, he’s happy growing his volume orders in foreign markets. “Last year, we grew at 10X and this year, we look to outdo that,” he concludes.
Founder: Kaushal Dugar
Industry: Online retail of fine teas
Investors: JAFCO Asia, Accel Partners, Keystone Group, Dragoneer Investment Group