In a telephonic conversation with TheSMEIndia, homegrown specialised tea company, Karma Kettle’s co-founder Dhiraj Arora shares how they’ve managed to grow so far, impact of Covid-19 pandemic, future expansion plans and how they decided to boot-strap instead of raising funds from VCs. Edited Excerpts:
Q. How did you start your journey with Karma Kettle?
We started our journey in 2004, with a family business (a boutique hotel in Kurseong) in the heart of a tea garden in Darjeeling. I played a key role in establishing the operations. Initially, I used to walk through all of our guests to neighbouring tea estates in Makaibari, Kafirton, and so on. The aroma of Darjeeling tea used to entice me, and thus the business idea was born.
In 2007-08, my wife Priti (Co-Founder of Karma Kettle) and I relocated to Singapore for 4-5 years. We used to run tea rooms (a food and beverage concept) under the name Karma Kettle. The tea was then sourced locally and from few tea estates in Darjeeling. This is how the tea business began. I later studied the entire tea business concept by enrolling in World Tea Academy in the United States as well as an academy in Sri Lanka. We have been conducting business for the past four years and we saw a market for gourmet beverages in India. We have our offline presence with a store in Kolkata, and our products can also be found in a few niche stores in Bengaluru, Pune, and Goa. This accounts for 30% of our business, with the remaining 70% being in the B2B sector.
We sell online through the use of our website as well as other e-commerce portals. During the last year, selling through an e-commerce portal proved to be our saving grace. We have seen demand from Tier II and Tier III cities and are concentrating our efforts on the B2C segment as B2B is still recovering. We also collaborate with lesser-known specialty e-commerce platforms such as wellness, groceries region wise.
Q. How’s the industry considering the impact of Covid-19 pandemic?
Managing working capital has been a significant challenge for smaller organisations like us over the last year. We wanted to keep our employees motivated, so we didn’t let them go or postponed their pay. We shifted our focus to the B2C segment, white labelling for larger known brands, and discovering international markets to export our products to offset the revenue loss.
We will be launching in Singapore in April, followed by Brazil. However, Covid-19 has its own set of issues, as exports have become prohibitively expensive due to a significant increase in freight charges. However, tea and the wellness factor have been the beverage of choice, raising health awareness all over the world.
Q. Are you boot-strapped or equity funded?
My wife and I have currently bootstrapped (financially self-sufficient). Despite the fact that we have been approached by early-stage venture capitalists, we believe that even though we have scaled up to this level, there is still a lot of progress to be made. If a third party invests, the entire game shifts to volumes, targets, and so on, and we lose sight of our value proposition. At this stage we get better creativity, product designing, marketing team from our limited options. It gives better ideas and good invention
Q. How difficult is it to leverage finance?
The experiences have been positive for us. We have turned down both national and international venture capitalists. Our bankers have been gracious enough to inquire about our needs. Apart from the following, the Government of India has launched a number of MSME/SME initiatives. In fact, the MSME channels established by the government have aided us in receiving our funds from the market on time.
Q. What are your growth plans ahead?
We are looking at international markets because we have found these markets to be approachable in terms of consuming tea and obtaining quality work from India. Even Indian packaging is well received. We are considering opening a few more brick-and-mortar stores outside of Kolkata, in places like Goa and Pondicherry, where rents are lower than in a metropolis. Another area where we are seeing a lot of interest is the wellness range and sustainability. We have cut down on plastics and our packages are environmentally friendly.
Q. How are you working with tea garden estates?
We have gone completely organic as a company. We received organic certification from Eco Search. There are many organic growers in India who specialise in herbs or botanicals tea. It gives them a better return if we buy organic from them.
We have raised awareness, educated farmers, and created sampler packs of teas from lesser-known estates and areas. Next month, we will begin launching Hornbills from the seven states. We do not grow tea leaves as a company; instead, we concentrate on tea blending. We source tea from all over India and export one or two specialised teas from Japan and South Africa that are not grown in India.
Furthermore, when it comes to tea and wellness, there are over a dozen products that do not contain tea leaves. They are referred to as herbal teas, but they do not contain Camellia or caffeine. They contain herbs (chamomile, hibiscus, dandelion, and hibathon). We source it from smaller producers, and herbal products from non-tea growing regions.
There is a lot of potential both domestically and internationally. If an MSME or SME can package it attractively, they will have a great business opportunity because he sees growth in this industry.