Good Morning [%first_name |Dear Reader%],

My love for coffee really started a few months after I moved to Bengaluru. And when I say coffee, I mean Americano. Until then, I never really got the point of coffee without milk or sugar. Now, firmly part of the unlucky horde of daily office-goers, the coffee machine is the first thing I say hello to when I reach office. Even my weekends are now incomplete without a visit to a nearby café and a slightly expensive (no regrets) cup of bitter, blessed Americano. 

India is a relatively recent convert when it comes to coffee. And for the longest time, the argument went: how can you build a business selling coffee in a country of chai drinkers?

This is no longer a question that comes up very often, though, largely thanks to the emergence of craft and specialty coffee chains fueled by VC money. People now know there is a market for even premium coffee products. 

But there is something about cafés that makes it hard for them to scale in India.  

This week on Two by Two, that little mystery is exactly what hosts Rohin Dharmakumar and Praveen Gopal Krishnan set out to puzzle out with two guests deeply knowledgeable about the café business. 

But before we get to that, I wanted to give a shoutout to another cool thing that Rohin and Praveen will be up to in the next few days.

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Come 19 May, your two favourite podcast hosts will sit down with Zerodha’s Nithin Kamath, Capitalmind’s Deepak Shenoy, and Fiduciaries’ Avinash Luthria to make sense of investing in a stock market fraught with irrationality and uncertainty. 

When age-old investment principles no longer seem to apply, where does that leave retail investors like you and me? 

Join The Ken’s upcoming Beyond the First Order event in Bengaluru to get that, and your biggest stock-market questions, answered. Every ticketholder gets the chance to ask one question to our panelists that will be baked into the discussion.

Tickets are selling out fast and there are few seats still left, so hurry up and book your own here: https://the-ken.com/event/the-next-10-years-of-investing-wealth-and-markets/

Now, back to this week’s Two by Two episode, where Abhijeet Anand, founder and CEO of Abcoffee, and Deepak Shahdadpuri, managing director and founder of DSG Consumer Partners, uncover the many factors that prevent Indian café chains from turning profitable at scale.

Two By Two • EPISODE 41

Coffee versus cafe? India is poised at an inflection point

Even as the market for coffee matures, cafes still struggle to turn profitable at scale

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A customer who’s back for his coffee hit every day—that’s every café business’ dream. But even chains with a large proportion of such dream customers find it hard to make the model work.

Abhijeet also spoke about how Abcoffee differentiates itself from the rest of the competition in the episode, but if you want a quick read on the subject, my colleague Seetharaman wrote about Abcoffee’s business model in his newsletter Trade Tricks last year.

The Zepto cafés and Bistros of the world now offer cheaper and somewhat good coffee in minutes. So are they poised to take over the segment?

Abhijeet thinks not, because while they might have built convenience into their product, they do not have a brand attached to it. Deepak differed on this a bit, though.

If you want to learn far more about what makes and breaks café businesses in India, do make sure to stream the full episode here.

We’ve now added a new section in Two by Two where right before the episode ends, Rohin and Praveen take a pause and reflect on what’s has happened with subjects we’ve covered in earlier episodes since they were published. 

This week, we reflected on:

Google Pay: Big. Successful. Vulnerable

Ather Energy was a pioneer. Can it also be a leader?

Airtel fights spammers. And Truecaller’s business model

At least with one of those, it’s probably easy to guess what we spoke about. But keep listening until the end of this week’s episode to get the full picture. 

As for the name of the section—Pre-credits—the jury is still divided. Praveen and I are on the fence, while Rohin is all for it.

Listen to it and then tell us what you think by writing to [email protected]? I look forward to hearing from you. 

Regards,
Hari Krishna

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