Ep #22 | WTF are Craft Beverages? Nikhil ft. the Founders of Blue Tokai, Subko, Svami, and Mossant

29:40And there was this group of brown people, basically, that showed up to become do double E at the time, electrical engineering in Iowa. So he, I don't think he was a particularly good engineer, but he was fairly entrepreneurial in spirit. So he graduated and then he moved to California. And I guess there was a lot of buzz about like semiconductor and things at the time. So he sort of, you know, he ended up working at this company called Synopsys at one point, semiconductors, and got into that semiconductor space. And then that sort of like, so he's become sort of like a serial entrepreneur for the last 30-odd years now, been in the valley, and that's where I was born.

30:27So I was born in the heart of the valley, actually, a place called Fremont, not too far from San Francisco. How does it feel to people like you and Matt who have gone to school in America? You don't have the same outlook of India as us kids who were born here, right? How do you see it differently? Oh, so different. And I think, I'll let Matt speak for himself, but for me that's definitely part of the fabric of what ended up becoming this idea called Subco. For me, it was always like a grappling with being this diaspora kid who was part of this South Asian community. And to be fair, I was in a city and a region with a lot of Indians and a lot of South Asians.

31:17So there was a nice kind of contingent from like all over India and neighboring countries as well. When you're not Indian and you're growing up in a wide school, I don't know, Iowa, whichever school you were going to when you were a teenager. Are you wishing you were an American? From a very psychological perspective to want to fit in? Do you get bullied more if you're an Indian kid? Matt doesn't look Indian. He looks Polish. I agree. When he starts speaking, we get to know. I grew up in like a village. So anybody who's not fully white is considered not white. So are they racist if you're like...

31:55Yeah, you know, I think it was always, it was an evolution, Nikhil. Like, I think starting off, yes, there was a lot of, hey, why can't I be part of that sort of majoritarian fabric of where this is? And, you know, always feeling slightly ashamed at times and slightly... How does it come across? You feel ashamed when they do what? I think initially it's like little things. It's like your mom wants to pack you some Indian food for lunch, right? And they're like, I love it, but it smells a little strong, right? Like people around you are like reacting to it. Like, okay. And when you say reacting, what are they doing?

32:29I mean, it's like, what is that? And they have this like terrible food that they're eating, right? Like some like terrible like white bread sandwich or something. And like, you know, that's one visceral reaction. Or when your parents come to pick you up and, you know, their accent's a little different, right? Their accent, Desi accent and whatever. And no matter how long they live there, your accent stays, right? Typically. And so, you know, stuff like that. So I think a little bit of shame initially. I mean I think that there's like two camps like people then try to overcompensate and then sort of become like hey I'm you know what like I'm brown but like I'm not really brown I'm like more of like a coconut right so like I'm like brown on the outside white on the inside yeah yeah it's like there's people that kind of like aspire to be a coconut right and I'm like okay you do you uh that was never me I I and I think the turning point for me was we my dad at one point just before the whole Y2K fiasco, my dad 97 to 2000 here's my Bangalore connection I moved to Bangalore so I was going so throughout my childhood we would go to Hyderabad every single summer my my mama, my tata my grandparents they were all there still like half my family was still in India so we actually like compared to a lot of people I grew up with Is it strange?

33:45because when you come back to Hyderabad I have an aunt who used to go to the US, who lived in the US all her life. She's still there, actually. Each time she came back, she got us like, you know, these toys and chocolates that people didn't have access to. Invariably, we had this perception that she is this superior being almost. Yes. But to feel that way when you're in Hyderabad, but you go back to the US and your Indian origin friends are trying to be a coconut. It's a dichotomy, right? Here you're feeling superior, there you're feeling inferior. Totally. So do you like being here more because of that?

34:27I think for me, the story ended up being embracing my roots while also understanding that I would never be, I would always be neither here nor there, but that I had such strong roots to lean on and that I wanted to make a contribution back to where my roots were. And so that's why I sort of ended up later in my life as an adult gravitating towards moving here, moving back here. But yeah, I think it is, and this is, I'm kind of jumping around in the story, but later on in my life, I think what I always wondered was with all of the little bit of the jibes. And, you know, I think being Indian or being South Asian went through phases.

35:18So first it was just kind of lame and just very much not cool. Then sort of the valley happened and the valley was like a lot of brown people and they were like killing it, right? So then it was like, okay, you guys are just like nerdy and you guys go to Harvard and you guys go to Stanford and you're all like engineers and doctors. And that was like another layer of pressure on me because I was like, shit, I don't think I can do this. I'm not wired quite that way. I was much more into the humanities and like IR and like political economy and stuff like that. And so I think from that evolution, it ended up becoming, hey, well, you know, can I study international affairs and can I find a way to take my sort of South Asian background combined with, you know, sort of some of the privileges I had growing up in the States?

36:09and build something to kind of like reimagine and reframe what sort of a global Indian experience would look like and feel like and be like. It was very vague at that point. It was just that. And I think when that came to becoming a product, it came to kind of what we're doing now. But yeah, but essentially moved to Bangalore. We moved back to the Valley. I finished my high school in California and I think those three years in Bangalore were very impactful because we lived in this place called Dollar's Colony and I went to this international school and a bunch of fun pictures of me in my uniform that I always laugh at because we didn't have uniforms in the US typically, right?

36:53So here I was buttoned up and uniformed and very formal and then I go back there and I was wearing shorts and it's like two very different lives. But when I was in Bangalore, I think that's when I learned Hindi. I started understanding and speaking Telugu never learned Kannada unfortunately but I think that's when I sort of started like cementing my relationship as an Indian as well and so I think that ended up playing a very different role in my life compared to a lot of the people I grew up with who never quite had that level of linkage and so till today a lot of people back in the States that I might have grown up with are like, um, they've always been like surprised as to why, uh, you know, I relocated and moved to Bombay and all of that.

37:39So, but, but essentially I, I went to do my bachelor's in Los Angeles and I, I studied a mix of international relations and I did a minor in sort of global marketing and I did a, another minor in French. So I lived in Paris for a while, studied there, came back. And then the next decade of my life was spent between, mainly between New York and London. And funnily enough, in a very weird, like post-colonial way, it was in London where I think there was this like additional enhancement of what it meant to be sort of like a global Indian, just because of the sheer amount of impact that that diasporic community ends up having in the UK's fabric.

38:28And I think a lot of that, I was studying international development in my master's there and started to get interested in various parts of the agricultural economy in India. And I think throughout this period of time, like when I was in New York and in London, I'd gotten a little obsessive about specialty coffee. And And I think it started off as just like habitual. And then I felt like I had a decent palate maybe. And so I started like doing geeky things, like analyzing like the tasting notes in the coffee and stuff like that. But the thing that really stood out to me was specialty coffee was positioning and marketing itself from an industry perspective with this whole idea of traceable farms and talking about the global South very openly and vividly.

39:22Can I ask you a question before you move on to the story of coffee? Sure. I think, personally, that passion and talent are two forms of the same word. We often think passion or talent are inputs. Like if you're passionate about coffee, you get into coffee and then you realize you're talented and you have a good outcome. I feel like passion and talent are more outputs than input. when you're better at something, when you feel good doing something, you feel like you're passionate about it and then you inherently develop a talent and then you continue to do it. Do you think you moved back to India and thrived because you felt that people around you treated you better and you didn't have to deal with the nonsense of growing up in the US?

40:18Is that why you moved? No, I think in a weird way, if anything, I moved because the whole reasoning behind the business also started as to the motivation. So it was really to kind of prove a little bit of a point maybe that one could build something world-class in India. And if one was good enough at that, could actually make it something relevant on the global stage. I think that was a very powerful sort of like motivator for me but it had to be rooted very deeply here. Why? Because because you grew up in the U.S. you're as American as you're Indian then. That's true that's true. So why not build something in the U.S.

40:59which satisfies all of the conditions you mentioned? Because I think in in what ended up being our industry coffee chocolate bakes I think the raw material is the most important element. We're really an agriculture business we're a supply chain business. And for me... India is not particularly known for its coffee historically, right? It's not. And why India? Well, it's anywhere between the fifth and seventh largest producer of coffee in the world, despite not being known for it. So I think the underdog story and the chip on the shoulder are the two ways that I kind of refer to this. So... Chip on the shoulder, why?

41:35Because as Matt said earlier, I mean, people were growing X number of metric tons of coffee here, but they all presumed that the only market for it had to be an export. And Matt opened up the opportunity for entrepreneurs like myself to even fathom the idea of domestic consumption. And I think what we wanted to then do is, in a lot of ways, building on top of what Matt already created, was how does this now become a cultural symbol and something of real cultural currency from a creative perspective as well. And how does that sort of play a role in a lot of the coffee brands and projects that are being fomented in a lot of the global cities around the world?

42:19And I feel like doing that in the West feels a bit false. It feels a bit dishonest. If you kind of do it there without actually committing to the soil, to the land, to actually having real relationships with the producers, with the farmers and establishing it here, I think that was very critical for that credibility to be there. So I think that was a big reason. How is Sapko and Blue Takai different? Oh, that's a fun one. Same price point, largely? No way, he's more expensive. He's way more expensive. Okay. What else? I think similar... On the coffee side, I mean, so one is they obviously do more other products.

43:01They do cocoa, which we don't do. We didn't have bakery, our own bakery, until fairly recently. And that was by acquiring another brand. So that's the difference. Coffee side, I think sourcing is fairly similar, I think. We work with some of the same estates. Roasting, we have, you know, they have their philosophy. We have our philosophy. Even if we source the same lots of coffee, it'll be different for an end customer. we I would say are more mass premium they're more niche premium I think the customers are slightly I mean I would say we're more we try to be more accessible basically calling them expensive no no no I don't think I think that what I really appreciate about Subco is they've done things in a very distinct and different way the communication that they have the storytelling that they do the whole brand is very different than other coffee brands that have started in specialty I have an observation for both these brands because I've had the privilege to see Blue Tokai from day one I think I was one of their very early customers and just to take you back in time there was nothing speciality in the country that time there was only Cafe Coffee Day in Burist and that's about it No concept of brewing good coffee at home or any of that.

44:30And I think with Blue Tokay, you start in a certain way not knowing how things are going to pan out. So you don't have a very defined brand identity, tone of language. Your brand book is not developed, right? You're just trying things out as you grow. and what I've seen with you is that I think you're one of those brands that has come out from day one with such a well-constructed world for your brand which is very commendable. With that you don't see that often that you launch with everything sorted in your packaging, how your brand puts out content to how you serve a dish and you nail it from day one.

45:10So I think to me that's a difference between two brands but it's also how you guys have started. in a very different year of how coffee was. What else? Rahul, do you want to say something about niche and mass niche? Look, I think BlutoKai has changed the palette of coffee consumption in India. And that's, I mean, without that having happened, Subko wouldn't have had a shot, to be honest. So, and that's not just because Matt's sitting here. I genuinely believe that. I think we're different in a couple of key ways. Like Matt said, we started off as being like, okay, we're going to try to, the way we can premiumize this segment was we felt we had to provide value addition on top of something Matt was already doing well.

46:03So I think he was serving a much better cup of coffee in a much better environment than it existed earlier. And we said, okay, so let's try our best to produce, to source the best coffee we can, and roast it the best way we can. But then two key things that had to differentiate us further were building a very deep commitment to what a global Indic design language may look like and baking in conjunction with roasting coffee. And to me, that was the next step because if we wanted to really justify a higher price point and a more experiential sort of coffee brand, I felt that what pairs really well with it are really world-class baked goods.

46:49And I wanted to kind of bring both of those two things together and try to construct that in unison. So I think the design language and then having the bakehouse kind of like be co-created with the high-quality coffee I think was important. So I think that's the difference. we do tend to kind of be maybe like bullheadedly committed to this idea of design and coffee coexisting. So we try to like, even from like micro a lot of coffee to micro a lot of coffee will change an element of the design or the packaging. And I think these are things that perhaps have helped us gain some support with folks that are more in the creative industries or in the entertainment sphere or in the arts industries.

47:40And I think maybe that's something that we've had maybe more of a focus on than maybe blue tukai has. So those are a few differences, I would say. And now recently we make chocolate. So I think that's something that Matt doesn't currently do. So I'm a 25-year-old boy or girl who wants to enter the coffee industry and compete with you guys. I walk into Bandra. There is a blue tukai. Next to it, there's a sapko. the third store right adjacent to both of you let's say on the same lane as Bougie Cafe is me what can I do today that will work at what price point that will send some of your traffic to me I think you should be a multi-roaster cafe so now there's many other coffee companies around if you're a place that I can go to where I can get coffee from a roaster A B C and I can choose and figure out what I like, I think that would be a good differentiator.

48:40Do you think my audience cares that much where the coffee is roasted? They just want different, something different. So if you come to Bluto Kai, you're only going to get Bluto Kai coffees. If you go to Subco, you're only going to get Subco coffees, where it's a good opportunity for people to sort of understand what else is out there. And I think people appreciate variety. If I were to be honest, like I'm no big coffee aficionado or something like that, But I know like a good coffee from a bad coffee. But beyond the point, I can't distinguish which roaster, what, all of that. Me, 25 years old, starting a store in Pali Hill Bandra will make the assumption that my clientele is largely like me.

49:25It's not multi-roastery that will necessarily, like I could tell some of the people we play paddle with that this particular coffee shop has different roasts from different places, but it is next to a Sapko, a Blue Tokai, a Bougie, or whatever else is on that road, I don't think I'll be able to draw them in with just that. So I think that's just a way to differentiate the offering. I think food is unfortunately something that's very, I mean, I say this as a coffee person, food is something that really makes or breaks the success of the store. For sure. What if he decides to sell biryani and coffee?

50:09Do you think something like that could work? No, it's too dissonant. People who are going to coffee shops are not looking for biryani. That being said, there are coffee shops where coffee is only a small part of the sales, where they have an extensive menu, and those do incredibly well. Like a co-working space or such. one thing that we notice in our business is that if we extend the menu it increases the sales so the wider variety of food items that you have the more you're able to sell operationally it just is very challenging I mean we don't want to run kitchens so if you're able to run a restaurant and have coffee in the market right now that's an appealing proposition what's that percentage split?

50:56For us, for us, we sell 45 % is beverages. 40 % is food and then 15 % is the retail packets and bread. And for you, Rahul? We're almost exactly at 50-50, believe it or not. Yeah? Yeah, like we've had quarters where there's a 45-55, you know, it's, yeah. So coffee shops are actually making 50 % of revenue from food? Yeah. All coffee shops? If you both are, I'm extrapolating? I think that's probably accurate. But so also we have a more, I mean, theirs is definitely very differentiated. But even for us, we have a more differentiated food offering than let's say a Starbucks or a Costa where they're just getting food from like a Taj Sats and then just reheating it.

51:40So do you have like a hot kitchen in the coffee shop? We used to. We don't have a hot kitchen. We have a central kitchen and then we have a make line. So it's freshly assembled and prepared, but it comes centrally from our central kitchens. Is that a big differentiator? That if you had a hot kitchen, you could draw in some... You have a hot kitchen. Does that make a big difference in getting people in the dome? It helps in getting higher APCs for sure. What is an APC? Average per person. Average check per person. But the capex related to a hot kitchen kind of mitigates that. It's not necessarily a capex thing.

52:12It's more of managing a kitchen staff. Also, you're not really able to get very high quality... I mean, our experience, not able to get high quality kitchen talent because people who are very talented, they don't want to work at a coffee shop. They want to work at a restaurant. I also feel like it's a matter of iteration, right? There's way too much iteration in the kitchen these days. Yeah. You'll have a hard time retaining talent. It's the biggest reason why food is not consistent in most places. Because there's just way too much iterations happening between the staff and the kitchen. It's just a...

52:47Do people care about that so much? consistency of food? Like when I go into a restaurant, I often hear people talking about consistency in how the meal tasted today versus yesterday. I mean if you're going to a place with an expectation then it matters a lot. If you're going with, if you're going for the first time it doesn't, I mean there's no, there's no really precursor to how the food was. But if you're going with an expectation that okay I came the other day, the sandwich was like this, I'm coming back here, it isn't the same, watch the deal. Actually, ours is a very repeat business too. So people are coming for the same thing regularly and they notice if there's small changes, whether it's in the coffee or the food.

53:26Okay, so if I'm starting... Okay, also guys, ask each other questions, ask me questions. This is a conversation between all of us. Can I give you an answer to the 25-year-old? Yeah. So it's a little different because I think Matt's made a ton of valid points.

53:43I tell that person,

53:48definitely manage your sourcing and your, you know, who you want to source from for the coffee and all of that. Definitely important. What kind of association do you want to portray? Whether it be, hey, we work with BlutoCore, we work with Subco or whoever. But I would say you have to have a key focus on, on shit that has nothing to do with coffee or food. Like? Like we do vinyl. We do vinyl records. you come here as a space to indulge in some kind of a subcultural activity. And having a subcultural association, I think, is a really key element today. So the way the curve works in my brain is, as a country or a city's coffee culture gets more mature, the standard that people expect is already higher.

54:38so the differentiation factor becomes less and less to some extent about like after after you show that you have a certain you know standard you're like okay i source from a good coffee roaster sorted okay i have something to eat that's tasty enough sorted um what else and and and that is the ever escalating sort of matrix of competition increasing differentiation required Can differentiation only be achieved through the quality of the roast or the food? I tend to think not. So my thesis is whatever your thing may be, like maybe our thing is being obsessive about graphic design. But someone else's thing could be we have a cigar lounge in the back and that's what we do.

55:22And you get bomb Cuban cigars here and you get, you know, a good cup of coffee, right? For example, or we spin vinyl or we give investment advice. You spin vinyl? We've done it. like on a recurring basis but we don't yeah we don't have it as a core element Do you think the drama element of it? I guess you could call it that I would say I don't say drama I just remembered I played once at a record store there That was a while ago You're a DJ also? No Adding to the bubble But I like vinyl so I have a decent vinyl collection now But Nikhil to this point right like I don't know how much you've seen of this but there are literally like there's a lot of virality right now on various social media around you know coffee raves right And I think there's two points to that.

56:06One is, okay, this whole, you know, is Gen Z drinking as much? And are they just happy going to coffee shops and having raves and drinking kombucha or tonic and, you know, some kind of sober drink? That seems to be definitely a lot of data pointing towards that. But I think it's also, if coffee shops are occupying the cultural space and having the cultural capital now that maybe bars at one point dominated, then naturally you need to create, you need to be more creative. You have to. Having good coffee and good training and even good food is going to become the bare minimum. One of the reasons why we wanted to do this episode is, there is like a lot of data today that suggests younger people are weaning away from nightclubs and alcohol.

57:01Like a 15 year old today in three years is much more likely to spend time in a coffee shop versus a nightclub. And spend more of his money there. So all of this becomes more relevant. What else? Okay. Food can be a big draw. How much of... How much importance do you give to sourcing? I know you guys are very specific about sourcing with estate. But how does... A 25 year old essentially get in touch with the estate? Make sure that they have lots enough to give this person? Considering most of it gets auctioned off if I'm not wrong. Much earlier. No? No. But I don't think the average customer, to your point, the average customer walking to a cafe doesn't care that this coffee comes from the state ABC.

57:52But for the guy who's opening the coffee shop, how does he go looking for beans? Like where does... So you can tie up with any... Most coffee companies have a wholesale business. So would you, if I were to open a shop, I can buy coffee from Blue Tokai? Yeah. Okay. So can I say something? Like the way I see this, Nikhil, is again, like coming back to this sort of the maturation, at least from the coffee perspective of the specialty coffee market, I think I'm going to go into this wave discussion. So there's this literature that talks about the waves of coffee, right? The first wave, the second wave, the third wave, and now there's like fourth and fifth wave.

58:31And so let's say we're now very firmly in this third wave of coffee movement now where specialty coffee is permeating the market, right? Now, within that third wave, I feel like there's multiple layers. There's multiple more waves. So the first wave within the third wave is probably when a brand like Blue Tokai comes and disrupts that market, right? Like all of these big international players are now like, whoa, there's a homegrown brand that can do this, that can scale good coffee, sources everything domestically, has beautiful cafe spaces, amazing. What I think you see globally, what happens is that then you'll have a population of different roasters.

59:10Roasters are also doing what you said, which is sourcing from farms, roasting their own beans. Then they'll start doing some wholesale. Now, I think the point at which India has to now go is like, everybody doesn't need to be a roaster. It's very capital intensive. It takes a lot of quality control. I mean, you have to build very strong supply chain linkages. If that's your passion, do it. How much money does it take? Like, if I'm 25 and I have 2 crore rupees to start a coffee shop, roastery is not covered in that. No. Tough. But also, as a 25-year-old, are you starting this business to just run this one outlet to earn that money from that?

59:47Or you're starting it to kind of become... I want to start one coffee shop next to the two of you and I want to make money. Okay. You're not worried about funding, like raising the capital and giving the exit and all of that. I have this rich uncle who's agreed to give me two crores. And he's happy if you just pay him back on your own time. If I make him a decent return on the cash he's given. I see. Yeah. Yeah. But like what I would say is like as the market is maturing now and there are a certain collection of coffee roasters who hopefully all you know have their own little areas of differentiation for coffee shops to now proliferate right in the way nickel's describing where it's like you know the way i would love to see india go is that every city every neighborhood has like dozens of local coffee shops right and you will also still have maybe literally a dozen great roasters in the country that have their own shops and also maybe supply.

1:00:44And I think, you know, so the more of these local, smaller scale shops that open, they can, you know, choose the roaster that they want to work with or multiple. And they have to have other differentiations. They have to have some kind of a conceptual arc. Like, could there be a coffee shop that's built for the investor community? I don't know, right? Maybe that's a coffee concept right there, right? Or, you know, I don't know, like a mini paddle coffee shop. Like literally like an indoor paddle only coffee shop. Do you think that could work? 100%. It would work. Paddle and coffee? I have a slightly different view.

1:01:24In fact, I have a question for all three of you. Sorry, because you're not that much in Bombay. What does a bougie do that they are packed all the time? Monday morning, 8 o 'clock they're packed. What is it? I feel like if you see a line somewhere, the line kind of is like a self-fulfilling prophecy almost. And it's been like that consistently. I love the place. Yeah. But when we talk about these differentiators, there's nothing, it's good food, it's good coffee. There's nothing more to that than that. But I think we're at a stage of the market where that's almost efficient. That's sufficient still.

1:02:00Correct. So it's good. And I would say another thing they have going for them is a good price point. Very good price point. It's not very expensive. It's not too cheap. So that's it. Good coffee, good food, good atmosphere at a decent price point. There's this one thing I eat everywhere. Wherever I go, I'm eating avocado toast and eggs. They have decent avocado toast and eggs. I feel like just that one hero dish changes so much. For someone like me who eats that, I don't eat breakfast during the week. on weekends I eat breakfast and it's always just that. Yeah. So roastery, no, doesn't apply to someone like me.

1:02:38What does coffee have going for it? The way when I think of coffee, I wasn't a big coffee drinker up until maybe three or four years ago. I'll tell you why I switched to coffee. I consumed content, A, which said black coffee is healthy. from people like Peter Attia and Huberman and all of these people. C, on social media. and B, I realized it kind of mitigates my hunger pang for a certain period of time. Like today, when I wake up in the morning, I have a coffee at 9am, I'm hooked to it or 8.30am and that leaves me feeling satiated up until 11, 12, all the way up until I eat lunch at maybe 132.

1:03:31The third thing that I think coffee really has going for it is it's a high. It's the only legal societally accepted high where you can sit with your grandmother and share a cup even in the Indian subculture and it's a high that we've all kind of accepted. These are three really big things which are going for coffee. Do you think if I make my proposition as a 25 year old, societally acceptable high, kills hunger pang, kind of healthy because not because I'm saying it, but people who have a lot of relevance in the field of health are saying it. That in itself should be so much. But when I look at the coffee industry in India, it's not that big, especially the craft coffee segment.

1:04:27Do you guys want to talk about how big the market is? I tried to research online. I didn't get to a number. I got like wide approximations, but I didn't figure out how much is the number. If I'm selling a coffee for more than 100 rupees and people are buying, how big is that market in India? There's only around 5 ,000 branded coffee shops and another equivalent amount of unbranded. And what would that number be in terms of net sales? Net sales, It's around a billion is what they... There are 5 ,000 branded coffee shops? Damn. I didn't know that. But you know, on the coffee bit, a lot of people who consume coffee, according to me, are having a coffee beverage and not just coffee.

1:05:09Because if you're going into a Starbucks and ordering a mocha latte with a red velvet foam on top of a pumpkin spice, something, how much of it is coffee versus sugar? I think very few people are coming for the reasons that you mentioned, the health aspect, killing hunger. Is that just me? Yeah. That's us paddle people. Yeah? That bubble? Yeah. So most people are coming in for what? A place that they can sit that has something enjoyable to drink. It's not... And so you'll segregate versus like, I like an atmosphere in this place or I like the products in this place, but it's not for any functional.

1:05:50and I think the other thing is that it has a but there is caffeine you think there is caffeine there is caffeine I mean when I say caffeine but you think that's a driver for people I mean I think it's addictive so one is it's addictive I think it's a driver only from the lens of like you're having a meeting okay what do you socialize or meet or speak over it's not a coincidence that you're drinking coffee while having to have your energy be intact right so I think from that like correlational point of view whether you're like co-working quote-unquote on your own or running a meeting with someone I don't think it's a coincidence that you're probably going to drink coffee and not like a very heavy sugary milky chai from that perspective.

1:06:33Can I ask you a layman question as somebody who has no knowledge about coffee like idiot question if I started a coffee shop let's say you have 100 milligrams of caffeine in your coffee and you have 110 or whatever What happens if me, the 25 year old, starts a shop next to you and puts 350 milligrams of caffeine? Wouldn't it be more addictive? It would. It would also get into it. It would be hopped up, I feel. Yeah. Could go down. The thing is, it won't taste very good, though. Does it affect the taste of coffee? Well, I mean, so you would have to put in a ton of Arabica, which is the higher quality, better tasting coffee, to get 3x the dose.

1:07:15or you'd have to switch to Robusta, which doesn't taste as good. Right. But is this something you guys have experimented with? We've never looked at caffeine levels as a draw or a driver as such. Like you don't have regulation like him. He can't have more than half a percent of alcohol in his kombucha. No, there's no caffeine regulation. So you can put like a thousand milligrams if you like. Theoretically, yeah. And then have a rave party, which is called a coffee rave. Or people having panic attacks. What about cold brew? Cold brew has more caffeine? Yeah. Cold brew would. A lot. A lot more caffeine.

1:07:50A lot more? Yeah, it's like palpitations. How much more? You're putting way more coffee is going into a dose of cold brew. There's also a lot more contact time, right, with the water. So cold brew would like maybe mingle with water for like 12 or 16 hours, whereas espresso comes out in 30 seconds. So contact time will make a difference. Is there a thing? Do people drink a lot more cold brew now than before? Or is like a hot coffee your highest selling? People use it a lot for like exercise. So it's a pre-workout and things like that. So that's become common. We covered food. Normally 50-50 split between food and beverage.

1:08:33If you have a hot kitchen, can help me as a 25-year-old. But keeping consistency and not losing people is not easy. especially at scale subculture vinyl records I don't know if you have I would add one more thing since these gentlemen are here one thing that's made a big difference from the subco lens has been we crafted this kind of menu that we call the speakeasy menu and that was interesting because what we wanted to do was sort of mimic what bars are done with cocktails but use coffee as the base right? Simply put. And in fact, we built a lot of it with Swami Tonic at the time. And so I think this amalgamation now of coffee with soda, like carbonated soda, water, tonic water, flavored tonic water, like kombucha and coffee, these are now becoming additional interesting like product differentiators.

1:09:38Is that a novelty thing or will it stick? I think it'll stick. I think that people who aren't, if the industry is moving away from, let's say, alcohol in some generalized sense, I think it makes perfect sense for coffee to still give you the sort of mimic the feeling and give you the benefits of drinking like an old-fashioned without having any booze in it, right? Like we've tried making like Negronis and old-fashions and like all sorts of like, we made a Singapore sling the other day for this like Singapore event that we did. with just non-alcoholic ingredients. And so, I think it'll be more than a novelty.

1:10:18Yeah? Yeah. Yeah, I think so too. You're almost going to a coffee shop for the crowd that is in a coffee shop. Almost like a bar. How do you influence that? I mean, for us at least, we try to do a lot of community events in the beginning, having pop-ups, having music, I mean, art gallery people come and do installations. So I think you have to have a hook. Like what Rahul was saying is very true. You have to have some kind of reason for people to come. Is it like a bar where you bring in the women and the men follow? No, I don't. No, I don't too. So what hack can you tell me in terms of getting the kind of crowd in a coffee shop, which would attract more people?

1:11:07That's a good question. If I had the answer to that, I would replicate it across our 135 outlets. But I mean, for us, we've tried to just do it by product. And I think at a certain scale, that works, right? If you know that, okay, I know that this brand has a consistent coffee, consistent food. So when I'm choosing to go for my meetings or whatever, I can go to that place and be assured a certain level. I think that works. But for a standalone coffee shop, you'd have to have something more significant. I feel like I might be the anomaly. But I can't remember the last time I chose to go to a coffee shop because they have consistent food and coffee.

1:11:53That you like. Maybe I can go to a restaurant for that reason, but not a coffee shop. Yeah, same. Right? Yeah. I would, I mean, as non-coffee people, You know, I wouldn't necessarily go to a coffee shop for that repeat experience. But for both of you, what's your standard coffee order at a coffee shop? Americano. Yeah. Latte. But so if you knew one place had an Americano that you liked versus a place that had a cool looking vibe, you'd choose the cool looking vibe. I also think it depends on the... on the occasion, you know? Like... At home, I used to do Nespresso coffee. For the longest time.

1:12:36Then Rahul did some mini-sapko setup. I saw the Alinea mini there. Yeah, it's here as well. Nice. Now I know that the Nespresso is bad. Because if I have a cup of this and I have a cup of that, I can distinguish. Yeah. But when I'm going into a nice coffee shop, their distinction becomes a little bit harder. Because all the coffees are kind and nice. Or like you know like many things in life like alcohol. If I'm having Grey Goose vodka or absolute vodka, how much is the differentiation in taste that is actually palpable and I can distinguish? And how much is the fact that I know one bottle costs two times the other so it must be good?

1:13:22You know what I mean? Yeah. Do you get this question a lot with tonic? Not with tonic. I think it's more alcohol. So no one's like, hey, can you really tell the difference between the tonics anyway? You can. Because... Yeah. So there's a line by Fevertree, which I love. Which is like three-fourths of a drink is the mixer. So by volume, it's so much that you will... And why I was asking them about the coffee or whatever. You can actually instantly tell the difference between tonics. Yeah. I, the other day... Sugar, bitterness... You can. Whatever, second loss. As flavor-wise, you can tell. But can you tell that this is a better quality tonic?

1:13:57I don't know if it's about better, right? I mean, the taste is very subjective at the end of the day. but it's not about better, but you can definitely, definitely pinpoint the difference. And then maybe you can pick what's better for you. Why were you asking what coffee would you like? Yeah, so why I asked that was because in an Americano, I think to differentiate would be a lot easier than to me in a cappuccino format, especially if someone's adding sugar or something. Then that taste across coffee shops could be, you know, a little more difficult to decipher. But Americano? I also think you're going to a certain level of coffee shops now.

1:14:34But in a lot of places, the Americano would be terrible. Like a five-star hotel, I'm assuming would have a terrible Americano. Is what milk I have a novelty anymore? Yes, I wanted to talk about milk. Yeah? So if I have oat milk, almond milk, soy milk, I don't know how many other milks are there. Can it be a novelty? I think the quality of… I mean, so at least for us, very few people order these alternative milks. But how big is that? That's a big difference between both of you. How much of total sales is alternative milk? 2-3%. That's it? Yeah. It's much higher. I don't know the exact number, but more than 10 % for sure.

1:15:07Like 15%. If you go to a coffee shop in Bandra, and you ask for regular milk, you get the look. Like, really? You want regular milk? Well, what's interesting, Nikhil, is that there are these insane brands worth... I mean, I think the compounded annual growth rate of alt milk is... I have the figure somewhere, but... brands like Oatly, which I'm sure you've heard about... They did very well and then the stock has crashed. Yes, that's true. Yeah. But I think the competition suddenly became... majorly fierce. And there were a lot of brands in the West that are also... Initially, they differentiated themselves heavily on the packaging.

1:15:46And it was... Look, for baristas, the way textures and stuff was superlative for a long time. But now there's loads of interesting oat milk brands and even other milks like you mentioned. You know, macadamia, naat, and like all sorts of stuff. But yeah, I mean, somewhat controversial. The composition of the oat milk. Yeah, exactly. Yeah, there's a lot of stuff in there. It's actually better. Yeah, I don't get it. I don't get the oat milk. How many things you don't understand on the back of the label. Yeah. Hey, I must say, I'm still not feeling very confident opening a coffee store. You guys are like the masters of this business.

1:16:25Convince me to open one. I know coffee gives me a high. Crazy addictive. Possibly healthy if I'm having black. You've told me what food I serve is very important. 50-50 in terms of sales with coffee. Drama, vinyl, subculture, music, coffee raves, very important. You've said the crowd is a big draw. Actually, we've said the crowd is a big draw. You've said the crowd. How do we... how do you create an atmosphere artificially of good crowd but i think just take a step back to what we were talking about earlier if there's only 5 000 coffee shops and more and more people are interested in coffee more and more people are going to coffee shops it's a very underserved market so i think the the challenge is that real estate in india is also very expensive and there's limited supply but there's even if you feel it seemed like there's coffee shops opening up all over.

1:17:20It's very, very shallow. But I'll tell you the problem. I have two crore rupees my uncle gave me. Yeah. Matt and Rahul have a lot of money that investors have given them. Yeah. How do I compete with you guys? I have... Open between us. We're going to bring in people. I do something a little different. Just by virtue of being next to us, you're definitely going to siphon off some of that crowd. I don't know about that. Often I see these two very similar restaurants. One has long lines, the other one is empty. The long lines kind of self-fulfill the prophecy that where it is crowded must be good.

1:17:52I think for restaurants it's different. People don't want to wait for a coffee shop. And we've seen that when we have a coffee shop and let's say a third wave coffee opens, a Starbucks coffee opens, a Chaios opens, an independent coffee shop opens, it actually sucks in more people to that market and everybody does better. You think? I have. I mean, it's happened many times. Is Starbucks doing well in India? Yes and no. Go ahead. I mean... There was some rumor that Starbucks is shutting down. They came and clarified that it's fake. But how is it actually doing? But I was going to... I don't have any data on how they're doing.

1:18:30What I would say though, Nikhil, is... When you say speciality, this is an interesting one. So Starbucks' perception differs heavily based on which country it's in. Right? Which means what? which means in India, Starbucks is the biggest specialty coffee brand, even though me and Matt would not refer to it as a specialty coffee brand, which is kind of fascinating. Because price point-wise, Starbucks is even at times more expensive than we are. And, well, they are who they are. They have the brand that they have, and you have to respect that. But that's interesting to me. I mean so they've gotten to a thousand plus crores 97 cities so Profitably?

1:19:17No Why is that? Why is Starbucks globally as profitable as they are? Because I work in the stock markets I've looked at it from a very stock market lens They're almost a bank as much as they are a coffee shop But for somebody who's so profitable outside why are they struggling to break even and make money in India? Their cost structure is also quite different in India versus other places. It should be better, right? No, because it goes back to the real estate. They pick the most prime locations in every market that they're operating in. So the rentals that they're paying are incredibly high. The one thing I've noticed is in America, a lot of people buy a coffee and walk.

1:20:02Yes. They don't occupy real estate. Exactly. In India, if you sell somebody a coffee for 200 rupees, they're going to sit there for an hour. Yeah. That whole behavior shifted to tomato and swiggy. I was just going to ask about Zepto Cafe and all. They seem to be, Zepto Cafe seems to be doing well, from what I've heard. Not sure. I think it's 100 bucks or 120 rupees for a cappuccino on Zepto. Makes a compelling case. Does that one thing ruin the chance for me, 25 years old, wanting to open a coffee shop? if I were to open in America 100 people will come in the morning buy and walk but in India if 5 people come and I have 8 tables in my store and 5 are occupied I can't service anymore yeah that's a limiting factor for sure I think that's why in this market I feel like all the stuff I keep saying about differentiation becomes hyper important because you're still dealing with needing it to be experiential primarily and then everything else serving that experience It's that's the way that I see it in the domestic market, because you're absolutely right.

1:21:05I mean, if Matt was to open in Manhattan or in London or in Dubai or wherever. Yeah, I mean, he'd be able to serve people that were like, OK, habitually, I drink three to four cups a day. I get them at various times. Sometimes I pick it up. Sometimes I sit there. Sometimes I, you know, pick it up and come back to my office, whatever it may be. So it is not even like baked goods, right? Like people, there are people that live on eating like croissants. I'm not saying they should, but they do. And so I think we're kind of at this weird inflection point where when you look at Starbucks, I think because they have the capital to expand as quickly as they have, they're doing that whilst brands like us are trying to change the culture of coffee.

1:21:50I was just going to say that, yeah. And that's pivotal for a brand like Starbucks to actually succeed at the scale and the profitability that they're ultimately looking for. is it can't only be limited to like, hey, we're aspirational. It has to be about changing the habituation towards coffee. And I think like Matt's played a big role in that. Before him, Cafe Coffee, he played a very big role in that, you know? And we're trying to play a role in that. I also think that Indian consumers' affinity towards international brands is not what it was 15, 20 years ago. 100%. So the idea that I can just be an international brand and automatically I'll have a line is no longer applicable.

1:22:25Which is great, in my opinion. Yeah. Homegrown is very cooler now, right? And Starbucks is not cool. It may be cool in a smaller town for some time. And I'm sure that town will see. In Bombay it's not cool? I don't think so. No? I think it's very functional. You might want to meet someone and you know Starbucks is going to be standard so you might do that. I don't think it's cool. I think in a certain subset of the population. But even within Bombay, it's like maybe a younger crowd. But when at that same place, where there's a Starbucks, tomorrow when a blue Tokai opens or a Subco opens or a Bougie opens, I think they will take a lot of their customers.

1:23:05Yeah. And you guys always open kind of next to each other, right? Like all the coffee shops. Because again, you want to be where the people are. So there's not a… it's not… we're all kind of… We're a little different. Similar real estate. Like I remember Third Wave used to always be next to Starbucks. because they're very similar in terms of the TG that they're attracting. No, off topic, but one thing, I think McCafe doesn't have a cool impression, but definitely better coffee than Starbucks. Which one? McCafe, McDonald's. Yeah? Yeah. Really? There are people that say that. Yeah. Pretty decent cappuccinos.

1:23:44Isn't that in itself subjective? What is a good coffee? What is better? What is worse? I mean, there is an objective scoring system. Yeah. Yeah. But ultimately it depends on your individual preferences. But you guys are not helping me enough. I know a bunch of things, but I'm still scared to open a coffee shop. Now you're telling me if I were in the US, I could sell in 2000 square feet, 100 coffees every morning. But you would face so much competition. You would face so much competition in the US. But I think tier two is good for opening a coffee shop. Is it? Yeah, I think so. Because lesser options.

1:24:16Underserved, more underserved. Still there's enough of a population who appreciates coffee, who was interested in it. Me and Matt were talking about this earlier, like before we came here. What is the thesis behind brands that want to sell coffee for less than 100 rupees? Because for me, coffee is like this upwardly mobile aspirational beverage. So suddenly you're running into this, this like U-curve, right? Where, who are you serving? You're not sure. You're just trying to have a race to the bottom with the product. I mean, I think I've spoken to Nikhil once about this actually, about, I think you asked me a question once, Nikhil, about what I would do with pricing, like what pricing strategy might look like at Subco.

1:24:58And I think with various things happening, supply chain shocks, inflation, how would you try to deal with that? Would you make things more affordable for your customers? Would you start, you know? And I think given the kind of brand we're trying to build, I said, no, we would maintain our standards obviously very high. but I think the customer base we have expects sort of like this premiumization of the segment and I'm just wondering I'm personally not sure there are multiple brands that have come up and raised a lot of capital recently who like have coffee for less than yeah I don't think that dropping the price increases demand so much to compensate for that no the people who are coming for a coffee shop are more price insensitive What price are most people okay to spend on a coffee when they come into Blue Tokai?

1:25:49So we've done a survey and it's 250 rupees is kind of the... They won't notice anything up until 250 rupees. If it's above 250 rupees, then they'll start to pay attention. Right. What's your pricing average? So cappuccino is 240.

1:26:08There come some coffee shops in Bangalore I go to outside of Blue Tokai and Sapko. there's Araku there's Lavon like even for me it's complicated now when I have to choose I'm trying to think why do I choose to go to one versus another it's coming down to avocado toast and eggs for me I must say there used to be one coffee shop in J.P. Nagar I don't know around the corner Benki yeah you heard of Benki standard right no food no nothing just coffee 95 bucks It's$95. Excellent coffee. Yeah. Same thing. And there's one in Mysore now. I know people are driving from Bangalore to Mysore that bakery. Sapa.

1:26:53Sapa. Sapa straight. I just finished that stolen. Yeah. Beautiful. What about India's palate? Sweet, not sweet? Is that changing at all? Are there any micro trends there? What if I start a coffee shop and I say the novelty is no sugar whatsoever? No. In the entire store? There'll be four of us. Yeah. You won't revive. No? And a very high premium price in. 350 rupees for a coffee and above. No sugar whatsoever. Some venial playing coffee rave Sunday morning. So, interestingly, I would, I would, I don't know if it's a subco thing or what, but the data that we have, year on year growth of pour over coffee.

1:27:33Just black, right? 81%. From last financial year to this one. Same thing with the retail beans. So, I mean, that indicates two things. One is that people may be brewing more coffee at home than ever before in India, which I think is probably fair to say is happening. And typically nobody would add milk or sugar into a pour-over. You're paying like double the price. And so I do think I totally understand that like at scale, yes, I think India likes sweet things and that we know that. But I do think there is a growing segment of people that are, whether it be for health reasons, whether it be for just actually trying to experience the natural flavors that may be there in coffee or a mix of the two.

1:28:16I do think there is a growing segment for people wanting to drink it black without sugar, without milk, without anything. Coffee, sorry, coffee is also a big hobby. Like that part of coffee is so, that's also addictive, right? And we spoke about this once. There are not too many beverages, like you said, that can give you a high that are also that complex, that also becomes a ritual, right? You grind your own coffee, you make your own coffee, you're trying different beans. That ritual also, I think, is such a fabulous thing to get into. Workflow, as they say. Workflow, it's that magic workflow.

1:28:54And that's such a big community, right? And that's grown so much in India as well. So I'm obsessed with consumption trends, okay? So I'm constantly doing research again from a very investor lens. Like right now, if you were to take the end of January, beginning of February, many different sectors consumption is slowing down. I don't want to name brands because I should not be talking about their numbers. But like say a clothing brand, I'll name foreign ones because I can. like a Zara in India which was growing at 30-40 % or a H &M a year ago is now either not growing or flatlining vehicle sales be it passenger or commercial have slowed down to a large degree clothing brands across price points the ones who are selling it 500 rupees a t-shirt to 5000 rupees a t-shirt we are seeing slowdown across all of this I've gone around asked a bunch of people who run operate brands like this why is it happening many believe it's cyclical there was a boom in consumption after covid that boom is kind of plateauing out right now nobody knows the real reason it could be that it could be that discretionary income is going down because the cost of money in the west is higher and less money is finding its way.

1:30:27For a long time, especially in bank law, everything we bought and did was subsidized by foreign P's and VCs who were dumping money on me and my friends in the startup world, not so much me, but they were in turn subsidizing everybody. The one unique insight a lot of these consumption gurus who run many, many brands have is anything health in this three-month cycle, two-month cycle, is really starting to gain traction. People are really doubling down on health, which is ironical in a way because if your discretionary spend is going down, your spend on health should be going down. But that is like a counter trend almost.

1:31:15Do you think there is a scope to incorporate that here and say the healthiest coffee shop next to Sapko and Blue Takoy where you guys are selling cookies and all of that and I don't. Can I do that? Yeah. Can I say whatever you come in? High protein, protein coffees or protein. MCT and all of that. You think that could work? Yeah. What if I say you come into my coffee shop, I will make sure you walk out without consuming more than 250 calories. The minute you've spent 250 calories, I block you from having anything. I would go there. you would go there I would go there right I think it's an interesting angle and both of you guys have marked as low calorie on your products I noticed yeah low sugar zero calorie I mentioned the full calorie content on the front label not per 100 ml not just per 100 even front label right bottom in the center total calories are the bottom right there people should be educated about what they have there I have no problem.

1:32:22There's no point in seeing four calories and there's per hundred and then there's 300 and then that triples up. I know your philosophy is like less sugar is what you guys write, right? Yeah, where more less sugar better than no sugar or artificial sugar. Ethos being everything consumed at a particular level is just good for you. Your body accepts sugar. It's like a dopamine kick, right? Your body needs that level of sugar for you to not crave it further. And we believe low sugar is much much better than no sugar. In no sugar your body is going to crave it. So you're going to feel like having something more sweet again after a little while.

1:32:59But when you completely knock it back... Your body is still getting just the right amount of sugar. Do you think Indians understand how kombucha and sugar interact? And how the SCOBY works? No they don't. Why don't you start? Let's take a break from coffee. I'm not convinced to open a coffee shop guys. Not yet. But we'll come back to this. Should we move to kombucha for a bit? Maybe you start by explaining what is kombucha. Because most people don't know it. In South, it's bigger than North for some reason. Yeah, yeah, it is. Okay, very simple. It's fermented sweetened tea. Tea, black tea mostly, or green tea, which is usually sweetened mostly by an organic source like a sugar or a jaggery or a honey.

1:33:46It's fermented with this culture called scoby, which is a symbiotic colony of bacteria and yeast, which means both bacteria and yeast have a function to play in the process of fermentation. It was discovered by accident. I think one of the stories is that 5 ,000 years ago, there was this Korean guy who just left tea outside, and then it had this... Chinese guy, no? Yeah, different stories. I read a few stories. Asian guy. Yeah? And then it was called Kombucha in German. No, no, no. That is Kwas. So apparently he left this tea outside there. And then he gave it to a Japanese emperor. The emperor liked the tea.

1:34:31So he called that dude's name was Kombu. So it was Kombu's tea, Kombucha. That was essentially the origin story for Kombucha. Many cultures have different fermented beverage. We have kanji. The Germans have Kwas. So origin stories and fermented beverages keep changing. But essentially, kombucha essentially is fermented tea. It's fermented using this culture called scoby. Can you explain what fermentation is? Fermentation is the process of breaking, in the most simple way, it's the process of breaking down sugars. That's fermentation. Sugar is bad. Why is breaking down sugar good? Breaking down sugar is easy for your body to consume.

1:35:10So it'll break it into mostly organic acids. and basically it's food for the bacteria. So the culture grows. So that's essentially. And it's breaking down complex sugars in a way where it makes a lot of difference in flavor or it makes a lot of difference in health in terms of consumption. So what you're saying, SCOBY is a bacteria? SCOBY is both bacteria and yeast. Symbiotic culture of bacteria and yeast. What is yeast? Yeast is what, how do I say? Yeast is what they use to puff up brain. But what is it again? A bacteria? It's another live culture. It's another living thing, so to say. So what you're saying is, okay, there's some bacteria.

1:35:54There's some bacteria, there's some yeast. Both of us have its function. So you take sugar, you feed the bacteria sugar. No, so you take sugar and tea and you put the scoby in it. First, the yeast works. The yeast breaks down the sugar, gives rise to alcohol and organic acids and carbon dioxide. The bacteria then eats away all the alcohol. And then it gives you this tea, which is a non-alcoholic, which is essentially a non-alcoholic beverage. And why is that good? In the process, it generates a lot of organic acids like lactobacillus, gluconol, gluconobacter. Probiotics, prebiotics, organic acids, all of it in one form.

1:36:33Why are prebiotics, probiotics and organic acids good for me? It's good for your gut. Essentially, how your brain controls your cognitive, your gut controls everything else. Like how you're fighting diseases, your immunity, your metabolism. Everything is essentially controlled by your gut. Your well-being essentially is not your brain. It's more your gut. So, our body is actually a bag of bacteria. Good and bad both, right? You want to keep the good. You want to keep it in balance. You want the good to always be better than the bad. And this bacteria you're saying is good? This has a lot of different bacterias.

1:37:12Eating dosa also is good for you. Eating curd is also good for you. Drinking kefir is also good for you. Essentially, it's a way for you to feed the bacteria. Just by eating bacteria, it doesn't mean that this bacteria is getting consumed. So this bacteria is directly going and sitting in your gut. Basically, what it does is the process of fermentation gives rise to all of these acids that are good food for the bacteria. So it's good for your gut flora. So if I'm eating something fermented, I'm feeding the bacteria in my gut. Yes. Either through all of the organic acids that we produce and… There's some of the bad that I'm feeding the bacteria in my gut.

1:37:47It's actually good for you. It's actually good for you because if you're feeding… Like I said, there are good guys and bad guys. You're feeding the good guys. You're feeding the good guys so they can fight the bad guys. The bad guys… The bad guys mostly… I don't know. I don't think I'm qualified enough to tell you this. Yeah. So it's mostly, it's what lets you not fight off a disease or an infection or anything like that. So I must say, I've been a kombucha drinker for a long time. I've had all his flavors. I've probably tried every kombucha there is to try in India. Outside also I've tried a lot.

1:38:22This new thing in the US, what is the store called? E-R-E-W-O. Irwan. Irwan. I've been having their kombucha. I've had everybody's kombuchas. I like it because it I don't know if it's placebo or not but somebody has told me it's healthy and it tastes like I'm having a coke so is it really healthy or is it like you know having 100mg of caffeine is good for you kind of thing no it's healthy I'll tell you how it's healthy now health is a very specific claim I'll tell you healthy if you were to you're drinking essentially your consumption is because you want to drink a carbonated beverage You're replacing your carbonated beverage with this.

1:39:04You're better off drinking this than a standard market bought carbonated beverage. That's how it's healthier for you. You're saying this is better than Coca-Cola? It is better than Coca-Cola. But are you saying if I'm drinking water and I have kombucha, it's good for me? Water is the best. Okay. But like, you know, I'm not going to make fat claims. Water is the best for rehydration. Kombucha has its purpose, right? You're drinking kombucha essentially to replace that fizz factor. People are not going to get healthy and become like Superman by drinking kombucha. That's not what happens. The consumption is getting changed.

1:39:44You're better off. Look, for example, if I were to tell you, you know, Coke has this much, this much sugar. It has artificial flavor. Now, there are studies to say that it's bad for you. Right? But when you're consuming kombucha, there is no maybe effect. It's good for you. It'll do you good while you're drinking it. It'll do you good when it's coming out. There is no maybe class. Now, how much better? How much is affecting you? It's a lifestyle choice. You have to continually do it. And you will see that change. You will see difference. It's good organic acids. People say drinking apple cider vinegar is really good for you.

1:40:17It is good for you. I drink Dados. Because it's of that pH balance, right? Kombucha is essentially vinegar. It's tea vinegar. Every morning I have hot water with turmeric, lemon and apple cider vinegar. Like one liter. So what difference are you seeing? I have no idea. I've been on this thing for years. I have that, then I have black coffee, then I have something else. So it's one of those things, right? Maybe the difference is how you are today. It's not something that you can measure. And it isn't something that you should measure. It's something that you do if you want to have longevity, so to say.

1:40:52There's been no studies on this. I would imagine that it's been established for so much longer that there would have been all these health studies. There are studies, but not very conclusive. To say if it's good for you or bad for you. Right? The industry is not big enough for people to create studies. Like they say coffee is good today because so much money is made. Four to five cups is recommended to get the maximum health benefits. For kombucha? Coffee? Coffee. Yeah? Yeah. Four to five black coffees. We're going to amp it up man. Nikhil. Maybe we should have another one then. I've shot my quota for today.

1:41:27I read about this interesting guy online. His name is GT Dale. Yeah. Apparently he's the biggest kombucha dude in the world. And he's the first kombucha billionaire. Who started brewing in his house when he was 14, 15. Yeah. And selling it. And he made this massive brand out of it. The only billion dollar kombucha brand. What's the brand? What is it called? GT. GT is. That's his name also, right? It's GT Dave. So GT's kombucha is the largest they make. They started off with kombucha, did many other things. But kombucha is what they sell the most. And very different from the kombucha that we make here.

1:42:06In terms of, not in terms of function, but more in terms of flavor. The kombucha that you get abroad is sour. We were just discussing this before also. Kombucha that you get in the US is a different palate. It's super sour. If you've had those kombucha, you know it's a lot more sour. It's like it's doing more in your body than the kombucha you get here. I wouldn't say it's doing more or less. Ours is more about keeping everybody happy. Whilst having them consume this beverage. Now if I were to give somebody something that vinegar tasting, doesn't fly well. Because when we used to make kombucha earlier in the day, when we just started, that was the way to make kombucha, right?

1:42:42There was no tech involved, there were no machines, there was none of that. So the kombucha used to come out that way. Takers were very, very low. Yeah. And then we slowly started focusing. And we were doing tea-based kombucha, right? That's what I want to say. We were showcasing the teas around us. Exactly like how kombuchas used to be made back in the day. But with different teas. And the flavor differentiation essentially were the different teas. Things really changed for us when we made cola. Things really changed for us when we made ginger and blueberry. And things a little more funky and massy and things like that.

1:43:16It's because that's what people want also. But I think it's a journey, right? Like you introduce people to a certain level of that funk. And then as their palate shifts, you build. That's the thing for us, right? Essentially, right now, because the category isn't there, it's about building that category. And then doing many, many pieces in this. So you'll have like a, mostly you'll have like a probiotic shot that'll come now that people have started doing that. Then you'll have a more artisanal way of kombucha. Kombucha started off to be artisanal. It never got that chance to be built as a category.

1:43:51Which is what we are trying to do now. Which is why premiumization in that segment doesn't work for that. Because that segment hasn't been built at all. How big is it? It's very small. It's about 200 crores right now. In India? In India. 200 crores? The whole market? Yeah. Is that all? Yeah, that's all. Who has market share? How much do you guys have? We have a small share. I only have data from Quick Commerce. otherwise it's very hard to pick. On one of the quick warmers platforms, we have about 32 % of the market share. And in the US, it's about$4-5 billion. It's$4-5 billion, yeah. That sounds like potential, right?

1:44:30Yeah, there is a lot of potential. It's growing. I mean, we've been growing like crazy. It was, I think it was about 30 crores in 2021. So it's been growing. It's been growing really well. It's almost tripled, so to say. And it's only growing more because on the backside, just me being one of the small brands in a very crowded kombucha space, we've been growing 5x almost every year. So this sounds like a killer opportunity. Went from 30 crores to 200 crores in four or five years. And it's definitely going to go to a billion dollars by 2032 is what they say. In India. In India. And also, I think, like I said, consumption pattern for kombucha in India is very different.

1:45:12People are not drinking it to say, oh my god, I'm going to get super healthy. People know it's healthy. People know it's fizzy. So they were like, I'm already drinking this fizz that's bad for me. I'm just going to replace it. And I… And we achieved more success by making it more accessible. That's essentially how this category is going to be. Accessible, you mean cheaper? Cheaper. Distribution? Distribution, both. How much did your kombucha cost? My kombucha cost 130 rupees. Versus the market it wanted. At about… Yeah, different players are different. There is a kombucha much cheaper than I am.

1:45:45There's a kombucha at 90 rupees. There is a brand from Goa that does it at 90 bucks. There is a brand from Delhi that does it at 99. I'm at 130 rupees. How much does it cost you to make? Because it sounds like you're just fermenting tea, right? Is there any raw ingredient which is expensive? No, not at all. Not at all. It's just mostly quality of tea. We end up using fairly higher quality tea than... I don't know. I wouldn't say higher quality. I wouldn't draw a comparison. But we use a very high quality tea. I think the margins are great because the the pricing is so high but that is the only thing that lets us build this product without so to say having an investment or people are very skeptical about kombucha in general right because of the name because of the education involved in like telling people what a kombucha is so it was it was very hard for us because we had to build we had we're still building it it was very hard for us because there was nobody interested in putting in money uh not even the banks so it was it was our own money it still is uh five five years in two guys super lean super super lean operation had to crack different segments as it went quick commerce being the biggest one because distribution is something that they took care of and you know you sitting in your house in delhi can order my kombucha in 10 minutes that was never never been done before it was just it was the right place at the right time when uh we started off and along with us the kombucha sort of wave started and along with that quick commerce also sort of grew so quick commerce has been good very very good channel for you now that's the largest channel for us yeah it's it's about 60 percent of our business and they take 20 30 percent yeah they take roughly about 30 percent what kind of gross margins do you work at we operate at about 70 to 77 percent at this price point very high uh but i mean it's we will hopefully launch better beverages is slightly more cheap, slightly more accessible because at a hundred and third between, between hundred and hundred and thirty rupees, there isn't really a business to be made.

1:47:46But sub that, there definitely is a lot of business to be made. And that's what that's what we've been doing the last year. I think for about four months, just four or five months, just to test the water, we got down our price from 130 to 9 grand. Our business went up 6x instantly within three months. It was, it was And that was the take home from there. And you know, it isn't anything. There is a much larger business to be built. If there isn't kombucha soda, but a better for you soda. The market is super huge and there is a large scope. If I were to tell you that there is a functional beverage, a soda, which is good for you, has a little bit of protein, has a little bit of fiber, is super low in sugar.

1:48:31What is the functional beverage? What is the function of beverage? Function and beverage is what it's doing to your body. You got some, right? I got some. You guys want to try? Yeah. I got some tonic, water and some kombucha. So you guys are competition also. As long as someone's not drinking Schweppes. That is it. We have one common enemy. That's how I see it. I'm gonna get into why, again I should build. But this sounds exciting. If I only have two crores and I'm deciding between coffee and you. You're sounding more tempting. We started this business with six lakhs. Three lakhs and three lakhs.

1:49:08That's how much money we put into this business.

1:49:14I wouldn't say we made a lot of money. But I think we've built a business worth putting money into. Worth people... Worth enough for people to consider putting money into at this point. How do you explain the word to people when they first encounter it? So that's the problem, right? Like the lower your price point goes. The more you're accessing people who have no clue what this is. Kombucha in a... So I think that's been our learning. Right? From then to now. Education has been sort of our biggest letdown. And education requires a lot of capital. And a lot of time. And a lot of expertise in being able to communicate that.

1:49:51None of which we had. But you probably have the inflection point the US did at some point. Naturally. Naturally. We seem to mimic the West. But that's what's helping us right now. That's what, that is the only thing that's helping us right now. That culture saying kombucha, oh my god, okay. It's such a billion dollar industry, okay, people are looking into it. How about export for you guys? Huh? How about export? We've talked about it. We have. I think, Middle East is seeming really juicy right now. But we're working around... Legislations over there and it's a lot of things. allow certification.

1:50:27In our category, logistics is expensive. Yeah. making the product is actually really, really, really cheap. It's not, it's not, like I said, anybody with a bucket can make kombucha now. Can you do it to be scalable? Maybe not, but you can definitely, definitely start and then you can learn along the way. So, is there a use case where I make an alcoholic beverage like beer, which has 5 % alcohol, but it's kombucha? It's called hard kombucha. They have hard kombucha, yeah, in the US. So, that's what it is. It's hard everything. That's the next phase I think kombucha will hit as in general. It'll be competition to your standard brees or…

1:51:03Or beer. Or what did you say? Beer. Beer. Beer. How big is that market? If the US market is 5 billion… So they say that the hard kombucha market is almost as big as the regular kombucha market in the US right now. Same about 4-5 billion. Because it's also trending. Right? But we believe that hard kombucha in India, we still have time. People need to understand what kombucha is first. Let alone, we've been trying to push the agenda of using kombucha as a cocktail mixer for the longest time. We haven't been very successful with that. Only then comes hard kombucha for us. Do you think there's scope in India to build that?

1:51:47A beer competition? Do the health benefits of kombucha with 0.5 % alcohol stay at 5 %? The question of health goes out of the window when there's alcohol in it, right? Mentally, if you think about it. Would you want to consume sugar? Yes. Calories? Yes. But that's about it. I wouldn't... If somebody told me there's healthy alcohol, I would probably pick it. Low calorie, maybe. Low calorie, yeah. I think there is. I think maybe in the next two or three years, there is maybe a little bit of scope. We won't know until we've tried. So if you look at hard celtzers, right? US, it became so popular. All your white claws of the world and all.

1:52:29India, it's not really worked. What didn't work, celtzers. A lot of hard celtzers, right? With that whole promise of low sugar, low calories and all. That's a great product though. Great packaging. But my belief is that we're not ready for that yet. I hope we are at some point because between Thorla Distillery and Swaminol, we are set up to do this. We have both expertise. So we'll be the first to get into it the moment we think the time is right. But in India, breezers worked after 10 years of them in the market, eventually working out. Schweppes has a gin and tonic, which is RTD. I don't think that's doing much.

1:53:06And the sellers haven't done much because when people want to drink beer or those kind of things, They don't care about... They want to get calories. Strong beer. And that too. We're a strong beer drinking country. Not even a light beer drinking country. Also consumption, right? Consumption, straight drinks sell more here. And that's easy to do, right? Easy to do. And more people are drinking at home than in restaurants. That's also... That's another side to this. So... Maybe in like small sects of population it might do better. But not if you see India as a country overall. In the same market that they live in, craft coffee market, it might do well.

1:53:45Hard? Something hard? I think things like hard booge, I think, I mean, I'm very curious. But selling it would be such a challenge, right? I don't think we are anywhere close to… You'll need a wine license at least. And that's if you get lucky enough to classify it under that. I think it's a question of not understanding what the hell the product is, Anish. Like if you ask me, I agree with Nikhil's thesis. Like, if you tell me I can drink booze, I can get at least 5, 6, 7%. It's low in calories. It tastes decent. It has good bacteria. Maybe good bacteria. And it's still sweet enough for me to enjoy.

1:54:21Do you drink celtzers? Yeah. I don't actively, proactively buy it. Yeah. But if it's there as an option, I would. But celtzers don't have the bacteria. Hard celtzers, yeah. It's just that to be in India... Here's another... Sorry, sorry to cut you off. Here's another tidbit about bacteria, right? people say consumption of it's like I said it's not like if you're eating bacteria the bacteria is going into your system that's not how it works your gut bile is so strong it's killing 99 % of it anyway that one percent that goes yes might be beneficial to you if you want to drink good good bacteria a supplement might be a better way to do it a more stronger supplement with a lot of other things making your gut more susceptible to doing that is the right thing but the thing is what people also are failing to understand is, if you want good gut health, that's why people keep talking about bacteria, right?

1:55:11You need to eat more fiber. Because fiber is food for the bacteria. If your bacteria in your gut is really healthy, there is no requirement for you to put in more new bacteria in it. And that's not how it works. So you're saying if I eat a cucumber, it's better for me than having a bottle of kombucha. But your cucumber is not going to give you the same feeling as the Coca-Cola. No, it's not going to give me the same feeling, but it's better for my gut. Absolutely. Absolutely. Eating anything in its rawest, most truest forms is much better for your body than anything else. Fundamentally, yes it is.

1:55:47But you know, I might be a small proportion of your target audience. But I would probably pick a kombucha with 5 % alcohol over a beer. Because everything in life is placebo beyond a point of view. We have a very funny story. Okay. So when we just opened in 2019, had this big plan, take over the world, pandemic hit. Everything fell flat on its face. The only reason why we survived is because people started ordering kombucha from us directly because there was no beer available. We somehow managed to get an essential pass. So we were brewing, bottling, and then we used to make very like black tea, slightly bitterish dry kombucha.

1:56:31just for these guys who are ordering because they missed a beer. You've done a hoppy one? Huh? Hoppy? We have a hoppy one, yeah. We have one with citra hops in it. Oh, nice. Yeah. You have dash here? No. And did you control the quantum of alcohol in it at that point? Absolutely. It'll only taste like beer but it doesn't get you high. It doesn't get you high at all. Do you think if we did kombucha together and we tried to do like a unique flavor that corresponded to like cacao or coffee, premiumized it, and then put it into that US market as an export product. As hard? No. Just as this? Yeah. And do really well.

1:57:10Because it has a story to it, right? Yeah, absolutely. Like an Indian story of... Like I was just talking to you about like if we did like an Indian... Kaskara kombucha. Kaskara kombucha. Kakao kombucha. Safran kombucha. Yeah, we like can that and export that. We've actually done a couple of those for some people. It turns out it's really, really good. Kaskara I think is like so underrated, right? I don't know why more coffee shops are not focusing on selling kaskara. It's just amazing. Hard supply chain. Kaskara is a really hard to make. Hard supply chain. What is kaskara? It's the fruit of the…

1:57:39I've had it, but what is it? So coffee is a cherry. So you take the skin of that, which normally gets treated as a byproduct. So you have to process it very carefully because there's a lot of bacteria and microorganisms in it. And then it becomes like a tea. And then you can brew it like a tea. what happens to it normally? Discard. Yeah, I guess. So you fertilize around there. So the coffee bean is the seed of the fruit. And then in between there's the skin and then in between there's pulp. Right. Pulp typically will be removed or there's processes where it stays on the seed. But the skin itself, when it dries up, it's like this beautiful like rooibos tea.

1:58:18Yeah. You know, that's the way I describe it. So we're going down the same path where I'm a 25-year-old girl. but want to open a kombucha business. Yeah. And you're going to eventually tell me why I should do it or not do it. You should totally do it. Because there needs to be… I feel like… So I define craft with three words, okay? Authenticity, innovation and quality. The more the better. And that's why craft beverages in general as a segment need to have a lot more players in it. And there is money to be made. If you see, if you look at a shelf, even say at a 7-Eleven in Thailand, the number of options for beverages is just way too many.

1:58:59And all of them, and I've been going to Thailand a bunch of times over the last five years and I see this brand, repeat, it's not like every time I walk in I see a different brand. It's the same brands again and again, right? But there are just at least five times more brands than there are in India. And I think we have a much larger population. We have a much bigger appetite for carbonated beverages than most of the countries. Because we have less discretionary spend per capita that there are less options. Maybe. Which is why you come back to accessibility, right? With time you have to make it cheaper for people to be able to...

1:59:36make it a part of their daily lifestyle. And that's what Coke and Pepsi have done really, really well. They've played with the food angle. They made sure it's super accessible. They made sure that distribution is great. They made sure that even after paying 40 % in tax... It's 20 bucks, 25 bucks, 10 bucks. I really want to talk about that bit. Because out of all the enthusiasm in this case... You should say this. One caution for anyone to get into beverages is to understand taxation in India. We're taxed at 40%, which is ridiculous. I think we're either the only country or one of the two countries that has such a rule against carbonated and sugar beverages.

2:00:18So if I have sugar and carbonation, I'm at 40%. If I remove the carbonation, I'm back at 28 % or 18%, depending on the product. Or if I remove sugar, then I'm at 18%. So it's a very bizarre rule because if I take a tetra pack of juice, that will be very harmful in terms of sugar and you know a lot of how our juice, package juice and all that. That is considered as a healthier product. And what kind of taxination? This is on the sale value. Yeah, on the MRP. Your MRP includes the tax. So 40 % is a very large amount. When we were launching Swami, that time it was 18 % sales tax. We assume that everyone, your Schweppes, Pepsi, Coke will increase their prices.

2:01:04Most of them didn't. They absorbed it. For us, it was a big challenge, right? But you were at 18%. It went to 40%. When we were launching, that time it was 18%. By the time we launched it, it would already become 40%. So it changes your cost card drastically, right? Because the government applied a tax on Coke and Pepsi, but they just... Any carbonated leverage, which is sweet. And it's bizarre because again, you can have a Ruwafzai, You can have a packet juice that can have far more sugar. Can do far more damage to you. But that's at a low tax. But what happens if you remove... the sugar from your tonic, then tonic doesn't sell?

2:01:41What happens if you use a scavula? Doesn't matter. Doesn't matter what's any sweet. Could be anything. It could be even date syrup. It could be honey. Doesn't matter. If it tastes sweet, it is 40%. It's 40%. Which is just bland. So what you're saying is you should... tax it by virtue of the percentage of sweetness in the drink? Either you have slabs, right? There has to be some method to this. So this has been done before and it's working really well. UK has a sugar tax. Yeah. Now when they say sugar tax, it's not that... So they have three slabs, okay? Beverage under 5 grams of sugar. Beverage between, I think 5 grams...

2:02:18Correct me if I'm wrong, Samay. Beverage between 5 grams and 7.9 grams of sugar. and beverages with more than 8 grams of sugar. Now, they tax these beverages per liter sold. Now, for a beverage between 5 grams and 7.9 grams, I think they charge 18 pennies or pence to a liter. And anything after that, I think they do 22 or 25 if I'm not wrong. So I get it. Higher tax, more sugar. And the thing is, people have circumvented this sugar thing also. So for the longest time you would use apple juice as sugar and not refined sugar. Or datesil. And circumvent the thing. So now the government made it a blanket thing that if your product tastes sweet, you don't care what sugar, apple juice, aspartame, whatever you're using, it's 40%.

2:03:11Sweet means tax. Should it be by virtue of how much sugar or how many calories? It should be sugar. To me, that can be circumvented like I'm saying. Right? So I don't think it should... To me, calories is a much more defining factor than sugar. Here's my two cents on this, right? There was a time when Coke and Pepsi were doing really, really well. It was like the time of the world war. Where people needed sugar. Those empty calories, so to speak. They needed sugar. There was a lot of drought, etc. Which is why this kind of worked. Okay. In today's world, we don't need sugar. What this country is deficit of now is protein.

2:03:54So like I said, I wouldn't go as the effect to say calories per se. But I would definitely say sugar is the enemy right now. But the sugar rule can be circumvented. I'll use date syrup. I won't say sugar. Sweet no. There you go. Not sugar. Any sort of sweet. So I'll tell you what this does. This is just hampering innovation in the country. Because now, if I want to launch a product, I need to work backwards from MRP. I want to launch a product today that I want to scale. So MRP becomes a very defining factor. Now I need to work backwards because 40 % of that is going into taxation. It's a very big component.

2:04:33And till that changes, it's going to hamper a lot of younger people coming into the space, unfortunately. But India's ripe for people to get into this space. Because again, who are your biggest players? Go Pepsi, right? We work, we have so much in our country. Spices, fruits, produce wise. But till this taxation is solved, it's going to be tough. But do you feel like, so it's 200 crore market. To me, it seems from the outside, there's so many kombucha brands. Yeah. So are new entrants stealing market share or are they expanding the market? So it's very fragmented, right? There'll be a new player that comes into the market.

2:05:10He'll know three or four restaurants that he'll want to sell to. It's a… You know, it's like a peer-to-peer thing, right? You know him, he'll get his kombucha. They'll support them. A lot of restaurants end up making their own kombucha. It's a very, very small number. But it will change. It's not going to remain the same. This is how… This is essentially… It's all good because the category is getting created. Right. But it will change. There… You can make dosa batter at home also. But like today ID is killing it. And there are so many other brands that are coming. Just like that, it will take that time and it will come to a point where it becomes just another beverage for you to consume.

2:05:46So if I want to start a kombucha brand, how much money do I need? I started with 6 lakhs, so you can start with 6 lakhs. You have to hustle your way through. Can you articulate the process for me? Okay, the first thing that we needed to do was... I want to compete with you. Okay, the first thing that we needed to understand was... regulations and legislation like you said, taxations and regulations. Regulation most important, keep the alcohol below 0.5%. You have to do that. Understand taxation of your product depending on how you're manufacturing this product. If you've got this right, you can create this brand.

2:06:21Next obviously is voice, which essentially is what is the problem that kombucha is solving. And for us, it was very simple. The problem that we were solving is we were giving you a better coke which wasn't available. It still isn't available. That's the problem that we were starting with. Very less health-fired. Maybe there is room for a new entrant to come in to push health as a more objective sort of play to do kombucha. We had a much larger vision of building beverages. Which is why we kept talking about sodas and how we are the replacement. We are the new kid on the block and we're the next-gen soda.

2:07:00But there is room for a bigger kombucha brand to come and spin that health wave and you know, grab it by the neck and really take it forward. There is a lot of room. It can be done. But your taxation rules and everything will vary according based on how you produce this product. What he is saying here is a point. Like there is a new, better chocolate brand called Super U. Ranveer is saying the actor's brand. I like Super U. Yeah, we're a partner with him.

2:07:28if anybody came in and tried here's a protein bar with 20 grams of protein which costs 200 rupees in India didn't really work but him having come and said here is a better Kit Kat it costs 60 rupees has 8-9 grams of protein it's not healthy but it's healthier it's flying off the shelves it's sold out across category not available anywhere I love it, I'm a picture of it makes a lot of sense I love the cheese. Yeah. There was slightly savory flavor. A great way to get protein in. Yeah. So maybe the kombucha story is similar to that story. It's not healthy. Healthier than what you're having right now.

2:08:08Yeah. I would say not only kombucha, right? You take the whole non-alcoholic category. So Swami, we started off as mixers. We saw a very clear white space in the market. There was only Schwebbs. Rahul and me one of my co-founders we were gin drinkers I know this the taste was getting killed so we we would do half Schweppes half soda and we realized that there were no homegrown brands in this space so that's how we started but the way our thinking has changed now is that the whole non-alcoholic category and mixes is a part of it can be so vibrant and again it's better for you right yeah and there are several categories within there's gut health There's hydration, there can be nutrition, protein.

2:08:54Protein, yeah. And there's so much to build. Collagen which as a beverage choice has not even entered the market. So we… I'm surprised you said this. So we constantly have a lot of R &D happening. And for some reason I've been very… Thinking of beauty actually. Yeah, yeah. And we are experimenting with that category as well. So beverages doesn't just have to be mixers in a kombucha or... There's so much can be done in this space. It's a wide open space. What's happening in places like Japan, Korea and all that? What are people drinking? Japan is so crazy that if you see how many products Suntory makes.

2:09:33Yeah, it's insane. And Suntory is setting up a shop in India now. Originally whiskey. Originally, yeah. Yeah, but they... I think they do about 3 to 5 billion in non-alcoholic beverages. I think the largest manufacturer of RTD coffee. Yeah. You look at their range. Everything from hydration to energy. Everything. Everything. Same with Korea. There's so much innovation in beverages. So there is a lot of innovation to happen. When it comes to beauty, I think Thailand is like up there with vitamin, collagen, a number of supplements. I just got these collagen little tubes back. Yeah, the tetra packs.

2:10:08Yeah, sort of things. They're not bad at all. I would say one thing though. the conundrum that always kind of excites me and confuses me at the same time like for your kombucha brand, Nikhil you have a foreign kind of foreign as an unfamiliar category we've all discussed that primarily, I know you maybe have a couple of flavors primarily you're also talking about flavors which are largely unfamiliar then you're trying to drive costs down to make it more familiar but that audience probably isn't familiar with a flavor like yuzu, right? Yeah. Or like hops or any of these like these more foreign...

2:10:46So then it becomes... It begs the question is creating like Indic flavor profiles the answer? 100%. Oh yeah. Most definitely. Most definitely. So what are you thinking? That's why cola serves the most. So, I don't know. Jaljeera kombucha. Yeah, 100%. 100%. That's what I want Nikhil to make. Jaljeera kombucha. Think of flavors that don't need education. Ethnic kombucha. And sell it even abroad. Yeah. It's like why Radical is doing so well. Exactly. So here's this thing, right? The reason why we don't talk about, why we don't play too much on the health card is because we want to end up building something like this.

2:11:22The next global Indian beverage. There is a white space, there is nobody doing it. What is the current global Indian beverage? Tea? No, thumbs up. Really? Nothing, there is no Indian beverage. But thumbs up comes closest. Okay, let's say we five Indians have to sit together and screw ****. Yeah. What do you think the answer is going to be? Is it going to be a kombucha? Is it going to be like an Indian tonic? Is it going to be coffee? Ethnic soda. Slightly functional. Ethnic soda. Like? I remember back in the day when we were young, we used to have goli soda. Remember that? Yeah. There used to be a ball, you push it down and drink it.

2:12:01Yeah, exactly. Is there like a bottling lobby in India? Yeah. 100%. There's a distribution lobby also. And a canning mafia. Yeah, I was just going to come to that. And it's becoming worse now. Let's go canning mafia. Because if I'm starting a kombucha, coffee, tonic brand, I'll need to deal with them, right? So I'll tell you our story. We from day one manufactured ourselves. We didn't go the contract manufacturing way. Which is usually the norm everywhere. And there were a couple of reasons for that. One is that we wanted full control on the product, not give our recipes out. And in India, whatever, India and all you might sign, your one recipe can go wherever, right?

2:12:41You can do jack about it. Second thing is that today, that lobby is becoming tougher and tougher. So a lot of your bottlers are being bought over by bigger guys. And... Some listed large players are doing very well. And somebody told me it's a deal of relationship with local politicians who gets the bottling in that area. Yeah, yeah. And it is going to only become tougher and tougher. Yeah. Why is that? Like there's a large listed company I was reviewing and they said their moat is the fact that their political connections locally at Panchayat level, MLA level, all of that will not allow for real competition.

2:13:21Why does the bottling industry work like that? Not only that, go to raw material. Now with Canon. Tell me first about bottling. So it's just money, right? Just so much money at stake. Is it the collection of the bottles? Like if I sell Coca-Cola in a bottle, the user is not paying the cost of the glass. But it is dependent on whoever drinks it, returning it and then collecting it. No, that's not coming back. That's not coming back. They're trying but that's not going to come back. So the biggest raw material will be your glass bottle. Actually your can costs the same now. That's our largest cost, yeah.

2:13:56So I can give you our economics, my bottle would be about 8-9 rupees. If I did a can, it would cost the same. It would only save me on... Free. Same for you? 8-9 rupees? Yeah. And this also you will beg, borrow... for them to give you quantities. Smaller quantities because they will otherwise not talk to you. Luckily we're at a scale where that's now not a... Who is they? Bottle manufacturer. Who is the bottle manufacturer? There are many. There are many. There are three, four big players. Who are the big ones? There's Piramal, there's Sun that we use. There's ATP. Yeah. In Hyderabad. So wait, you're telling me you will go to them...

2:14:33and say I want a million bottles, they won't give you. No, they'll give you. Million they'll give you. The problem is getting a small quantity of it. See, that's the thing. If you're a 25 year old starting this business, that becomes really hard because what are you going to do with a million bottles? So you're saying if you want a thousand bottles, they won't give you. If you want a thousand bottles, they will never give you. My advice would be, actually this is a double head sport. Do you launch a product in a glass bottle? Or a can? Or an alternate packaging, right? A tetrapack or a pouch or something.

2:15:01Tetrapack is good for the planet. The reason we did glass bottles because it was cheaper, it was easily accessible. And the technology required to fill it was a lot less cheaper and it was very easily… It was a proper do-it-yourself project for us to crack. Canning, you can't say the same. Canning is super technical. It's very hard. I'm sure he has some experience and you have some experience doing it. Production, I don't see that much of a difference. But again, procuring canning… So if anybody can go get bottled if I have a big order, what's the mafia then? Now a lot of your bottlers, contract manufacturers are being bought over by bigger companies.

2:15:36So they may not even manufacture for you anymore. Because their entire allocation will be to a particular brand. Is it that hard to make glass bottles if you had to do… No, I'm not talking about glass bottles. I'm now talking about… End product packaged in a glass bottle. I today want to make a tonic water, right? I'll go to four or five contract manufacturers and say, I want a rosemary tonic water. They'll make it for you. They'll do everything for you. But the same guys are making something for a Red Bull. They're bottling for a Red Bull or some other company or Budweiser's energy drink or whatever.

2:16:12Those kind of players are now being bought over by bigger beverage companies. So they may not even be available for you to contract for them. That is what is starting to change. I've never faced this when we've gone outside looking for third party manufacturers so to say. But I've heard of stories but I've never but I've genuinely never faced it myself. Where they've denied me of manufacturing. They said no, don't come. I think it's easy to start a beverage brand. You can tell by the number of energy drinks that have popped up in the north of India. Way, way, way, way, way too many. But they are from incumbent corporations as well.

2:16:47Yeah, yeah. Nobody new has come up with energy drinking. I won't do energy. If I was to rethink everything and I'm 25 years old and I want to get into the beverage industry. I would completely rethink from a very fresh perspective. Because I think energy is not... It's a very tough nut to crack. And you've had two ends of the spectrum, right? I had the Red Bull and I was Sting now. It's very difficult to compete on either ends. So... Energy will be... You have energy drink at Rs.95, you have energy drink at 20 bucks. How did Sting do it? 20 bucks? It's cheap. And distribution. It's cheap. It's so cheap.

2:17:25Who owns Sting? Sting is... Vahran beverages. Your… It's Pepsi Kona. It's Vahran beverages. The bartler. So they did it because of the means they have. A small 25 year old like me will not be able to. No way. I don't think a small 25 year old can ever make a beverage under 80 bucks or 90 bucks. But you know a lot of people are consuming sting. Firstly it's a 20 rupee product. Now again extrapolate. 40 % tax. This this this. What's the worth of the liquid inside right? Nothing. Can't be high quality. liquid. You're putting that in your system day in and day out as a meal replacement. A lot of people are doing that.

2:18:04And somewhere that's gonna screw with your system. People are using it as meal replacement. A lot of people are, a lot of their audience is that. It's a lot of blue collar workers who are using that as a means to get their energy. The guys who are doing hard labor, so to say. This is something that they're using. Auto drivers, construction workers. The consumption is a lot in that sector. If I look at the full beverage space in India, this includes coffee. I think all the bigger brands. Today when I landed in Goa, I went to Relay at the airport, saw what beverages they had. There's a cold brew by a big Indian coffee company that you would normally trust.

2:18:47Turn the label around. The cold brew in a can has coffee flavors added to it, right? So to me in India, all the bigger players will not actually innovate. They will try and do everything to cut their costs down, hoping that a consumer is not careful enough to even look at the back label. And I think there is a lot of scope to build out cleaner brands in India. So say we're all starting independent brands, you four, including me, the 25-year-old. How do we get people to pick us over them? And I don't mean the rich. I mean like more people. I think the story will play a very decent place. But if they have more marketing money, how do you compete with branding?

2:19:31I don't think it's about marketing money anymore. And this was my thing about a coffee shop. A lot of people I would dream to open the restaurant. I think at some point my dream is to open the coffee shop. And… Are you going to work with him or me? Yeah. I'll work with both of you, of course. But to me the excitement there is that… I today can, I think, compete with a Starbucks and offer a better experience because I understand the consumer. I understand this country and the people that an international brand may not. And they will have an agency working for them and they'll have some market research working for them and so many other things in the system that you actually may not really know your customer.

2:20:17Today as a 25-year-old, you have a fresh start. Think what's happening in your ecosystem, right? If alcohol is on the lower side of things, and that's another debate and conversation to be had, what do people want to drink? People want to drink or consume a product that has a legit story. And beyond a point, you will see through marketing fluff. Every brand, and this happens on the internet right now, right? Right from a clothing brand to an underwear brand, the most comfortable underwear ever. Everyone says the same thing. The most comfortable black t-shirt ever. Everyone will say the same thing.

2:20:56But at some point, your genuine storytelling and your product will have to differentiate. If I were to start a coffee shop, after all that you have heard, what should my story be? I can tell you my story if I was to start a coffee shop. As much as I think that a lot of people may not care about the roaster and the farm. I would put together a very solid collection of about five, six beans on rotation. I would focus a lot more on pour over coffees and maybe coffees on tap, like nitro coffee. I think that's a great product. You feel like you're having a Guinness, a well-made nitro brew. I would have a concise coffee menu, a food menu, but I would have really good music.

2:21:48Really good music starting in the morning. If you walk into a... Like banging music. Banging music. I want energy. Tell us a bit about your business, Anish. Now we know the coffee. These boys have the biggest market. Which is about projected 1.2 billion dollars soon. Craft coffee. His market is 200 crores. How big is your market? So my market is... Hey, you gave me the numbers. Say it again. For the full non-alcoholic beverage. For the non-alcoholic beverage, okay, this was... 1 ,376... billion rupees. It's a very complicated... Yeah, it's a billion rupees in the company. That's the data that was shown to me by the computer.

2:22:36So that's like... 1 ,37 ,000 crores, about 20 billion. 17, 18 billion. Yeah, about 20 bucks. Could it be that big? It would be that big but it's huge though. I would never ever start for myself or advise someone... to start a tonic water company. Like Swami is not a tonic water company. We're a non-alcoholic product company. But your drinks that go with alcohol. Yes, the majority portfolio currently are mixers. I love the name by the way. Thank you. Yeah, it's very cool. Like I have this similar story in a friend of mine called Abhishek... runs Radico, where am I an investor? I love the f***ing fact that here is an Indian making Indian whiskey which is not aged.

2:23:22And people in international airports are picking up that non-aged whiskey and paying more money than a Glenfiddich 12-year-old bottle. I love that too. And Raita is the moment for Indian whiskeys, right? So a couple of markets that we export to. we were very clear that our product cannot be cheaper on at an MRP level than any other product. Even if I'm landing cheaper, even if it works out like that, you take more margin, give the shop more margin, but I'm not going to be a cheaper product on an international shelf. Why is that? Because that perception that India, Indian product will be a cheaper product has to go.

2:24:00Do you think all perception is price if something costs you 20 rupees to make? You can sell it at 50, 100, 200, 300, whatever. It's all perception. I think a large part is perception. Just to be very clear, not that we are... End packaging. ...perception. We are as modest on gross margins as we can be. What is your gross margin? We are at about 60 % with our own production. But at an international level, I was talking about because whiskeys came up, right? I don't want to see an Indian brand cheaper than a Glenford. Why should it be? Right? In fact, if anything else, it is more craft in a lot of ways.

2:24:39It should be more expensive. Why is a stranger and sons... A stranger and sons will be more expensive than a lot of jinns in the UK. And they should be. Why should they be cheaper? And why should they not have Indian names like Swami? Why should it be stranger and sons? Who is stranger? So stranger and sons went with... Okay, funnily enough, the name is pretty much almost by the same team. Like, I'll tell you Swami's name. We went through a lot of iterations with Swami's name. I have a very good story now that we wanted one word, Indian, not more than two syllables, something a waiter could say easily.

2:25:14Export friendly name, some connotation, but not very colonial or old school. And that's a very good story, till you realize that we went through ten names. And we were so frustrated about names that Rahul, my co-founder who also started a stranger, came up with a name. What were some of the other names you went through? Give us one or two. One. I'll give you the most bizarre one. Space goat. Space goat. You can use goat. Yeah. Nice. Correct? We had a similar thesis around the nomenclature. Yeah? I think we spoke about this from the interview as well. I think to your point, Nikhil, like, so subcos is kind of like portmanteau, like play on words, right?

2:25:55So short for subcontinent, define the region, means for everyone, for all in like multiple Indian languages. and I was just going to bring up, not to cut you off, but, you know, I just realized, like, one of the most interesting beverages that people found from us ever was a Ruafsa cold brew. That sounds good. So we made that and it was, like, a bit of a shot in the dark, right? We'd seen things like, I don't know, potty-infused sourdough bread do really well in the cafes. We're like, okay, how do we apply this to beverage? And then so we started creating stuff like Ruafsa cold brew, for example, And it latched on because I think if the positioning is contemporary, nostalgic, global implication, all together in one place, which I think Swami has achieved as well, I think it definitely can work.

2:26:49How many is Swami now? Just for context. Swami should do about 30-35 CR next year. Right. We are very pro-India in terms of our provenance. So not only the name, look at our label. So usually tonic water would be this soda right now, but tonic water will be Indian tonic water, right? What is tonic? Where did that name come from? So basically, malaria was a big issue. From quinine, right? Yeah. And the Britishers realized that quinine is one cure for malaria. I think for a good 150 years, it was the only known cure for malaria. So they had to have those tablets as part of their rations to not get malaria.

2:27:35They would add it to their gin. Too bitter. You added sugar. And that's a rudimentary gin and tonic right there. So tonic is quinine and sugar? At a very base level, yes. Quinine is what? Salt, high sodium water? No. Quinine is from this tree. It's a bark of a tree. Really? Yeah. It's called cinchona. And they extract quinine from cinchona. Ah. And in fact, we had a lot of trials about which went into use, because you also have in India, you have in Burma, you have multiple places. But the story of gin and tonic is from India. And that's why Indian Tonic Water is the name. On our bottles, we don't say Indian Tonic Water, we say Tonic Water from India.

2:28:21On our front label, like they say soda water from India. Because we want to say we're from India and we're very proud about that. Right. So with Swami the name to everything has been very pro-India, that we're proud of our provenance and why shouldn't we be? There is so much here to build on. But in terms of business, mixers is one part. I would not, I would advise anyone wanting to get into this space to think of a much larger, you know, ecosystem of beverages. Don't only think mixers, don't only think kombucha. It's very hard to get into this. We have everything to play around with today. So what are you doing?

2:29:00Tonic then? Soda? So our core range is mixers, which is your tonics. Ginger ale can be both. Lemonade can be both. We have a lemonade that... To me, fresh lime sweet and salted is the national drink of India. Yeah. Most consumed beverage, I think. Same. At every level. So we did one version of that that's... slightly more elevated at a 55 rupee price point. Eventually at scale, we want that to come down to about 40. that'll be a better price point. So what is the problem you're having? You're competing with the club soda, the bisleries who are selling it 25 rupees. So soda is not a problem because largely soda will be a cheaper product.

2:29:39How much is your soda? Our soda is 55 right now but in a bigger packaging and all we'll get down to 35 to compete with your bisleries and all. What is the differentiation in soda if it's carbonated water? Take a sip. Get a glass. The amount of work we've done And on the water profile of this. Can I try actually? I drink a lot of soda. It's a little, it won't be cold right now. It doesn't taste, you know that almost bitterness that comes with the other soda? This is lesser. And it's not as bubbly either. We worked on the water profile so much on this, right? So if I want to start a tonic brand or a soda water brand and I want to create a differentiation, what can it be?

2:30:27Flavour? Flavour is where you create the most amount of difference. It's very minute flavour changes, right? No, not really. I would create. So what we've done with Moussant is, we know Swami is sort of the market leader in the craft tonic sort of space. So what we've done is we've tried to do something completely opposite from them to stand out, right? We've done a spicy tonic water, which is sort of the first tonic water that's catered to a tequila. Not necessarily a gin. We've done a rosemary which is the most savoury. There is only one other brand. One of our first products was a rosemary product.

2:31:01Oh really? Did you launch it? You guys also competition in some ways. With this one segment. Yeah. Maybe more to come in the future. It'll be fun. Again, I will happily promote any other home grown brand. As long as I can get someone to move away from a schwapps. No, I'm with you. Like I'm the biggest proponent of home grown brands ever. I will go to the extent of paying more for an Indian brand if I could. The other challenge, and this again comes down to pricing. Because even your quick commerce today, right? As a new brand, they will eat you up. It's tough. It'll be tough. There have been times when they'll ask you for a 50 % commission.

2:31:40So between your 40 % GST and your 50 % commission are... Good luck. The glass is always greener on the other side, right? They'll give you volumes that nobody else can give you as a new entry. Because you're not pitting against shelf space, you're pitting against thumbnails. It's a big difference. It makes a huge change. Is quick commerce sustainable? I asked the same question to my friends who run restaurants. I'm reviewing the industry from an investor use case. It didn't work in the West. West went the way of big box retail. Quick commerce had like a tiny spike but it died. I think the moment I'm trying to figure out if it's going to be different I think it's sheer volume now but debatable I just think the moment quick commerce and right now a lot of them are behaving that way that we will be your discovery then they own you then they'll start competing brands yeah so they always do that that's the they will come to brands that are doing well like if you're an established brand there's more reason for them to take you if you're a newer brand they totally can squeeze you, right?

2:32:50And they've had the same playbook with restaurants and you guys have seen it. I think they will also now get into seeing which category and which product is doing well and start by labeling the same. But Amazon has done that for years. And why expect otherwise? So I feel like slightly opposition to this. I feel like unfortunately for us, it will very much stick around and dominate because if you look at the US, which I'm familiar with, people have been ordering groceries, let's say, in the US online for like a decade now. But not getting it in 10 minutes. No, never, right? But the behavior that they got used to and adapted to was that it was okay to order the day before.

2:33:33Right? Whereas in India, it basically went from not really ever ordering groceries online to immediately ordering it and getting in 10 minutes. Yeah. So I feel like now the consumer expectation is for that to be the norm. I'm not saying you got a quick comment. is going anywhere. In fact, for my product, to me, Amazon doesn't make much sense. BigCommerce makes all the sense. But if they keep charging you 30, 40, 50 % and you pay 40 % taxes, same for restaurants. 30 % to be listed, 10 % on the carousel, 5 % for something else. Then marketing spends. And then they have all your data. You don't know who your customer is.

2:34:10If they know the customer better, they can build a more suitable product. But that's the whole point. you have to build your brand on your own distribution not distribution let's go back a few years in every investor conversation I would open the conversation by saying I'm not a D2C brand I'm not aspiring to be a D2C brand India is largely offline for these kind of products we're an offline market and to me quick commerce is also that it's a physical it's a dark store show but it's coming to you from a close by place right? Not from a not a next day delivery or a two three day delivery from an Amazon or a website.

2:34:50People don't buy alcohol in advance. Most people in our country forget buying mixers one week in advance or three days in advance. So quick commerce makes a lot of sense because I would have had to go run to a shop to buy the product now I can get it delivered. If you're a more established brand quick commerce will be absolutely fine for you. But if you say that I will build my brand today on quick commerce. To me, that is the issue. You still have to build the brand yourself. You have to get customers. You have to get people to talk about it. Whether you do that via collaborations, whatever your hacks might be.

2:35:24But don't think that you'll build it on the back of quick commerce because then they can shut you down as soon as they want to as well. I differ from this, right? For something like our product, the category had to be built. Now, category for a product which is 130 which is sold in a glass bottle you're better off having it delivered to your house rather than going picking up on a shelf putting a heavy thing in your bag same case same thing I'm saying but that's the thing right and kombucha as a product for us is something that you drink it's a habitual usage right just like just like your eggs in the morning continual consumption essentially becomes like your eggs in the morning where you're ordering your groceries your standard dry provisions and you're ordering like a couple of bottles of kombucha it comes I wasn't saying that.

2:36:12What I'm saying is, let's say you're doing really well in Bangalore, right? On a Blinkit. I'm a new player starting a kombucha brand. And he decides to do the same thing. At what point will Blinkit keep five brands of kombucha? They won't do it. That's what I'm saying. It was very hard to crack that market. Why do they have their own brand? So that's what I mean. The moment I'm relying on them to build my brand. That's to me the end of things. I can't build my brand. That's where craft comes into play. That's where authenticity in manufacturing comes to its place. So in a way, all of you are selling a story.

2:36:47The story is partly your face. Yes, we are selling the story. The cultural connotation of it. That's essentially what you're selling. Product quality and story. Basics. It's not rocket science at all. But product quality will kind of get democratized and commoditized, right? I don't know, Nikhil. I don't think so. It's been a long time, right? Until today, like, I don't know anything about the market share that Schweppes has, but I assume it's like 95%. Yeah, yeah, of course. 95 or more. I don't know. I presume. I mean, the incredible innovation that these guys are doing in flavor, and a few other brands in India are doing in flavors of tonic, for example.

2:37:27I mean, surely at some point that moat that Schweppes has will be broken. The only moat Schweppes has is distribution because of Coca-Cola. That's exactly the other mode. Yeah, that's it. But it will not take longer for us. See, for us to start off, Quick Commerce was great. We have to get into more offline. We have to get into more retail. If I want my brand to be built, I have to get into more restaurants. Horeka and QSA are where the restaurants... Do you think the market for craft then, which is all of you, is more offline than online? 100%. 100%. 100%. Without a cafe, it's very difficult to have a coffee brand without a cafe.

2:38:01We've built our brand via Horeka. Yeah. Right? Swami's first point of discovery would be a restaurant or a bar. If there's hotels, restaurants, cafes. If there is no identification in a place like that, your favorite restaurant serving one or two of these products. You're saying for craft, for someone starting off, it has to be offline. I wouldn't say just craft for a brand in general, at least when it comes to beverages or food. Unless you're playing with price. Unless it's a race to the bottom, then maybe not. Yeah, but it can't be a race to a bottom in this segment, in this category with this taxation.

2:38:36True. It just can't. I also have very different views from a lot of people about performance marketing and stuff. Right? What do you think? That is just… It doesn't work. You love this. You love this topic. Yeah, yeah. We're all just fighting amongst each other. Thank you. It's absolute trash. It doesn't work. Agreed. Because the other thing is, you'll get an agency. Okay? Let me be… I cannot state this enough. 99 out of 100 % of performance market agencies are going to do the same thing. Yeah. Right? They don't understand your product. Everyone's going to talk the same language, what I said earlier.

2:39:13Right? Performance marketing, building a brand on that, I think is dead. It's not going to build long term. Not brands that last 20, 30, 40, 50 years. It's not going to be the thing. And the unfortunate part is the quick commerce platforms are now getting to do this amongst the brands. So the three brands of kombucha that will be there, We'll be fighting against each other for the same bloody keywords, for the same everything. But there's only one winner and the house always wins. Don't you pay the quick commerce to be listed higher? So that's what I'm saying. There are only three kombucha. How much more higher up are you going to go?

2:39:41Marketing independently with them. With them. I mean, for us, it's predominantly with them because it's a large chunk of our sales. Since you're in this industry, I'll ask you, if you could buy Zomatos, Wiggy or Zeptos shares today, knowing that quick commerce is their growth driver, as of today at least. Would you? I have. Yeah, I have to. What did you buy? Three. Both. Would you? It's me though. Yeah? You too, Rao? No. No? What about you? That's the most important question. I haven't. See the thing is, someone has to pay. Right? Every company that's going public will have the pressure to perform in terms of Pat and all of that.

2:40:27That's my point. But then you're buying the stock. As a new brand. No, because they will make the money. I'll tell you who will suffer. A lot of new brands will suffer. Because the moment this mentality comes in there, listen, I don't care. I have to make this much money on this quarter. You will squeeze more ad revenue. And you will bully smaller brands. It's a very natural process. So why I'm bringing this up is that if you're a new brand, Please don't just think that you'll build it on quick commerce. It's not going to be just that. I agree with him. You're saying that while you're on quick commerce.

2:41:03Yeah. He's established. So he has the market share. But I'm available at most of the good restaurants in the country also. I'm not solely relying on them. And what is your pitch to a restaurant? Say I start a tonic brand. You said Horeka is the word. I go to Horeka and say put me on. Do I have to give them higher margins than a bisleri? Can I tell you the actual journey? Exactly what happened with us. So we had three partners who started Swami. Me, my brother-in-law and Rahul. Rahul also started Stranger and Sons in Third Eye Distill. Between Rahul and I, we had enough contacts in the restaurant space.

2:41:40So we knew that if we launch a product, everyone will do a tasting with us. Now whether they just indulge us by ordering once and then not ordering again is purely going to be on the basis of the quality of the product. We would literally go restaurant to restaurant, open a Schweppes, open a Swami. I was like, you taste and tell me. As simple as that. There was nothing more required. Because the taste was so different. So you're saying if I start a tonic brand, and I get it to taste better than Swami, I should go to all the restaurants you are, open yours and mine. Yeah, 100%. I'm already doing it.

2:42:20It's the truth. It's the truth. I mean, it is the truth, right? I mean, at the end of the day, we are competing with each other and we have to do this. And we also market it on differentiation. One is obviously taste, right? And it's subjective. Some people like it. Some people like it. Some bartenders like the fact that it's less bitter. Some bartenders don't like it that it's not as bitter as Swami. Some bartenders don't prefer both because they like the bitterness in Schweppes and they've, you know, sort of tailored all their cocktails to be that way and it's engineered to be used with the Schweppes.

2:42:52See, there are many other factors that go in, right? So that's one level. Compared to how we got ourselves into restaurants. We tasted the product. It also sometimes didn't work. For example, Delhi did not work. Delhi was like, where's the sugar? They don't want to change. So initially, all our products were half, almost half the sugar of Schweppes. Then we launched what we call the original tonic water. That was a little more sugar. Are you beating them on price is the question? No, I cannot beat them on price. I don't want to either. I can't. So I feel in that sense, sugar becomes very secondary.

2:43:27Because Delhi is like that market, right? And this is not any bar. This is... the biggest bars. You name them having the best cocktail game, I won't take some names. Big names. No, I don't want to. No, I'll come to price. Tomorrow I have to go and force them and sell them my kombucha, my tonic again. Or at least my kombucha on some spectrum. But anyway, that being said… Some of the best. Okay? They've said no to us because straight away they were like, match swept. There are two reasons why we can't do it. One is, they're two very different products. Quality-wise and flavour-wise and how they're manufactured.

2:44:05Bro, I'm talking about sugar. I'm talking about sugar. Sugar also. Just one, we'll come to price. About sugar. Delhi was a rude shock that everyone doesn't want a less sweet product. And if you're trying to build a larger business one of the learnings very early on was that Anish is not 100 % of India consumption though. So every product in my portfolio can't be my favorite product. I have to build for different tastes. So that was the other thing we had to do. We had to build something like an original tonic water that got us more acceptance at least in North. That changed a lot for us. Now in terms of pricing, we've had this multiple times where an international brand has come into India and their pitch literally has been we'll match Swami's pricing.

2:44:54And they've not displaced us. And that is because a lot of consumers will ask us by our name. And that's the difference. If you are served with Schweppes and you ask the bartender, but Dhoni are Swami, my job there is done. I'm sure that restaurant will negotiate with me for a month, two months, three months. Eventually keep me because people are asking. And our thing is very clear. Don't replace Schweppes. Keep me as an upgrade. You keep Schweppes at 110 rupees on the menu. Keep me as 130, 150. Bombay canteen, a lot of people, everyone does that. I'm not here to replace. Just put me as an option.

2:45:33Is there a deal you can make with the restaurants where you give them more upside than a Schweppes? Yeah, of course. But how much will you fight the Coca-Cola? No, I'm saying that... Say I go to the NRAI or I go to Riaz or Zoravar. All sweet guys. And I say... All sweet guys till procurement comes into play. And I say, Riaz... You put Swami in all your restaurants. I'll give you 5 % of the upside in the brand. Asset equity. Is that something I can do? As a 25 year old tonic brand? I don't think you can manufacture to that scale also as a new entry. No, that can be figured. I'll raise some money.

2:46:14That can be figured. See… But that whole thing of… It comes back to raising money again. That's not true. You can't fight a prize battle. That's my ultimate realization. You'll undercut someone, they'll undercut you further. Then what? Again, you have to build a brand that someone will ask you by your name. Till you do that. There is no brand equity. I have a very important piece of advice for someone who is 25 and starting. Which camera am I looking into? Which camera is on me? Which camera is pointing at me? This one. This one. If you are 25 years old… Say it again. That looks good. I am just back to it.

2:47:01If you're 25 years old, please remember that first mover advantage is not the end all of anything. Writing India's first XYZ doesn't matter. Just remember that. That's not your moat. And a lot of people I see fall into another thing is that, oh, but this is India's first XXX. So what? There's more education. It doesn't do anything for your business. It's a nice story to say, but it doesn't necessarily do anything for our product. It'll make you feel good. That's about it. No one else is buying it. If I would like to start a coffee shop, coming back to coffee, do the commodity prices of coffee make such a big difference?

2:47:40I remember growing up from Bangalore, we went to Coorg a lot. That's where I realized how well coffee is doing. Because in Coorg, if coffee is doing well, they all have new cars. If coffee is doing badly, they have old cars. Right? Yeah. Does it make that much of a difference to me starting a coffee shop? Not for a coffee shop. It would make a big difference if you were selling B2B to Horeca or you're selling directly to consumers. In a coffee shop, even now, coffee prices are at a 50-year high right now. It'll add two, three rupees to the cost of a cup of coffee. So it's very easily absorbed.

2:48:20In a coffee shop, in a packet of coffee, it's not very easily absorbed. Does it make a difference to you, Gretz? It does, because, I mean, both of our brands, I get what Matt's saying in terms of there's some like absorption that we can do when it comes to the per cup cost but as soon as you start getting into let's say the cost of a canned coffee ready to drink beverage or a box of beans that you want to freshly brew at home or a two kilo sack you want to sell institutionally then suddenly your margins are getting shrunk so I think from that point of view the supply chain shock really can impact the business in a major way.

2:48:59But if you're, you know, fortunately Matt has this incredible array of cafes across the country and with that kind of distribution model for him, I mean, yeah, I guess it's less impactful. How much money do I need to start a coffee shop? Say 2 ,000 square feet. Prime. Bandra, Laval Road, Vasanth Kunj. 80 lakhs to a crore. Yeah. Yeah? More, man. I think more. 2 ,000 square feet? Yeah, it depends how fancy you want it to look. It's up cost 2 crores.

2:49:38Yeah, a crore and a half, I would say at least. Hmm. Yeah. That's doable, though. Yeah, but it could be done also, like, it depends. If you're not, don't get the best equipment, like, get lower, lower kind of equipment, it could be done even for less. But you look at a place like Goa's example again, Grind Bar. They've got a decent machine, they've got a linear mini. They've not spent too much on doing it up, but it's done very nicely. Yeah, super diced coffee shop. What is this between Arabica and Robusta in India? Do we grow more Robusta than Arabica? And why is Arabica better than Robusta? Me, Matt.

2:50:14Matt, you first. Tastes better. I mean, that's a simple answer. Arabica has more flavor. Because India doesn't have the altitude that other countries have. So most of the coffee growing areas are at a lower altitude where Robusta does better than Arabica. Yeah, and interestingly, what's been viewed as like a disadvantage in the past when it comes to Robusta being more prominently and successfully grown at a high standard in India and Vietnam, which are, I believe, still the two biggest producers today. day. With the effects of climate change kicking in, there are a lot of theories that say that India might emerge a winner because the taller altitudes, growing regions will get hotter, which will make Arabica less and less viable.

2:51:04So theoretically, that means that Robusta can withstand more heat at lower altitudes. And so it could be an interesting opportunity for Indian in Robusta in the future. But I think what's interesting about India is that you actually have multiple species of coffee growing in the same region. So you have Arabica, you have Robusta, you even have a species that's kind of a hybrid of the two in some sense called Excelsa, there's Liberica. So I think that makes India quite unique because a lot of other growing nations don't have that amount of diversity. Is sustainability still an angle? If I start a coffee store, shop, and say I'm the most sustainable in every element, will I attract an audience?

2:51:48You will attract an audience, but it's niche. I don't think you can, that can't be the backbone of it. It can't? Okay, I'm going to ask you some really specific questions, okay? We did some research online. Steps to start a coffee shop. Ignoring the generic stuff like define your concept, target audience, market research. how to estimate costs, secure funding, all of that. Can I ask you specifically where I would go about hiring... I need 10 people to work. A barista, servers, this, that and the other. Where do I hire them? Any competition. From them. How do I find your employees to hire? You can just walk into a store.

2:52:36Walk into a Blu Tokai and ask them? Yeah. What's a typical pay scale like? Is there not like a barista school or something that you can reach out to? Not so much. Just frame them, just take from them. You can just post on LinkedIn and people... Like it's an industry where people will switch... companies for a relatively low increase in pay. What's a typical pay starting? Anywhere from 21 up to 28k. A month. Eight hour shift. Eight hour shift. Five days a week. But I'd say that that bracket is rapidly increasing because I think increasingly baristas are falling into more of the categorization that an expert kind of cocktail mixologist would be than a typical maybe server would be.

2:53:27So there's this whole new categorization, I think, with mixologists and baristas that's kind of being formed. So that's an interesting phenomenon as well. And I think so. I do think that pay scale is increasing. and so all of these things impact kind of the premiumization of the segment that's happening and the costs that have to be passed on. Is there a size you guys have realized by virtue of experience that works? Should a coffee shop be thousand, two thousand, three thousand, five thousand square feet? Thousand. One thousand? Yeah? Thousand, huh? You'd say including a kitchen? We don't have kitchens so for us it's thousand.

2:54:03Why is that? Two thousand, the CapEx becomes is too large to fit it out. And the incremental revenue is not justifying the increase in rent as well. Below 800, then tables become occupied and people don't want to wait for a coffee shop. If they see it's full, they'll just go to somewhere else. Okay. Is there something that you would like to recommend in terms of equipment? Now I'm assuming I've decided to open a coffee shop. I have one, two crore rupees that I've borrowed. I've found the space in. Any recommendation in terms of finding the space? What areas tend to do well? The areas you think would do well.

2:54:46The higher density areas. Definitely the place that has a mix of office plus residential. Pure office, then you get limited to only five days a week business. Night business is very low, but you still have to pay the same rental. Pure residential is also, can work, but you need very good catchment, dense catchment. Um, but if you were to think of, I mean, for us, it's the, tends to be the posher areas where rents are above a certain threshold where... Parking? Parking is not necessarily a requirement. No? Don't most people drive to a coffee shop? Depends. Like in, in Bombay, our stores have very little parking and still, but delivery share is also higher in Bombay and that helps balance it.

2:55:36What share of business is delivery? I'm assuming when a coffee travels with a delivery guy, it doesn't reach the client at optimum temperature. But people are willing to have that trade-off for the convenience of it. I microwave an order. Even like a cappuccino will never come with foam on it, but people accept that. We're at 35 % of the revenue is delivery. Is that the same for you? In terms of the results? In terms of how much revenue is delivery and how much is instant? Not quite as high. I think delivery is lesser still for us. 20 %? Yeah. In terms of machinery, now I've done, I found a space.

2:56:18I've done my fit out. I've spent 9 ,000 bucks a square feet. It's a thousand square feet store. Now I need to buy equipment. To make craft coffee and be commercially viable and make money from this project, what equipment should I buy? God, there's such a big range. What equipment do you guys buy? I think we would... We buy it from the same similar brands. Lama Zoko. I think you also have all Lama Zoko. We have Lama Zoko. You have a Slayer, no? We do have, yeah. A couple of different machines, but yeah. But it's also, it becomes a signal. It's not to say on a lower, a cheaper machine, you can't produce good quality coffee.

2:56:55I think the variability is much higher on a lower quality machine. So the consistency won't be the same. You'll have to have much better baristas who are able to operate that equipment to get the same consistency. So who should I buy it from? They're distributors. So they have distribution agreements with like... And your service is dependent on which distributor you use? Yes, yeah. Is there anyone you guys would like to recommend? Matt. We've been working with... Give him some business. Yeah, this 3.1 Engineering. It's a small company and the guy, the owner is very actively involved. And they do a good job?

2:57:33Yeah, yeah. We've been working with them for a year. I mean, so actually we used to import them directly and do the servicing ourselves, and then we've transitioned to buying from him. Is there no Indian brand doing this, making coffee machines? No. Please don't buy any Indian coffee machine if you come across it. They've tried. They've tried for, especially on the automatic side, a couple people have tried. Why didn't it work? Quality and consistency is not comparable to the equivalent Chinese or European manufacturers. That takes us to China. Yeah. What all can I learn as a 25 year old or buy from China or learn from China if I'm starting a tonic, soda, ginger ale, kombucha, coffee brand?

2:58:19What can I use from China? So a couple of things. When we went from sort of say, from a zero to manufacturing at a slightly larger scale than that, there were a couple of options available for us in terms of bottling machines. Right? Filling machines, so to say. There were some Indian options available. There were some Chinese options available and the American options available. Indian options were cheap. Chinese options looked the best and were cheap. American options were straight up expensive. Yeah, of course. So your eye automatically goes to getting Chinese machine. Through experience on some front, and through talking to a lot of people in the industry, They say, please don't get a Chinese machine because now on hindsight we realize this, that the smaller segment machines, you have to baby them a lot.

2:59:11But regardless of whom you get the machine from. What about Chinese? A carbonated beverage bottling line. The broader.

2:59:22Pressure, temperature, all of this plays a very, very important role in how that machine is going to function consistently? Is it going to give you the speeds at which you want to manufacture? I would say my recommendation is start small, get a machine from the nearest person that's available who will reach you immediately if there is an issue. And then maybe move on to larger, more important machines or American machines. I would refrain from getting something from China because service becomes a very big problem. Though they're very prompt with service, and most things are solved over a call.

2:59:58But if you need a spare part, it always needs to be important. It becomes really, really challenging. So to start off with, until you understand the process, until you understand the product, I would say work with a local smaller manufacturer. Even if the machine is not good, you will figure out a way to learn about the product and learn about the machine enough for you to be able to operate it and get to a particular scale after which you can invest. A couple of things. Learning, I think, on a product standpoint, Learn from the US. Look at a website like a BevNet that does every beverage story and learn so much on trends from there.

3:00:33See what's happening in Japan, see what's happening in South Korea. Those are markets to really look at. On an equipment thing, because India has so much pharma and all of that, we have enough suppliers here for everything. Good quality guys. So we use all local stuff. Quality and all is not an issue. Service is not an issue. So on beverage manufacturing, we have enough options here. There's… We have a Hymec client, Hymec engineers… Hymec is pretty good. He's known to be reliable. He's been doing this for a really long time. They do bigger plants for bigger bottlers. Hymec is really good. Expensive but very good.

3:01:12If I were to ask you both a question. Don't name yourself. If you had to go to a coffee shop in India, which is neither Bluetokoy or Sapko, which is your favourite? Thank you. Quick Brown Fox is the deli company that I go to. Yeah? Quick brown fox. It's only in Delhi? Yeah. Brown? That's a fun one. I can't wait to hear what you say. So tough, huh? On the spot, dude. I mean, there's a bunch of names coming up.

3:01:46Wow.

3:01:50I recently had a very good pour over from a brand in Bandra called Gray Soul. Gray Soul. Gray Soul. Yeah. Nice pour overs. Zero vibe though. Yeah, I mean, no comment on that. But good pour over coffee. A lot of good shops in Gujarat that have opened up, surprisingly. Oh yeah. You wouldn't expect. Which one? I'm going to Ahmedabad this week. Oh, yeah, in Ahmedabad there's a couple. Which one? There's one from Kedar. Meraki is good. Meraki is good. Yeah. So many smaller towns. Nagpur has such a good coffee scene. Yeah. Yeah, there's a corridor 7 in Nub. Correbi, was that the one in Ahmedabad? That's in Delhi, I think.

3:02:32Anything in Bangalore? Correbi coffee? Yeah. Bangalore-wise, I guess. Ground Up. I mean, Nuruloo does a multi-roaster. Benki is good. Who's that? That Nuruloo cafe. Nuruloo, yeah. Nuruloo is quite popular. Ground Up, they actually have a coffee estate. And we actually work on sourcing coffee from them as well. Called Salawara. And they also have their own coffee shop. They're quite nice. On double road. On the Arshaka Pella road. Nice shop. You say for kombucha? I actually like Umami Brew from Pone. That's a nice brand. It's a good brand. I like that brand. They make nice kombucha. I discovered them at Izumi.

3:03:13Oh you did. Nice. See that's the thing what you said right. A lot of your discovery for beverages will happen at a Horeca. At a Izumi or something like that. And it makes a big difference when you try the product at a well-established restaurant or a cafe. You can't do that for coffee, right? You rely too much on the person who's brewing it. Yeah. And in most places, coffee is seen as a, okay, I invested in the machine, any random person can make the coffee. They're not going to put the same care and effort that a coffee shop would. and for they call this category NAB or NAD right non-alcoholic non-alcohol there's in India I would drink a fever tree happily what is it say again fever tree fever tree is the UK based company they're in India now publicly listed good stock to see by the way just to understand the consumption and globally there's a brand actually that I've not tried all the products of, but for me it's a very interesting study to see their products, is a brand from Australia called Strange Love.

3:04:29Yeah. Very cool product. Superb Instagram page. Superb content overall. In the product, the stuff they've done. Beautiful. Content plays a big role in all of this, right? 100%. Yeah. How are you... Branding and marketing is largely content today. Yeah. Till the person walks into the store, then it can be in store. what are you guys doing differently for content? You have some popular celebrity investors and all that, right? But they're not active. They're not active? Do they help at all in marketing? No, no, it was a financial investment for them. Right. What do you do for content? So we have an in-house team that works on it.

3:05:09Then we've started doing more micro-influencers that's been effective for us. So you pick an area where your store is and find influencers there. Yeah. And use the agency to do this. Yeah. Which agency? I don't know the name off the top of my head. You? I think now a lot of content is on me. So I'm doing... Like if the last piece of content we've put out is me making a drink and talking about this fruit I found in Himachal. So... I do think... a lot of... people who work in the company should be on the camera. or it should be their voices or them making stuff or talking about it. I don't think Swami would ever do any influencer paid stuff.

3:05:55Why? I think if you're a brand that people love, they'll anyway post about it once in a while. And more than that, they'll serve you at their home or whatever. So I think that's the biggest thing there is. It takes time but once you get there, I think you're there to stay. The love is real. That was real. And to me, when you see organic stuff, I think that's where it's at. Rahul? I think we've taken a bit of a... arduous, bit of a different approach to this. We've tried to build all of our own design practice and our own content house ourselves. And that's been a challenge. It's like building a whole other organization.

3:06:39Small one, but nonetheless. we've never been believers in performance so we've actually never invested in it like a lot of people don't believe me when I say this but we've actually spent zero rupees ever in the last five years on performance so that's something I would also tell anybody watching this that I'm not saying it's wrong I'm just saying that it's not a necessity and it's possible so I would add that the other thing is that we you know, we try to shoot, I mean, we try to create a mixture of a lot of like graphic design intervention and, you know, sort of uniquely designed overlays that involve a lot of like languages and typography, which is a constant kind of like, I think like re-synthesis about the brand being homegrown and having these roots.

3:07:39And I think that has been impactful maybe for us. So I think that's a big pillar. And recently we've tried some new things like this product here, like we've collaborated with a really amazing band that I kind of was like fangirling around called Petercat Recording Company. And we did a really, really cool set of like videos and stuff with them where they came to our space and we built this little product together. where we made these toffees while they were on tour. And yeah, so, you know, we're trying to kind of keep innovating on how content looks for us. What percentage of revenue goes to marketing or content creation?

3:08:24Less than 5%. Including salaries of all the people. Yeah, 5%, I'd say. For you, Matt? Ad spends is 1, 1.5%. including the team? Then the team would be another 3 % or so. We're not doing any ads. Zero. Yeah. No, I mean, but the content team in the company? Content team is me only. Content team. So very high. The salary must be very high. I wish. But I just think and you're seeing this with so many brands, right? I think the team talking about the product is a much more genuine story than someone else talking about it. But then you have to get distribution. How do you get enough people to hear this story?

3:09:11I think people will hear a genuine story. If 10 ,000 people hear a more genuine story, I think that's more impactful than one like people seeing some generic ad that an agency has done. I think there's a big difference there. Like, we were talking about Ben A earlier. I'm not standing in the line for a dosa. Not happening. I'll settle for a dosa that's 90 % them but it's working because there are more people in the room but look at their content such simple stuff they talk about their journey and I think people want to see all of that now I still feel that you have to have some so we used to do everything internally but then it becomes a bit of an echo chamber if you don't have any external even an agency or some other way to distribute the content it's hard to get new customers You'll engage with your existing customers, but...

3:10:05Fair. You're also in a different cycle of the brand now. But I think if someone's starting out, I think if they are on camera and they're telling their story, I think it's a far more effective thing to do. Nikhil, what are your thoughts on endorsements? Celebrity endorsements? I'm part of some brands where we do have it. And I'm part of... Like us, inherently, we've never done ads. I don't mean in one, two years, but I'm talking about like 15, 16 years. It works for some. It doesn't work for some. Like you were talking about quick commerce. For somebody like Adit, performance marketing really works.

3:10:48Right. So I can't speak about a means of marketing in isolation. It depends on what product you're trying to sell. I think for platform plays where you have many things to offer, the cost of onboarding a customer is mitigated when they buy the other stuff. I'm, just to be very clear, whenever I'm talking about performance and all, I'm purely talking of a product company and not a app. And I mean, the amount of money Google is making on performance, it has to be working. Like if you were a fashion brand, where they don't have to come to your store or find you online and order, but it's a t-shirt or something, for people like that, for every buck, I know many companies I'm a part of where they're spending a buck and getting four bucks, five bucks in sales.

3:11:34And if there's a quality differentiation, they get repeat business as well. So this is something I get asked a lot because we have not done advertising and marketing. But to his point, I feel like at some point the person becomes the brand, but it's a long churn. It's a very long churn. I think distribution has inflection points, but to get to that inflection point is a long, long churn. I think the starting part is, again, this is what a lot of people don't realize. And, you know, a lot of brands have made things look easier. For example, Mac would have made the coffee business look a lot easier.

3:12:21Distribution, working on distribution is going nowhere. That has to be done day in and day out. It's not romantic. It is not... It's hard work. Like how many times we've sat, Rahul and I would sit at Nature's Basket office, spend three hours being sent back. That's happened so many times. It's both tactical and strategic. Because finding distribution is as much a factor of the quality of content or the authenticity of content that you put out as it is of the algorithm that is governing But the content is still coming in at the latest stage if I'm looking at the product distribution, right? Today I want to talk to a Taj or a Nobroy's for getting into their, all their hotels, right?

3:13:12The amount of effort that will take or like Nature's Basket example that procurement guy is not watching content or doing anything, right? No, but if something gets spoken about enough, people get interested in it. And these things make a difference. I think, like I said, marketing is a very nuanced thing. And it takes a long while to build distribution. Yeah. Like what I said earlier, right? If someone asks me by my brand name at the bar, my work there is done. Because then that team will reach out automatically. Makes things, makes life a lot easier. For you?

3:13:53We've never really had the expertise to put money into marketing and things like that. But we've done what we're good at. We're making a lot of product and innovation. So essentially what we did was we did a lot of collab with brands. And then we have a very small following in general but we sort of use their followers and their things to sort of gain a lot of attention towards us. One such was the Naaru Noodle Bar, the ramen shop in Bangalore. we did a bacon not bacon kombucha for him which was one of our most successful collabs we did another one with a clothing brand called race that focused on race clothing we did a 24 karat gold kombucha for them as a collab so we did a bunch of collabs and that's literally the only kind of marketing we do don't know any performance marketing don't know anything but I also feel like kombucha is one of those things like it It gets built with time.

3:14:50We have to do more education than marketing really. Which in turn becomes marketing on some level. Still figuring out those pieces. Yeah. But tell me what's your outlook on this space as an investor? In your space? Coffee? No, no. Craft beverages. Why did you invest in Subco for example? What was the rationale? I like how specific Rahul is. Normally, when you invest in a brand, it pivots a bunch of times. I think Rahul is so specific that everything follows a certain language. And he's not willing to compromise on that for anything. I think that level of specificity, there's a difference between craft and art, right?

3:15:42I feel like I feel similar about some other people I know who I work with. They almost go to the art point that they become so anal about what they're building that somebody can give them the business case of changing it. But they won't because they believe in it so much. Raul is a bit like that which is. And you've seen that type of behavior lead to good financial outcomes. Yeah. Over time in the long run. Not in the short run. See in the short run novelty sells. In the long time, I think specificity like that sells. Authenticity. Yeah. I think so. But as an investor, I like the coffee space.

3:16:20Like I said, gives you a high, legal, societally accepted, crazy addictive. I didn't drink coffee three years ago. Oh, yeah? Now I feel like crap if I don't have two coffees a day. What were you doing before that? I didn't drink coffee. Tea like what? No caffeine? I used to have green tea. Somebody had told me the concept that green teas are very healthy. Like everything in life, it's cyclical. Now when I look at a green tea bag, I think microplastics. Yeah, of course. But back then, green tea, you know. I used to drink it, I used to put it on my face, I used to like just play with it. But yeah, coffee is hard to stop drinking.

3:16:58Yeah. It's such a big thing. I think that alone, it's like nicotine almost caffeine. You know? the other thing in the space is especially for us which is alcohol adjacent and with this whole balance of what happens if people start drinking less alcohol and all of that and developing alternate products with them long term this is also very transaction heavy like you see a lot of transactions happen in this space so for anyone who's planning to enter this space also see again like a resource like a BevNet or something. See the kind of acquisitions are not happening in this space. Because that's also a very interesting thing to look long term.

3:17:42And I won't be surprised if tomorrow QuickCommerce company only starts acquiring, right? Rather than doing their own white label. Yeah. So there is a lot of opportunity I see somewhere down the line for that. We're not... Like they'll acquire you and then they'll get you run it as well. No, I'm talking brands. It's just that India has not seen too many beverage acquisitions yet. Great examples of it apart from... I think Thumbs Up would have been the last big one. Bindu. Bindu. Yeah. Jira phase. Yeah. A couple of Jira ones. But like raw press tree wasn't that great. We've not seen that much till now.

3:18:19But the space will be ripe for a lot of those kind of transactions. Where I think the world is also going. The last like fortnight I was in Switzerland. We have this thing every year called the World Economic Forum. So I spoke to so many Europeans and Americans. Everybody was talking about one thing. Trump, how the world is going to become more fragmented than we know how the world has been in the last couple of decades. If he stops foreign brands from having a free market and selling there, other countries will reciprocate. and I feel like if India were to start reciprocating against the Cokes and Pepsis, I feel like the use case for the craft industry in India, that becomes the inflection point.

3:19:09Oh, yeah. So I'm all the more bullish on this industry for that reason. But net-net, you know, there's some patriotic element in me where not just in like beverages, but it could be a clothing brand, it could be a food brand, it could be like anything, sneakers, electronics. As far as I can discount 5 % in quality and buy Indian, I would generally buy Indian. 5 % in quality or a premium in price. I try. I'm of the same opinion fully. Can I ask you something, Nikhil? Since you were in Switzerland and having these conversations, how do you feel like the sort of rapid advancement in large language models is going to impact consumer?

3:19:52I mean in a very generalistic sense but I'm very curious about how you see that because the algos are about to go all over the place what's it going to mean? How does marketing get impacted? It's a very complicated question to answer I did that podcast with Yan Lakoon who is the chief scientist at Meta me and the perplexity guy are doing something when it comes to AI specifically I don't know how to view it really I feel like till today, the amount of money that has been spent on infra around AI, to the revenues that it is generating today justify the multiples that the people who have spent the money are getting?

3:20:38Likely not. How will it change tomorrow and what will happen? Very, very tough to say. I feel like creativity, what you guys have, will get a significant premium than it has in the last generation. Because every model that we talk about can probably predict or say what the likely scenario will be. By creativity, I mean the very contrarian nature of creativity. I believe something is creative when you do something that is not following the trend. I feel like any model will eventually either predict random or trend, not necessarily counter trend. And most innovation generally comes from counter trend thinking.

3:21:27So creative people will likely become a lot more valuable. And speaking of Quickcom, who would you invest in? At the end of the day, as an investor, I look at companies as a multiple of the EBITDA or net cash that they're throwing out. In today's equation, I find them expensive. Hence, I have not invested. I'm more a conservative investor. So, no. But I do question. It's always going to come at a premium, right? Like if I buy a Swami bottle at 50 rupees, and if I get it delivered from one of the quick commerce guys, there is a cost of labor, the 30 minutes, the rider who's going to ride from their dark store to my house, then leave from here, go back, pick up another delivery from the dark store, the cost of fuel.

3:22:25Inflation will drive a lot of this cost up. His salary, for example, how much he makes per hour. if you were to extrapolate and say he has to make a minimum of 100 bucks an hour if he works 20 22 days that's like a salary of 22 000 rupees a month at some point i will question for small deliveries like if i want a bottle of swami will i pay that premium right now it might be discounted by capital coming in from elsewhere beyond the point of time in india if i'm using quick commerce five times a day and paying 50 rupees each time or 30 rupees each time maybe not for me but for a vast majority of India that 150 rupees a day the 5 ,000 rupees at some point we'll get to the point where you know an apartment complex hires three guys or four guys or you hire help I have heard the argument of why it didn't work in the west and it will work in India, the density of population and all of that.

3:23:24But the category of people in India which can afford to pay a premium is still very low. Very, very low. I think we are very, very price conscious. It's almost like annoyingly price conscious. If you're selling something at 50 rupees and you're not in the craft space, you're in the mass market. If he sells it at 45, people just switch. that is the Indian culture and mentality it doesn't matter what country I know he's Indian but thank you for doing this and thank you for making the time to travel this far and yeah super thanks all thank you thank you

3:24:15did I miss anything guys Vigna Rakshan. Yeah? You guys want to say anything? Last words? Thank you for having us. Yeah. It was awesome. Thank you. It's been a great conversation. Yeah. And like I said earlier, it's an open space. Yeah. And so much to build in this place. Yeah. And let's hope everybody buys more Indian, independent... Absolutely, yeah. ...brands like each one of you. Also, the craft beverage space in India is still a very small community. And mostly, largely everyone helps out each other that I've seen. So if anyone wants help or whatever I'm pretty sure when you reach out to people usually friendly people.

3:24:55We're very very open in terms of how we've got the windows. He gave his address also. He gave his address also. I'm happy to give more of him. Are you sure if 10 people show up to your house next Please don't encourage people to show up. I'm a Biryani in horror movie. You give them the address. Please don't show up at my doorstep. Tomorrow they should send flowers at least. I hope.

3:25:21But we'll be happy please reach out be happy to share vendors suppliers any issues taxes legislation whatever. How do people reach out to you guys? Social media? Instagram is the best way. Instagram is the best way. I still reply to most of the messages on my Instagram. I have 1 ,100 messages on WhatsApp. Instagram? No.