When the recession hit, Kaushal Dugar was a self-proclaimed ‘excel monkey’ working in a financial modeling job out of Singapore. He was very far from his roots; a multi-generational Indian tea merchant family.
“I’ve grown up with tea. My whole experience growing up was visiting tea gardens. I actually thought the people who worked there were magicians, because they have this ability to turn a leaf from a plant to something so amazingly tasteful when it’s produced in the right way.”
Kaushal had been overseas for years when the recession began to take its toll in Asia. But as the financial world was unravelling, his thoughts turned to entrepreneurialism, and how to revolutionize a centuries-old industry in a flailing economy.
“Even though tea is a 200 year old industry [in India], nothing has changed since the days of the British. Which kind of gave me an ‘aha’ moment,” he says.
“If nothing has changed then clearly this industry is ripe for disruption.”
Jumping forward six years,Kaushal is now the CEO of the world’s biggest online tea company. Teabox.com sells tea directly from the source to consumers in 75 countries, and Kaushal has a goal: to be the first billion dollar tea company. He’s now eying China, a market that is inextricably linked to tea consumption and already comfortably produces over 30% of the world’s tea.
It’s a radical shift from the ancestral model his father and grandfather followed, but according to Kaushal, cracking the tea market in China, and globally, is all about tech.
“Interestingly, we run less like a tea company, and more like a tech company that happens to be in the business of selling tea direct from source,” he says.
“Shipping to 75 countries is definitely very terrifying, it’s not easy because tea is a food product, but the way we’ve managed to do this is by not running it in an orthodox way, but really using technology as much as we can.”
Teabox.com has the most computer engineers of any tea company globally, and it is a big point of pride for Kaushal. “We have products managers, a VP of Engineering, software developers, we have quality assurance technicians and we have SEO guys,” he says. Teabox.com even has a dedicated developer team based out of Bangalore, one of the region’s biggest tech hubs.
While the staffing sounds complex, their goals are simple; recommend the right tea, and get it to the consumer as fast as possible. Much of their operation is about shaving days off delivery. “Reducing ten days to four days to maybe three days or so. That’s what we are doing with our technology team,” says Kaushal.
“Say if the tea is produced on Monday, it is in our climate controlled warehouse later that day or Tuesday morning. It goes through quality control and is vacuumed packed ready to ship at the earliest the very next day.”
The developer team’s other primary focus is predictive algorithms, which focus on recommending the right teas to the right consumers. It’s at this point that the combination of tech and traditional industry knowledge combine to push margins says Kaushal.
“Predictive algorithms help us figure out what teas are selling where. So for example in India you might like a black Darjeeling from this season, but someone else might like a Darjeeling black tea from the summer season.”
“Why you like those teas is very interesting, there are certain qualities about the taste on your palate that makes you like that tea. So figuring out what is liked by consumers is what we do, then working back to figure out which teas to sell.”
While the marriage of tech with two centuries of tea farming has been a relatively smooth process so far for Teabox.com, China poses an unprecedented challenge. Not only is the Chinese market firmly entwined with its own tea culture, it also has a relatively isolated e-retail ecosystem, making it a difficult market to crack for foreign enterprise.
Companies also have to migrate their advertising approach away from foreign social media platforms and search engines to adapt to the local market. And while shipping fresh produce to tier one cities in less than a week may be possible, it’s harder to guarantee outside of the major centers.
Despite the challenges, Kaushal believes it’s impossible to ignore China. Partly for the same reasons that Apple’s iPhone and luxury brands are flooding the market; China’s growing middle class.
“Just like the way people are happy to pay exorbitant amounts of money for a bottle of wine, people buy tea in China. Last year we sold a tea for about $3500 USD a kilogram.”
“And China, being one of the largest economies, has a huge growing disposable income. They have aspirational needs, they travel a lot. [Teabox.com] fits for those consumers who are looking to trade up or who are looking to splurge, who are willing to pay for a good lifestyle and are willing to pay for a good quality branded product.”
Their platform is currently enabled by Alipay, one of the leading payments providers, but according to the company there are many more to consider. They have a 100 person dedicated website for China, and they claim customers are growing 100 percent month over month.
“We are providing access for Chinese customers to the best tea available in India, and to customers anywhere in the world,” says Kaushal. “Technology really is the enabler allowing us to do all of that.”