Stanislas Dembinski and Ahmad Mukhtiyar September-October 2016
Gourmet Coffee and Tea, the Indian Way
In just four years, Bonhomia has emerged as the top Indian player on the fast-developing Indian market of single-serve capsules for gourmet coffee and tea beverages. The company, which also sells dedicated coffee machines, intends to provide its customers a full experience, from home to workplace and hospitality, with an Indian angle and hopes to develop rapidly domestically and globally.
Behind the success of Bonhomia are two young ambitious Indian entrepreneurs with an already diverse and complementary set of experiences. Kunal Bhagat, the Chief Executive Officer (CEO) of Indulge Beverages, the New Delhi-based company that owns and distributes premium tea and coffee brand Bonhomia, is a former investment banker. Tuhin Jain, the Chief Operating Officer (COO) of the company, is an ex-PepsiCo India executive. Both are food and beverage lovers, as one can feel when they invite you for a coffee testing, from flavoured cappuccino to a strong Italian-type Espresso or a cold Latte. They have brought to India the Nespresso-type experience of capsule beverage with individual coffee machines. It is already very popular in Europe and in the United States, notably through the famous international TV advertisements featuring Hollywood star George ‘What Else’ Clooney.
The whole idea was not to duplicate Swiss giant Nestlé-owned Nespresso’s luxury positioning but to do it the Indian way, with Indian coffees and teas, and a cool consumer community-orientated approach, building on the specifics of a rapidly growing but still young market.
“Bonhomia is the category creator and by far the market category leader when it comes to single served hot beverages in India. We were the first people to launch single served capsules in the country. What’s special about our Indian angle is that the entire product portfolio is India sourced. All our coffees and teas are 100 pc Indian origins since India is the world largest producer of coffee and tea combined. Another Indian angle is that all our products are manufactured here locally in New Delhi, using state-of-art machinery and technology,” told Bhagat to Biz@India, in his South Delhi offices, in Ansal Plaza Shopping Mall complex.
Bonhomia targets not only people already familiar with the Nespressotype experience abroad but also Indians at home, and especially the younger generation, for whom coffee is becoming the favourite beverage.
“We see two kinds of consumers: Those who have travelled and seen this concept internationally. But also, and it is very heartening for us to see the younger generation, the younger demographic in India taking to coffee as their go-to beverage every morning or through the day. They are willing to pay for quality. Convenience matters quite a bit and so the single serve capsule which gives quality and convenience is the go-to answer for them,” explained Tuhin Jain.
Bonhomia’s concept has drawn much attention from famous Indian investors, such as Fireside Ventures and ApurvSalarpuria’sSalarpuria Group or Valpro Capital. Indulge Beverages, the parent company of the brand, has raised INR 33 million (around EUR 500,000) in a bridge-round of funding last June, after a nearly EUR 2 million funding raised in two rounds in April 2015, in a marketing and product expansion push. Indulge Beverages reported revenue of around INR 20 million (about EUR 270,000) for the last financial year, and it aims at multiplying it at least fivefold for this fiscal year ending in March 2017.
“We have raised three rounds of funding already. We have been funded by some of the most well-known angel investors in the country. Currently, we are in talks with various foreign firms and individuals for investment in the company. What makes us very attractive to the investors is this category of single serve which has exploded globally. We combine a double bonanza of a rapidly growing market like India and of the fastest growing beverage category. When the two are put together, we become a very attractive investment destination. So, big international companies, wealthy individuals from all over Europe and East-Asia, as well as a lot of Indian companies and high net-worth individuals are looking at investing in us. Discussions regarding this are currently going on,” elaborated Bhagat.
India remains the primary focus, as it is a massive market and yet relatively untapped. The Indian retail coffee market was estimated to be worth EUR 400 million in 2014 by industry analysts. Coffee is the fastest-growing hot beverage in the country and the consumption value is estimated to go upwards of EUR 670 million by 2020 with a compound annual growth rate (CAGR), an indicator of return on investment, close to 10 pc, in this period. The sub-segment of organized coffee vending business is even more dynamic: it has grown at 32 pc yearon- year since 2008 and its estimated value amounted to EUR 254 million in 2014, according to industry sources.
As in other food and beverage market segments, a young, growing and increasingly wealthier Indian work population willing to experience western trends acts as a huge market driver. More specifically, an increased access to coffee in offices and institutions as well as the rapid pan-India expansion of numerous international coffee chains such as Costa, Starbucks or the Indian ones such as Café Coffee Day is building up greater interest in coffee among consumers. Restaurants, bar and top hotel groups such as The Oberoi, Ritz Carlton, Hyatt etc. are also promoting premium coffees among clients.
Naturally, out of home consumption is driving in-home coffee consumption, as an increasing number of Indians are moving beyond instant coffee and want to have quality coffee at home.
A ‘Coffee Revolution’ in India and China
Moreover, the Indian coffee market, like the Chinese one, is in a catch-up phase compared to Europe and the US. Indian and Chinese people are traditionally mostly tea drinkers and in 2011 their average per capita annual coffee consumption was only 80-90 grams compared to 4-5 kg in European countries or the US. But, both India and China have witnessed what some market analysts call a ‘Coffee Revolution’ and a solid growth in this segment. They are likely to be among the top five markets in the world for total coffee consumption within the decade.
Bonhomia is also gradually focusing on its international expansion. It has just started exporting to the Middle East, and has for instance set up a Bonhomia Café in the Riyadh airport, in Saudi Arabia. The brand is also expanding to the United Arab Emirates (UAE) and talks for Turkey are going on.
Not to forget Europe. France, in particular, is one of the countries where the company is looking forward to expand to, especially with its tea portfolio. France – where Bhagat graduated from a Master of Business Administration (MBA) program at INSEAD, in Fontenaibleau, near Paris – is a rapidly growing market for specialty teas. Many French households have already a dedicated capsule beverage machine and Bonhomia can push forward the best Indian teas, already famous among connoisseurs worldwide, such as Assam and Darjeeling teas.
Operationally, Bonhomia is looking for partnerships with distributors and retailers in the international markets, who can manage the business in these locations for the company.
Bonhomia tries also to promote the Indian way in reaching out to its customers, not only through frequent events and consumer experience zones, at home or in offices, but also via its own digital platforms and community. This way, the company also educates people, for example to use their machine at home, and tests new products and trends. In a friendly casual sense, Bonhomia is a nice contraction of ‘Bonhomie’ and ‘Bohemia’.
“Given the younger demographics that are very fast-paced and media-savvy with the proliferation of smartphones, we engage directly with our customers heavily using the digital media. We use blogs, our bonhomieworld.com where they can interact with the brand owners, and other internet platforms to know what they like, to tell them what blends they can use and how to use them better,” said Tuhin Jain.
Bonhomia intends to position premium coffee or tea tastings at home, at work or in hotels, bar and restaurants as a cool experience between friends and colleagues, replacing for instance wine or whisky tastings. The brand has at least two competitive advantages so far: its blends are adapted to the Indian taste with popular flavours like hazelnuts, and pricewise it is well positioned (a Bonhomia capsule costs around INR 30-35, less than EUR 0.50), depending on the flavour and the type of pack one buys. It is also better priced when compared with imported capsules or a shot of coffee at a trendy coffee chain nearby.