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How Teabox is disrupting a 200 year old industry

February 18, 2021
10 Mins
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How Teabox is disrupting a 200 year old industry

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How Teabox is disrupting a 200 year old industry
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Summary

Kausshal Dugarr knows tea. 

But then he should. He grew up in tea gardens. Every weekend he would visit his family’s estate with his father, and the magic of that time and place stuck with him. It was beautiful, but it wasn’t just that. To see so many people at work, and wonder who was doing what was part of the experience. 

It left a deep impression, he says.

But even so, he never thought that he would eventually come back to tea.

This is the story of how he did, how Teabox came to be, and where it’s going.

Settle down, this is the story of a passionate life as much as it is a startup story.

From the tea gardens, Kausshal took the road well trodden. After finishing school, his life took him to Singapore where he finished his undergraduate degree and almost immediately started up.

Starting up in Singapore

His first startup was in the luxury limousine space, of all things. As he recalls, his was the only company to have a Maserati Quattroporte available to be chauffeur driven. Because of Singapore’s position as a central nerve station for business, there was enough demand too. Kausshal convinced someone who had a car but didn’t know what to do with it, to give him a chance. Once the car owner was on board, he immediately put up a website, calling his business Ultima Luxury Limousines.

For the first time there was software being used in what was a completely offline business, with connections to limousine operators around the world. The business worked on referrals, and in time amassed a huge client base. 

But Kausshal couldn’t figure out how to scale up beyond one car. He simply didn’t have enough money. And that was that.

The next startup he worked on was in the e-waste recycling space. The idea was based on the fact that e-waste is a big problem in developed countries, and at the same time in developing countries a lot of people don’t have access to computers. Could they build refurbished devices and take it to market in the developing world, with lower price points?

It was a great idea, but it hit an operational snag. This kind of labour-heavy business wasn’t really viable in a country like Singapore.

Kausshal returned to the corporate world, and started working with KPMG, where he worked on fund-raising and on everything that consulting took him to.

Close to 4 years of doing this, and his itch returned. He came back to India, and started looking for ideas to start-up with.

The timing of this move intrigued me, and I asked Kausshal about it.

Kausshal’s simple answer was that the corporate career simply wasn’t his thing.

Most of his peers worked, like him, for 3 or 4 years, got an MBA in the United States and settled down in high-paying jobs to repay their loans and build an upper middle-class life. But coming from a family of entrepreneurs, he just couldn’t imagine being on this path for long.

His plan was to get some experience and credibility and then start something up again. If nothing worked, he could always get a job, he thought.

And of course, there always was tea.

His entire family was in the business. His elder brother, based in Dubai, is an exporter, and his father was a supplier to tea gardens. His extended family still owns estates.

The opportunity in tea

One evening back home, he found himself thinking about how the best, the freshest tea he had was always at the tea gardens. And also about the fact that somehow whenever he tasted supposedly Indian tea outside the country, it never tasted like what he had now become used to. There was a huge difference in quality.

This line of thought steeped in him for a while.

Kausshal also started thinking about how there was, even in India, great recall and affinity for a brand like Starbucks. No one seemed to be doing brand-building of that kind for tea.

It didn’t take long for the entrepreneur in him to boil up.

There were two opportunities, he thought: First, bring in high quality tea to a market which has not tasted great tea, and second, in that process put Indian tea on the global map.

This is the point where I got a crash course in the Indian tea trade.

Currently, India produces 25% of global tea. And yet, most top tea brands are not Indian, nor owned by Indians. This is how it is, and the industry is very content with the way it operates. The model is that of the traditional trader/middleman: The producer will sell it to an exporter, who will sell it to an importer, then a wholesaler, then the distributor and only then does the tea reach the consumer. 

Which is why a strong brand was never built in the Indian tea space, Kausshal says. 

So the gap was there, and the approach was clear: ensuring quality and building an Indian tea brand.

This was 2013, and the as yet unnamed company was still bootstrapped. 

But the game was well and truly on!

The Darjeeling Tea Express

For the first couple of years, Kausshal visited all the tea expos around the world with his brother. This was to get a better understanding about the industry on the demand side. He already knew the supply side, of course. He visited Japan, Australia, Syria, and Russia to understand what the brands were, who the importers were, and what the value chain looked like.

One of the immediate realisations he had about the market at this time was that this was an old industry not too keen to change. This was an opportunity, he thought, a wedge to start from. 

Things crystallised.

He started a website named Darjeeling Tea Xpress. The idea was to buy tea from Darjeeling and ship it to consumers directly, within days of production. The USP was that unlike a regular shipment, which takes 12 months to reach the consumer through multiple middlemen, it would reach them in a matter of days. 

This is important because in a regular shipment, by the time the tea touches someone’s lips, it has lost its quality. And there were other issues: If tea is not stored and handled will, it will get oxidised. Oxygen, temperature, and light affect tea quality.

Darjeeling Tea Xpress wanted to give its customers the freshest, most delicious tea they had ever had. 

Interestingly around the same time the popular Wes Andersen movie The Darjeeling Limited was released, and it was very well received. The company played this surprise SEO bonanza well, and with that traffic gained a lot of customers. Kausshal says that till date, the customers he signed up at this time remain some of his most profitable and loyal. 

A few of them have cumulatively given the startup orders worth more than $60,000 over the years.

Leaf to Scale with Accel

From here the little startup started scaling up. In Siliguri there were 4 people doing everything: buying, packing and shipping. SEO, social media, the website, tech, email, and accounting was outsourced to firms in and out of India. Customer support was done in the Philippines, social media was done in Kenya, SEO in Bulgaria. This was mainly because there was no talent in Siliguri then.

It was an operation that was doing well, but Kausshal hadn’t thought beyond that. He knew he had built some kind of business and he was concentrating on making it work.

The Accel connection was very fortuitous. One of Kausshal’s batchmates at college was Prayank Swaroop’s batchmate at ISB.

In 2013, Kausshal came to Bangalore for a meeting with Prashant Prakash, Abhinav Chaturvedi, and Subrata Mitra. Right after that meeting, Accel told Kausshal they were on-board.
For Kausshal, it was an obvious choice. He wanted Accel on his side.

With cash in the bank, the startup became more ambitious. They started to look at the website, the UX, the marketing. And also about going beyond Darjeeling tea as a category: Why not Assam and Nilgiri tea as well? 

The idea of an Indian tea brand idea came to the fore at this time. Kausshal and team ensured that they built the back-end infrastructure and ability to deliver India’s freshest tea to the consumers across the globe in a matter of days. They invested in India’s first cold chain for tea, because the entire thesis was that within 48 hrs the tea had to be brought to negative temperatures, about 5 degrees celsius. 

Even now, no one else has this kind of infrastructure, designed to keep tea as fresh as can be.

But that was the back-end. 

There was also the front-end.

Moving beyond the Darjeeling identity necessitated a rebrand, and a design revamp, which Kausshal’s wife Prachi Jain, his partner in life and business, steered.

The (big) birth of Teabox

They debated a lot of names, before arriving at something simple that could be easily pronounced in multiple dialects. That’s when Prachi checked if the name Teabox was available for purchase as a viable domain. It was, and they bought it.

Prachi also worked on bringing the branding and design up to speed. She was clear that whatever they did had to be clean inside and out. Since the beginning, they wanted something minimal, clean looking and attractive. They got that right.

And then the big break happened.

In July 2014, the New York Times covered Teabox, and it changed the game.

It was a full page story, and to Teabox it was worth $1 million. 

Kausshal recalls that it killed their website that day, but the number of new customers more than made up for it.

Accel was right with them at this time, helping them with connections, expertise, and even office space. As Kausshal and Prachi moved to Bangalore that year, they worked out of Launchpad, Accel’s startup space.

The offline push

It was now 2018, and there were growth challenges.

As Kausshal says, people are not used to paying a premium for tea in India. They think tea is chai and that it’s cheap. 

But Teabox was patient. They bet on the idea that a huge base would appreciate it as more Indians travelled overseas and developed their premium tea taste buds.

To grab these people was another problem, though. To aid distribution and recall, Teabox decided to go offline.

In 2018 they first piloted their offline strategy with a café called Cinnamon in Bangalore. It was a premium joint, where the who’s who of the town would come regularly, and yet it wasn’t a very popular place. This meant that they knew their clientele. Teabox set up a small kiosk there and engaged with these consumers. 

The results were amazing. Almost everyone who tried the tea fell in love with it. Customers loved the experience and quality of the product. It was something they had never had before.

Kausshal wasn’t surprised. As he puts it, tea is an experiential product. Often people want to know about the tea and the brand, interact with staff, and realise that this brand knows what they are talking about and offering. He was sure the offline stores would work.

And when the numbers showed that they did, Teabox decided to move into airports. In June 2019, the state-of-the-art Teabox store went live at the Bangalore airport. Kausshal says most people thought this was a brand from abroad because of the design and detailing. 

The numbers racked up. The sales from Bangalore grew 6X.

This proved the Teabox hypothesis that to scale a premium brand, just digital wouldn’t suffice. An omni-channel presence was necessary.

So Teabox doubled down. The next stores were at the Mumbai Airport, at the Orion mall in Mumbai, and at one more mall in the same city.

Things were looking very good.

Teabox vs Black Swans

And then the pandemic happened.

But Teabox was undeterred. You see, they knew black swan events well.

In 2018, Teabox had a catastrophic fire in their facility. They lost almost 80% of their tea. In the tea country of Siliguri, where their facility was, the firefighters can get to you only after 4 hours. There was no loss of life, but Teabox was in dire straits. It was a near-death moment, in Kausshal’s words. He had no idea whether they would survive. On the way to the facility to assess the damage, he messaged Prashant about what had happened. 

Prashant’s immediate response, as he recalled, was: Kausshal, we are behind you. Don’t worry about it. Just focus on what you need to do. 

Accel immediately doubled down and helped Teabox raise a quick round. Teabox’s other investors rallied around them too, led by Accel.

Teabox had to rebuild the entire facility and restock to fulfil orders. And they did so.

What they went through then has made them stronger, resilient. Which is why they see the pandemic only as a temporary blip in their quest to put Indian tea on the global map. As Prachi says, a lot of people know Chinese tea, even Rooibos tea, but don’t know what a Darjeeling tastes like. That’s the work Teabox is doing, and they are in it for the long haul.

There are changes afoot in the business too. Teabox believes retail will come back, but they are also moving from being speciality tea producers to a complete tea brand. Which means that the consumer will come to Teabox not only for premium tea but also for green tea, and even for chai, India’s unofficial national drink. 

This is because they have realised that there is a lot of overlap in customers. They may drink Darjeeling in the morning, green tea during the day, and chai brewed with milk in the evening. These customers are not mutually exclusive.

On the offline front, Teabox recently onboarded the CEO of Forest Essentials as an angel investor. A premium brand with a strong and admired experiential offline presence, Forest Essentials is a great template for Teabox to learn from, in improving their offering in time for the post-pandemic consumption boom. 

And this means not just national markets. 

The world beckons, and Teabox is ready. So is Kausshal Dugarr.

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