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

Nikhil Kamath 0:00 Anybody who wants to learn or who's keen on starting a coffee shop, a kombucha brand, sell tonic and service all the alcoholics in the country, should learn something here and go away with that. [upbeat music] Rolling? Ready? Hi, guys. Welcome. Uh, thank you for making the effort of lying down. So this is a lot of fun. It's not as serious as the energy you guys are giving out right now. [laughing]

Matt Chitharanjan 1:01 [laughing]

Rahul Reddy 1:01 [laughing]

Nikhil Kamath 1:02 We're here to, like, [beep] together and, uh, have a good time. And hopefully anybody who wants to learn or who's keen on starting a coffee shop, a kombucha brand, or sell tonic and service all the alcoholics in the country-

Rahul Reddy 1:20 [chuckles]

Nikhil Kamath 1:21 Any of that-

Rahul Reddy 1:22 Yeah

Nikhil Kamath 1:22 ... should learn something here and go away with that.

Rahul Reddy 1:25 Perfect.

Nikhil Kamath 1:25 Yeah, so we're trying to achieve that. Let's start by telling everyone a little bit about ourself. Who'd like to go first? Matt, you look very interesting. You- [laughing]

Matt Chitharanjan 1:41 [laughing]

Rahul Reddy 1:41 [laughing] Looks interesting.

Matt Chitharanjan 1:42 Interesting face.

Nikhil Kamath 1:43 Yeah.

Matt Chitharanjan 1:43 I peaked already.

Rahul Reddy 1:44 [laughing]

Matt Chitharanjan 1:44 It's only downhill from here. [laughing]

Nikhil Kamath 1:47 When I

Nikhil Kamath 1:48 saw you today for the first time, I was trying to, like, work out, are you Indian? Are you not Indian?

Matt Chitharanjan 1:54 Yeah.

Nikhil Kamath 1:54 Then I looked at your eyes, and then I'm like, "No."

Matt Chitharanjan 1:57 Mm-hmm.

Nikhil Kamath 1:58 Can't be Indian, no?

Matt Chitharanjan 1:59 Half.

Nikhil Kamath 2:00 Half.

Matt Chitharanjan 2:01 Half.

Nikhil Kamath 2:01 Explain.

Matt Chitharanjan 2:02 So my father, he's from Chennai.

Nikhil Kamath 2:04 Okay.

Matt Chitharanjan 2:04 He was born and brought up there. He emigrated to the US for graduate school. So then he settled there, and he met my mom. She's Polish, uh, German-American.

Nikhil Kamath 2:13 The Polish genes were stronger.

Matt Chitharanjan 2:14 Yeah.

Rahul Reddy 2:15 [chuckles]

Matt Chitharanjan 2:15 So that's how I got the eyes.

Nikhil Kamath 2:17 So you moved out when you were how young from Chennai?

Matt Chitharanjan 2:20 No, no, I was born in the US. Born and brought up there. So I grew up in Wisconsin.

Nikhil Kamath 2:24 Mm.

Matt Chitharanjan 2:25 Um, I went to college in New York. Uh, that's kind of where I started drinking Starbucks coffee because it was available and kind of, you know... It was never for enjoyment. It was just to have something to stay awake. So I was there for four years, studied finance, moved to San Francisco. Uh, and I was there when specialty coffee was really taking off and becoming the mainstream coffee culture. Then I started, uh, going to these coffee shops. I started understanding that coffee could be more than a functional beverage. Where it comes from, how it's roasted, how it's brewed, can open up a wide variety of flavor. And I started, uh, roasting coffee as a hobby. So I did that for a number of years. Uh, worked in, uh, financing, economics-

Nikhil Kamath 3:05 Shocks, beverages, years, everything long. [laughing]

Matt Chitharanjan 3:09 [laughing] Uh, yeah, so I was doing that. Uh, then, uh, my parents were professors, so I thought I'd, I'd also become a professor. Went to grad school in Canada, didn't really like it. Uh, then I started doing international development projects. So then I was in the Middle East for a year, then moved back to the US. Then in 2011, there was an opportunity to work for an organization in IFA- uh, in Chennai called IFMR.

Nikhil Kamath 3:32 Okay, what is IFMR?

Matt Chitharanjan 3:33 IFMR does financial research. So basically, they were executing research projects, uh, for US and European professors, uh, here in India. So I, like, was basically executing the on-the-ground work, doing the modeling, working with the professors. Uh, my future wife was working at the same ins- uh, organization, so we met while we were there. Uh, ended up getting married. Chennai was not a, a, a city that I personally enjoyed. I found it quite, uh, traditional, but her-

Nikhil Kamath 4:04 Is she Tamil?

Matt Chitharanjan 4:05 No, no, she's, uh, she's from UP.

Nikhil Kamath 4:08 Wow!

Matt Chitharanjan 4:08 But she grew up in Oman, her-

Nikhil Kamath 4:09 You have kids?

Matt Chitharanjan 4:10 Yeah, yeah.

Nikhil Kamath 4:11 How do they look? [laughing]

Matt Chitharanjan 4:12 [laughing] They look like, uh, uh... So actually, one has very light eyes-

Nikhil Kamath 4:17 Right

Matt Chitharanjan 4:17 ... surprisingly, and one has, has dark eyes. But, uh, they, they, they look like a mix of-

Nikhil Kamath 4:24 Mm

Matt Chitharanjan 4:24 ... uh, randomness. Uh, yeah, so we moved to Delhi. We were both at points in our careers. We were tired of what we were doing.

Nikhil Kamath 4:32 Mm.

Matt Chitharanjan 4:33 Uh, I actually used to brew beer, so I thought maybe we'll open up a brewery. Investment is too high for that. Uh, I used to grow mushrooms, I thought, "We'll grow mushrooms." There's no money in that, uh, at least back then. But we were both really into coffee, and, and, uh, we found that coffee... This was in 2012. Coffee situation in Delhi was quite desperate at that time. No good coffee. Uh, so we thought, "Let's start a coffee company." Um, and, and so we started in 2012, went down, visited the producers, convinced them to sell us their export quality coffee, and we launched it out of a small bedroom in my wife's parents' house. Yeah.

Nikhil Kamath 5:12 And then how

Nikhil Kamath 5:13 did Blue Tokai happen?

Matt Chitharanjan 5:14 Yeah, so then we, uh, we were looking for coffee, basically, is the, uh, for... Actually, we started it without a business plan, without anything, more for self-consumption. And we felt that there would be other people like us who were looking for specialty coffee. 'Cause at that point in time, it wasn't really available in, in India. Um, even when we went and talked to the growers, they felt that Indian consumers weren't ready to pay for good quality coffee, that you'd have to cut it with Robusta or do a commodity Arabica offering in order to bring the price down so that you could get acceptance. Um, so we started very small. We had a 500-gram tabletop roaster. So I would roast the coffee, and Namrata would do the grinding and the packaging, and it just kind of slowly evolved from there.

Nikhil Kamath 5:59 Was that your first job in coffee?

Matt Chitharanjan 6:02 Yeah.

Nikhil Kamath 6:03 And what age were you when you started this?

Matt Chitharanjan 6:05 Would've been 29.... twenty-nine.

Nikhil Kamath 6:10 And what were you doing up until you were twenty-nine?

Matt Chitharanjan 6:12 So I started working. My first job was at an economic and real estate consulting company.

Nikhil Kamath 6:16 Yeah.

Matt Chitharanjan 6:16 I worked at a hedge fund for a while as a trader.

Nikhil Kamath 6:19 Wow!

Matt Chitharanjan 6:20 Uh-

Nikhil Kamath 6:20 Hedge fund. What kind of hedge fund? What did you trade?

Matt Chitharanjan 6:23 It was a REIT, REIT hedge fund.

Nikhil Kamath 6:24 Ah, real estate. Illiquid asset classes?

Matt Chitharanjan 6:27 No, no-

Nikhil Kamath 6:28 Uh

Matt Chitharanjan 6:28 ... mostly the publicly traded REITs.

Nikhil Kamath 6:30 Uh.

Matt Chitharanjan 6:31 Um, actually, it was right when that, the, you know, meltdown happened, so-

Nikhil Kamath 6:36 Mm. Were you short?

Matt Chitharanjan 6:38 They were short, yeah, yeah.

Nikhil Kamath 6:39 Oh.

Matt Chitharanjan 6:40 Yeah. Uh, then after that, I started doing the development projects. So I was in Jordan, working for a stone and tile export organization on a USAID project.

Nikhil Kamath 6:50 Mm.

Matt Chitharanjan 6:50 Which I guess now there'll be no more USAID, apparently. So that was, uh, uh-

Nikhil Kamath 6:55 [chuckles] What is USAID?

Matt Chitharanjan 6:56 It's a, a US government's aid organization-

Nikhil Kamath 6:59 Mm

Matt Chitharanjan 7:00 ... that, uh, Trump has said is full of terrorists and needs to be shut down.

Nikhil Kamath 7:04 Mm.

Matt Chitharanjan 7:05 Uh, so, uh, I did that. Then I was in the US working for a NGO that did, again, uh, development. So actually, they worked with Dastakar. I don't know if you know Dastakar, is a Indian handcraft and clothing, uh, NGO in Delhi. Um, some projects in South Africa, so I did the monitoring and evaluation for them, and then I moved to Chennai to work at IFMR.

Nikhil Kamath 7:29 Okay, so let's move on from Matt to Adithya. Today morning, when we were researching you, I was sitting with my team, and when I spoke about Adithya, they were like, "That cute guy!" [laughing]

Adithya Kidambi 7:42 [laughing]

Nikhil Kamath 7:42 Meghna said this. [laughing] Right?

Matt Chitharanjan 7:45 Yeah.

Nikhil Kamath 7:46 See that girl there. [laughing]

Adithya Kidambi 7:48 [laughing] No, I know Meghna. I know Meghna from before. Yeah.

Nikhil Kamath 7:51 Is that why she said, "Cute guy?"

Adithya Kidambi 7:52 Probably, probably.

Matt Chitharanjan 7:54 [chuckles]

Adithya Kidambi 7:54 But I know Meghna from before. Mm.

Nikhil Kamath 7:57 How?

Adithya Kidambi 7:59 Uh, common, common friends. Bangalore is small.

Nikhil Kamath 8:02 Yeah.

Adithya Kidambi 8:03 As large as it's gotten now-

Nikhil Kamath 8:04 Yeah

Adithya Kidambi 8:04 ... it's really small if you've been there for over fifteen years.

Nikhil Kamath 8:07 Yeah.

Adithya Kidambi 8:07 I've been there pretty much all my life.

Nikhil Kamath 8:09 You were born there, grew up there?

Adithya Kidambi 8:11 Uh, born in Chennai, but I've been bor- raised in Bangalore pretty much all my life, South Bangalore. Uh, well integrated in the-

Nikhil Kamath 8:19 Mm

Adithya Kidambi 8:19 ... in the system, where been ... Did engineering like everybody else.

Nikhil Kamath 8:22 Yeah.

Adithya Kidambi 8:23 Uh, didn't like engineering like most people.

Nikhil Kamath 8:25 Mm.

Adithya Kidambi 8:26 Really sucked at engineering also, like most people. [laughing]

Nikhil Kamath 8:29 [laughing]

Matt Chitharanjan 8:29 [laughing]

Adithya Kidambi 8:31 Uh, uh, uh, eighty fifty-five is beyond me.

Nikhil Kamath 8:35 Mm.

Adithya Kidambi 8:36 But anyway, um, so through engineering college, we sort of, uh ... There was always a passion for food because Mum used to run a couple of clubs in kitchens and things like that, so I used to be in the thick of it mostly.

Nikhil Kamath 8:49 Mm.

Adithya Kidambi 8:49 Uh, loved that chaos.

Nikhil Kamath 8:51 Mm.

Adithya Kidambi 8:51 Absolutely, like, addicted to it.

Nikhil Kamath 8:53 Which one did she run?

Adithya Kidambi 8:53 So she used to run, uh, country club, if you-

Nikhil Kamath 8:55 Yeah

Adithya Kidambi 8:56 ... if you remember.

Nikhil Kamath 8:56 Yeah, I remember.

Adithya Kidambi 8:56 Yeah, so she used to run the club's kitchens for country club as a contractor.

Nikhil Kamath 9:00 Hyderabad guys own it, right?

Adithya Kidambi 9:02 The Hyderabad guys own it, yeah. Yeah, I don't know if it's there anymore.

Nikhil Kamath 9:05 So how

Nikhil Kamath 9:06 did you go from... Okay, where did you go to school, college?

Adithya Kidambi 9:08 Yeah. So school, uh, Jyoti Kendra Vidyalaya. I, I went to Australia to do my, uh-

Nikhil Kamath 9:14 Yeah

Adithya Kidambi 9:14 ... diploma in culinary and classical French cuisine.

Nikhil Kamath 9:16 Then you were a rich kid?

Adithya Kidambi 9:18 Uh, I wouldn't say a rich kid. I would say only son. [chuckles]

Nikhil Kamath 9:21 I don't think poor kids are going to study culinary art in Australia. [laughing]

Matt Chitharanjan 9:25 Yeah. [laughing]

Adithya Kidambi 9:25 No, it was, it was, I-

Nikhil Kamath 9:26 I went to Oxford Senior Secondary School in JP Nagar, second phase.

Matt Chitharanjan 9:29 [chuckles]

Adithya Kidambi 9:29 Look, my dad signed, my dad signed for my loan, okay? I paid it back myself.

Nikhil Kamath 9:33 Right.

Adithya Kidambi 9:34 Uh, he would have helped me, but I, but I still chose to pay it back on my own. But, uh, I really wanted to do that.

Nikhil Kamath 9:42 Mm.

Adithya Kidambi 9:43 After engine- I got pushed into engineering. Then they said, "Go to work. We don't have money for you to go for engineering."

Nikhil Kamath 9:48 Wait, you did engineering, then culinary school?

Adithya Kidambi 9:49 I did engineering first.

Nikhil Kamath 9:51 Mm.

Adithya Kidambi 9:51 I took six years to finish engineering.

Nikhil Kamath 9:52 And then you went to culinary school?

Adithya Kidambi 9:53 And then I went to culinary school when I was twenty-four.

Nikhil Kamath 9:55 Thank God you are the first child. [laughing]

Matt Chitharanjan 9:57 [laughing]

Adithya Kidambi 9:57 Yeah, I had that-

Nikhil Kamath 9:58 Imagine they had three, four like you. [laughing]

Adithya Kidambi 10:00 Yeah, imagine, no, they would have been... Man, man, I really troubled my parents. [chuckles] But yeah, so it was a, it was a thing. Like, I was, I was really bad at, really bad at engineering. They-- My dad said: "I'm going to get you a job." He spoke to somebody, he got me a job at Titan.

Nikhil Kamath 10:14 Mm.

Adithya Kidambi 10:15 I saw-

Nikhil Kamath 10:15 This is sounding like a good dad, huh?

Adithya Kidambi 10:17 Yeah, very sweet.

Nikhil Kamath 10:18 He sent you to culinary school-

Adithya Kidambi 10:19 Very sweet guy

Nikhil Kamath 10:19 ... got you a job.

Adithya Kidambi 10:19 Very sweet, very understanding.

Nikhil Kamath 10:21 Uh.

Adithya Kidambi 10:21 Things that he didn't get, he was like, "Mera beta."

Nikhil Kamath 10:24 What did your dad do?

Adithya Kidambi 10:25 My dad, uh, started off as an HR, grew up the ladder in corporate. He was working with Future Group and Essar and things like that.

Nikhil Kamath 10:32 Ah.

Adithya Kidambi 10:32 Yeah.

Nikhil Kamath 10:32 I thought you were going to say BBMP or politician. [chuckles]

Adithya Kidambi 10:34 No, no, no, not at, not at all. Not at all. Hard-working, middle-class family.

Nikhil Kamath 10:38 Mm.

Adithya Kidambi 10:38 It's just that they wanted the best for their son, always.

Matt Chitharanjan 10:41 [chuckles]

Adithya Kidambi 10:41 Their son is priority, right? It's an only son, right, so full priority. Took- I took a lot of advantage of that.

Nikhil Kamath 10:46 Mm.

Adithya Kidambi 10:47 So yeah, so I went, I went, I went, I finished engineering, went to join Titan. Titan was absolutely horrible because they're also-- I was also driving to Hosur every day-

Nikhil Kamath 10:56 Mm

Adithya Kidambi 10:56 ... to the Tanishq factory. I lasted one month.

Nikhil Kamath 10:59 Mm.

Adithya Kidambi 11:00 I said, "I'm done."

Nikhil Kamath 11:01 You worked in the jewelry business?

Adithya Kidambi 11:03 No, no, no, no. I was in the watch manufacturing division.

Nikhil Kamath 11:05 Right.

Adithya Kidambi 11:05 Yeah. And, uh-

Nikhil Kamath 11:06 Which kind of failed eventually.

Adithya Kidambi 11:08 Yeah, which didn't-

Nikhil Kamath 11:09 Fast track

Adithya Kidambi 11:09 ... didn't take off. Fast track, and, uh, I think they still, I think they still manufacture.

Nikhil Kamath 11:13 Yeah.

Adithya Kidambi 11:13 They are like-

Nikhil Kamath 11:14 But they killed it on jewelry.

Adithya Kidambi 11:15 Yeah, yeah, yeah. It was a, it was a, it was a thing. It was, it was a dead business. I didn't have anything to do with that job. I mean, I didn't even know anything. I liked it. And, uh, yeah, during engineering, uh, a lot of hustle in engineering, right? That's engineering life for you. And-

Nikhil Kamath 11:31 A lot of hustle in engineering?

Adithya Kidambi 11:32 A lot of hustle in engineering.

Nikhil Kamath 11:33 This does not sound like my version of it. [laughing]

Adithya Kidambi 11:35 [chuckles] Is it?

Nikhil Kamath 11:35 What I've heard was-

Adithya Kidambi 11:36 Did you, did you do engineering also?

Nikhil Kamath 11:37 No, I didn't go to college, but-

Adithya Kidambi 11:38 Fair enough. Okay.

Nikhil Kamath 11:39 The people-

Adithya Kidambi 11:39 Oh, yeah

Nikhil Kamath 11:39 ... I've met who did engineering in Bangalore didn't seem like they were coming from a world of hustle.

Adithya Kidambi 11:44 No, no, no. Engineering was full hustle because when you suck at it, you have a lot of time.

Nikhil Kamath 11:48 Ah, like that. Side hustle.

Adithya Kidambi 11:50 A lot of, lot of side hustle.

Nikhil Kamath 11:50 Engineering was not the hustle. [chuckles]

Adithya Kidambi 11:51 Engineering was never the hustle. Engineering was a thing that you had to do because mom was like, " [censored] go to college." So, [chuckles] but yeah, a lot of, lot of, lot of, lot of hustle. Lot of-- Learned a lot. Was on the street, picked up a lot of trades. We used to organize a lot of parties and things like that. Made, made, made decent, I would say, side income. Um, there was this restaurant up for sale where we ... It was like, how do you say? Adda.

Nikhil Kamath 12:15 ... Which one?

Adithya Kidambi 12:15 Uh, Casablanca in Banashankari.

Nikhil Kamath 12:17 I know!

Adithya Kidambi 12:18 Yeah, yeah.

Nikhil Kamath 12:18 I know.

Adithya Kidambi 12:19 So I used to, I used to own-

Nikhil Kamath 12:20 It was near that medical college, right?

Adithya Kidambi 12:21 Behind KIMS.

Nikhil Kamath 12:22 Yeah.

Adithya Kidambi 12:23 Yeah.

Nikhil Kamath 12:23 I've been there.

Adithya Kidambi 12:24 Oh, really?

Nikhil Kamath 12:24 Fish and chips and all that.

Adithya Kidambi 12:25 Yeah, yeah.

Nikhil Kamath 12:26 Yeah.

Adithya Kidambi 12:26 So, so that, that, that restaurant came up for sale, and we bought it-

Nikhil Kamath 12:29 Mm

Adithya Kidambi 12:29 ... because we used to go there enough, and that guy was like: "I really need one and a half lakhs."

Nikhil Kamath 12:33 Mm.

Adithya Kidambi 12:34 We were like, "Awesome, man." We bought it.

Nikhil Kamath 12:35 You used to play snooker or pool as a college-going boy, right?

Adithya Kidambi 12:37 Yeah.

Nikhil Kamath 12:38 I knew it. [laughing]

Adithya Kidambi 12:38 Yeah. [laughing]

Nikhil Kamath 12:39 This is a lifestyle.

Adithya Kidambi 12:41 I used to- [laughing]

Nikhil Kamath 12:41 Rich father goes to Australia after engineering-

Adithya Kidambi 12:44 Yeah

Nikhil Kamath 12:44 ... runs a restaurant.

Adithya Kidambi 12:44 I used to be very bad at it-

Nikhil Kamath 12:45 Pool

Adithya Kidambi 12:45 ... but I used to, but I used to, I-

Nikhil Kamath 12:47 Loser plays. [laughing]

Adithya Kidambi 12:47 It was a-- Yeah, I do. Yeah, it was a thing, right? Everybody goes to play pool. I mean, I was really bad at it. [chuckles] But, uh, yeah, so we bought this, we bought this coffee shop and, um, kind of got very intrigued into the business side of-

Nikhil Kamath 13:04 Yeah

Adithya Kidambi 13:04 ... I was mostly in the kitchen all the time-

Nikhil Kamath 13:06 Mm

Adithya Kidambi 13:06 ... uh, sorting out the menu. Uh, Zomato had just launched that time.

Nikhil Kamath 13:11 What year?

Adithya Kidambi 13:12 Two thousand and ten. Two thousand-

Nikhil Kamath 13:14 Okay.

Adithya Kidambi 13:14 Yeah, 2010. 2010 to 2000... 2009, 2010 to-- Yeah, 2010 to 2012 is when we owned this coffee shop. Uh, when we sold it, it was amongst the top five cafes in Bangalore.

Nikhil Kamath 13:27 Wow!

Adithya Kidambi 13:28 Yeah, that's one place we would say-

Nikhil Kamath 13:28 Who did you sell it to?

Adithya Kidambi 13:30 Uh, we sold it to some, some, some, some people that we knew who wanted to buy it. I was-- I really wanted to go to Australia to study. We had a third partner. Uh, we had three, we were three partners.

Nikhil Kamath 13:38 Mm.

Adithya Kidambi 13:38 Shortly, we had a third partner who passed away in an accident. So the other two of us, we just like... It was not, it was not-- We were-- It was not fun going back to work. So we sold it. It was, um, kind of worked out because we sold it, and then I could go to-

Nikhil Kamath 13:51 Australia

Adithya Kidambi 13:52 ... I could go to Australia.

Nikhil Kamath 13:53 So you sold the restaurant-

Adithya Kidambi 13:54 So we sold the cafe business-

Nikhil Kamath 13:56 went to Australia

Adithya Kidambi 13:56 ... in Australia.

Nikhil Kamath 13:57 Uh, came back in 2015?

Adithya Kidambi 13:59 We came back in 2015, towards the end-

Nikhil Kamath 14:00 How long did you stay in Australia?

Adithya Kidambi 14:01 Three years. Three years, worked across, worked for-

Nikhil Kamath 14:03 I, I like when people say this: "You can't take the Bangalore out of me. I love it so much," and all of that.

Adithya Kidambi 14:07 Yeah, yeah.

Nikhil Kamath 14:07 Then why do you guys leave in the first place?

Adithya Kidambi 14:09 I had to study. There isn't a good culinary school in, uh-

Nikhil Kamath 14:12 Right

Adithya Kidambi 14:12 ... in Bangalore.

Nikhil Kamath 14:12 How

Nikhil Kamath 14:13 did kombucha happen?

Adithya Kidambi 14:14 Okay. So, um, my-- I was actually not the one who started making kombucha. My partner, Shishir, actually started making kombucha. He was having, uh, some skin allergy and a couple of other gut-related issues that he wanted to... So somebody s-- A doctor said, "Make kombucha-

Nikhil Kamath 14:29 Mm

Adithya Kidambi 14:29 ... or kefir, and it's really good for you, and it'll like, it'll, it'll fully sort you out."

Nikhil Kamath 14:33 What's kefir? This is in the malls in, uh, Dubai and all that, right?

Adithya Kidambi 14:36 Kefir is another probiotic-

Nikhil Kamath 14:38 Mm

Adithya Kidambi 14:38 ... uh, beverage.

Nikhil Kamath 14:39 Milk beverage.

Adithya Kidambi 14:39 Uh, milk base, mostly like lassi.

Nikhil Kamath 14:42 Mm.

Adithya Kidambi 14:42 So to say, a more packed, enriched, probiotic lassi.

Nikhil Kamath 14:45 Mm.

Adithya Kidambi 14:45 It's the best kind of probiotic. If you want to consume live probiotic, that's sort of-- That should be a go-to beverage. And, uh, yeah, so he started making kombucha. I was in the F&B space. I was consulting for a lot of restaurants, and I used to handle a lot of kitchens and things like that. So I actually used to buy kombucha from him.

Nikhil Kamath 15:03 Mm.

Adithya Kidambi 15:03 Um, in 2019, just before the, just before the pandemic hit, I was working on a, a passion project that was super, super close to my heart, that shut in four months-

Nikhil Kamath 15:14 What was it?

Adithya Kidambi 15:15 ... after we opened. It was called-- It was a wine and tapas bar. It was in, on... You know, where B-Flat was in Indiranagar?

Nikhil Kamath 15:20 Yeah.

Adithya Kidambi 15:21 It was the floor below B-Flat. It was, it was on the first floor.

Nikhil Kamath 15:23 What was it called?

Adithya Kidambi 15:24 It was called Haute Wine & Tapas, like haute couture. Not, not a very good name, but, uh-

Nikhil Kamath 15:29 B-Flat used to have great live music.

Adithya Kidambi 15:31 Great live music.

Nikhil Kamath 15:32 Yeah.

Adithya Kidambi 15:32 But it used to be a nice, like a-

Nikhil Kamath 15:34 Yeah

Adithya Kidambi 15:34 ... it used to be, it used to be a good scene back then.

Nikhil Kamath 15:36 Yeah.

Adithya Kidambi 15:36 And this was on the first floor of that building. It was a 70-cover restaurant, well ahead of its time. We were doing-- We were, we were working with fermentation, koji, and a bunch of things back then. Uh, shut down in four months because of they were having issues with the Indiranagar Association and things like that. It was, it was bad. It didn't-- I, I, mostly didn't want to be in the kitchen after that. That's when I joined, uh, Shishir. And, uh, the intention was to always make a better soda, so to say, not, uh, a health gut-friendly beverage. That was his perspective. I joined him to say: "I think there is a potential to make this super delicious," because I was also in my domain, right, to do a lot of fermentation and things, was what I was really good at. And, uh, so it kind of worked out. So in 2019, we started immi-- like a little bit after this project, we started Mossant in October. Eleventh of October is when we started, and, um, there were two things that we were trying to solve for at that time-

Nikhil Kamath 16:39 What is Mossant?

Adithya Kidambi 16:40 Uh, it's nothing, really. It, it's just, it's just a name.

Nikhil Kamath 16:44 How did you come up with it?

Adithya Kidambi 16:46 So, so you remember I told you that friend who passed away?

Nikhil Kamath 16:49 Mm-hmm.

Adithya Kidambi 16:49 This was the first art deco poster that he picked out for our old restaurant. It said Mossant, and this was, this was, this was one of his favorite things, and he used to... He had a, he had, he had a very deep connection to that poster for some reason. He used to, he used to always talk about it. And, uh, it was the same two of us again in this business.

Nikhil Kamath 17:07 Oh.

Adithya Kidambi 17:07 It was me and Shishir back again in business. And, uh, so it just, it just made a lot of sense for us at that point to say, if he was there, he would be in-- He would do this with us, too. So just to, in remembrance, we have this- we, we call this company Mossant. Um-

Nikhil Kamath 17:22 People from Bangalore are very nice. [laughing]

Adithya Kidambi 17:24 [laughing]

Nikhil Kamath 17:25 Hey, I'm not comparing. I'm just saying. [laughing]

Adithya Kidambi 17:28 I, I like Bangalore people.

Nikhil Kamath 17:29 Yeah?

Adithya Kidambi 17:30 All good, yeah. Yeah, so, uh, so hen- hence, hence the name Mossant. It doesn't really mean anything. It was, uh, it was, it was apparently a company that used to make bowler hats.

Nikhil Kamath 17:40 What hats?

Adithya Kidambi 17:41 Bowler hats.

Nikhil Kamath 17:41 Right.

Adithya Kidambi 17:42 Like, uh, those round hats. The two guys in Tin- the detectives in Tin Tin used to wear that hat.

Nikhil Kamath 17:46 Yeah, yeah, yeah.

Adithya Kidambi 17:47 It was that hat. They, they apparently invented that hat.

Nikhil Kamath 17:49 Right.

Adithya Kidambi 17:50 And, uh, yeah, so we started Mossant in 2019.

Adithya Kidambi 17:54 Our biggest challenge was kombucha, as I think, as a market at that time, first, nobody knew about it.

Nikhil Kamath 18:00 Mm.

Adithya Kidambi 18:01 Second, people-- Second, the some who knew about it were so divided and polarized by the product-

Nikhil Kamath 18:06 Mm

Adithya Kidambi 18:06 ... that they were like: "I don't know if this beverage is for me. It's too funky. It all smells the same." Whatever, whatever, right? "I don't know if it's doing anything for me," et cetera, et cetera. Uh, that was what we wanted to break, right? And, uh, we really wanted to focus on-

Aneesh Bhasin 18:23 ... the teas that were available a- around us, I mean, this is the land of tea, so we wanted to do a tea-focused brand, so to say. We wanted to, we wanted to showcase all the teas around that we have from Assam, Darjeeling, specifically the Nilgiris, because those teas are super underrated. And what we thought happened to cof- is happening to coffee now, we thought would happen to tea, considering this is the land of tea, but only to realize that this isn't the land of tea, this is the land of chai. Uh, a little bit of a difference. It took us a while to sort of figure that out. Uh, but yeah, so we were, we were a tea-forward company making kombucha with teas from across, across, across India. We had two problems to solve, where the biggest problem was alcohol regulation, uh, which was you can't sell a product above zero point five percent ABV.

Nikhil Kamath 19:11 I read that somewhere.

Aneesh Bhasin 19:12 Yeah, and uh-

Nikhil Kamath 19:13 It's different in different countries, right?

Matt Chitharanjan 19:15 Yeah.

Aneesh Bhasin 19:15 It just changed in the US.

Nikhil Kamath 19:18 It do?

Aneesh Bhasin 19:18 It just changed in the US to one point two or one or something like that. And that was also because of kombucha. Somebody in the kombucha business sort of raised up and lobbied and said, "It's not possible for you to make a kombucha, and it's like, it's really unfair." Apparently, ripe banana has an alcohol content of one point three, one point four. So it makes no sense that the ripe banana is on the shelves.

Nikhil Kamath 19:39 Really?

Aneesh Bhasin 19:39 Yeah.

Nikhil Kamath 19:40 And beer has three, four percent.

Matt Chitharanjan 19:41 No one's ever heard about three or four percent.

Nikhil Kamath 19:43 Yeah.

Matt Chitharanjan 19:43 Yeah, I didn't know.

Aneesh Bhasin 19:44 So it's, it's one of those things-

Matt Chitharanjan 19:45 Banana? [chuckles]

Aneesh Bhasin 19:45 ... it's like, yeah, the regulations is very s- it's, it's, it's a little, it's a little strange.

Nikhil Kamath 19:49 Some pro- prohibition-based thing.

Aneesh Bhasin 19:51 It's, it's the law, right? For you to be on the shelf, you have to be under zero point five percent ABV, for you to be considered a FMCG product and not to go to excise to do business. And, uh-

Nikhil Kamath 20:02 So that's how kombucha?

Aneesh Bhasin 20:03 That's essentially how kombucha began.

Nikhil Kamath 20:05 I forgot to ask you, how big is the business now?

Matt Chitharanjan 20:08 Our business?

Nikhil Kamath 20:08 Yeah.

Matt Chitharanjan 20:09 We're at a four hundred crore run rate.

Nikhil Kamath 20:12 One thirty out?

Matt Chitharanjan 20:13 One thirty-five, yeah.

Nikhil Kamath 20:15 And mainly which part of India?

Matt Chitharanjan 20:18 Delhi is around forty percent, then thirty-five in Bombay. Bangalore is twelve, Pune nine, Kolkata nine, Chandigarh-

Nikhil Kamath 20:30 And how big is, uh...

Aneesh Bhasin 20:31 Sorry.

Nikhil Kamath 20:31 Sorry.

Aneesh Bhasin 20:32 How's Japan?

Matt Chitharanjan 20:34 Japan? [chuckles] Uh, Japan, we have, uh, one cafe there. Uh, it's slow. It's, uh, uh... We've been there for a year and a half. So it started as just a roastery with a B2B and e-commerce business. Then we started doing pop-ups, and we just opened the first cafe three months ago.

Aneesh Bhasin 20:52 But how did Japan happen? I'm just curious.

Matt Chitharanjan 20:55 It was more like an opportunistic thing. We had, uh, investors who used to run, uh, F&B businesses in Japan. Japan's the second or third largest coffee-consuming country. There's no Indian coffee there, very similar to anywhere, actually. You don't really see Indian coffee on the menu outside of India. Uh, third wave is kind of taking off. Uh, it's not as entrenched as it is in, in the US, so there's an opportunity to showcase Indian coffee in a, in a growing, in a large-

Aneesh Bhasin 21:23 Yes

Matt Chitharanjan 21:23 ... coffee-consuming market.

Aneesh Bhasin 21:25 Yeah. Very cool.

Matt Chitharanjan 21:25 But, uh, there's way more opportunity in India. We were-- Rahul and I were just talking about this.

Aneesh Bhasin 21:29 Yeah.

Nikhil Kamath 21:30 Yeah.

Aneesh Bhasin 21:30 I think for all our brands.

Matt Chitharanjan 21:31 Any, any market that we look at, there's more opportunity here in India.

Nikhil Kamath 21:35 So I know Rahul quite well, so I'm going to go to him last.

Nikhil Kamath 21:39 But Anish-

Aneesh Bhasin 21:39 My turn.

Nikhil Kamath 21:41 Yes.

Aneesh Bhasin 21:43 All right, my story. I'm a foggy kid-

Nikhil Kamath 21:46 Yeah

Aneesh Bhasin 21:46 ... born and brought up-

Nikhil Kamath 21:47 Is that why the cap that says Bharat?

Aneesh Bhasin 21:49 I love this cap. Like, to me, uh, I usually always wear a cap, and, uh, there's just something about India and Bharat written like that, like, I really like it. But yeah, patriotism has always been there. I think growing up in an army background, you always, always are in that environment, right? But, uh, grew up across the country from-

Nikhil Kamath 22:07 What did your dad do in the army?

Aneesh Bhasin 22:09 My dad was in ASC, that's the logistics, uh, corps. In fact, he was posted twice in Bangalore.

Nikhil Kamath 22:15 Wow!

Aneesh Bhasin 22:15 And, uh, the one year I was... like, we were in Bangalore, uh, that was nineteen nine- ninety-seven. That was a great year because Dad was super senior. That's the first time we were ever living in a big town, a big city.

Nikhil Kamath 22:27 Yeah.

Aneesh Bhasin 22:27 Otherwise, it was only small towns. And there was so much, uh, so much access, right? You had pavilion passes to a India-Australia game and all of that stuff. I remember I went to Frank Anthony for a year-

Nikhil Kamath 22:40 Yeah

Aneesh Bhasin 22:41 ... and, uh, a runner came to our class from the principal's office, and they're like: "Principal's asked for Anish." And I was like, "Damn, for once, I didn't do anything. What happened?" And it was for Dad to be the chairman for sports, uh, chief guest for Sports Day or something. So Bangalore was a very cool year like that. But mostly-

Nikhil Kamath 22:58 So he was very senior in the army?

Aneesh Bhasin 23:00 At the end, yeah. He retired as a brigadier, took premature retirement. I think he had another three, four years to go, but he was kind of done with it. And I grew up pretty much in small towns and cities across, right from Kashmir to Rajasthan to... Apart from east, pretty much everywhere. My tenth standard for me was very pivotal in a way that photography started to become a hobby.

Nikhil Kamath 23:22 Mm-hmm.

Aneesh Bhasin 23:23 Uh, by eleventh, I was taking a lot more pictures, uh, having to borrow a friend's, uh, father's film camera. Took a portrait of my girlfriend that time, that really, I think, somewhere cemented me into photography. For me, photography is that, right? You remember certain pictures or certain times. Uh, like right now, there's so much talk about Kumbh Mela, and I've been to Amar Kumbh before on photography assignments, and I remember distinct pictures from there. So for me, photography has been a very, very integral part of my life, uh, right from my teenage years. And by twelfth, I somewhere knew that college in engineering was not for me. Again, took-- So this is the other thing. I, I did CBSE. Apart from that, one year of ICSE at Frank Anthony in between. But tenth science was like common sense. Eleventh science was, jump was ridiculous.

Nikhil Kamath 24:16 Mm.

Aneesh Bhasin 24:17 And we were in army schools, so like engineer, doctor, right? And arts was for people who were considered not bright or-... dumb or any of that. So like, yeah, we'll become engineers, we'll take p- phys, PCM, and English. I flunked everything apart from English in my eleventh exams, and it was, it was a horrible thing for me. I just couldn't study, just couldn't get myself to do math and all. But to me, crea- creativity and photography was something I was very happy with. So I think somewhere in, in my twelfth standard, we moved from Bareilly to... Sorry, Ambala to Bareilly. Dad being army, they passed me for, so I would not flunk a year. And in Bareilly, Dad was the chairman of the army school, so his only thing was, "Son, please do not flunk your twelfth. Just pass. I don't expect you to top or do anything, just pass." And I thankfully passed. I flunked my chemistry, gave a retest, got a passed eventually, but I think that time I knew that maybe going to college was not the best idea for me, and my dad had that foresight as well. My mom was a little on the line. She's like: "No, you have to go to college." And my dad was like: "No, you do what you want to do. I think you'll be fine in life." So I didn't go to college. My education was twelfth CBSE from Bareilly Army School,

Aneesh Bhasin 25:36 and, uh, right after that, I started working with three photographers in Bareilly. So I gave my twelfth boards, took one day off, started working the next day at this place called, uh, Suri, uh, Photo Labs. Uh, they actually had a pretty world-class setup for that time. So just started working and learnt a lot about photography that time. Eventually moved to Bombay in a year to learn photography here, and started assisting and getting work and, yeah, starting off. So photography became my thing after school, hobby turned profession. Then I somewhere got introduced to wine and alcohol because of photography. So I shot a lot for Diageo and couple of alcohol brands, and eventually got commissioned to shoot for a book on the alcohol industry, uh, CIBC, which is their main lobby, uh, main body that all the companies are a part of. So that assignment took me to pretty much every winery in Nashik. Everyone would oblige you with a wine tasting. I had no clue what I was doing, but being polite and tasting. And somewhere that just got me into, you know, consuming a beverage with a little more intent rather than just gulping it down. Uh, that's the same time I got introduced to coffee. I still remember first trip abroad, I was twenty-one, going for a photography fair to Cologne in, uh, Germany, and having my first cup of cappuccino, which was not that Indian cappuccino, which was that espresso in a wedding that we get. Uh, I still remember that moment. So a lot of these beverage experiences happened, and I was like: "You know what? This is very interesting. I want to learn more." So I started learning more about wines, uh, end up building an app around wines six, seven, eight, eight years back. We almost got acquired by Diageo, London. Eventually, that didn't happen, but that is what really got me into beverages. So school, photography, photography led me to beverages, and then all of this happened.

Nikhil Kamath 27:37 Very cool.

Nikhil Kamath 27:38 Rahul?

Rahul Reddy 27:40 Hello. How are you?

Nikhil Kamath 27:42 Good, how are you?

Rahul Reddy 27:43 I wish I had your sense of humor. [chuckles]

Nikhil Kamath 27:47 I have, I have the kind of sense of humor where it's easier to laugh at me than with me. [chuckles]

Rahul Reddy 27:51 Okay, I'll keep that in mind. [chuckles] Awesome.

Nikhil Kamath 27:54 Tell us more about yourself.

Rahul Reddy 27:57 Uh-

Nikhil Kamath 27:57 I met Rahul last week in, uh, Dubai, where he's starting a new store, and I checked it out.

Rahul Reddy 28:03 Amazing.

Nikhil Kamath 28:04 Quite a cool space.

Rahul Reddy 28:05 True. It's a work in progress. Um, well, uh, actually, I have some similarities to Matt, uh, in terms of our backgrounds.

Nikhil Kamath 28:15 I was thinking that, you know?

Rahul Reddy 28:16 Yeah.

Nikhil Kamath 28:17 Like, these two are full-blown c- creative people. You and Matt look more like the corporate type. [laughing] Hedge fund, nerdy. I know you went to college in the US.

Rahul Reddy 28:26 Yeah.

Nikhil Kamath 28:26 Not because you, you know, wanted to study how to cook, but like college, college.

Rahul Reddy 28:31 So I grew up in the US-

Nikhil Kamath 28:32 Yeah

Rahul Reddy 28:32 ... uh, like Matt. Um, never worked in finance, but we do have some overlaps. Um, so my-- okay, so my family's all, um, from Hyderabad. So, uh, mom and dad's side, I guess one side's from Andhra now, one side's from Telangana originally, but that's another thing. Um, but Hyderabadi, both.

Nikhil Kamath 28:56 What did your dad do? I remember meeting him.

Rahul Reddy 28:58 Yeah, so, so basically, my, my dad migrated to the States, I think it was nineteen seventy-nine, and so he was part of that, I think, like, initial wave of engineers, pre-Valley boom and, you know, pre sort of internet era and the dotcom era. And he went from-- I mean, the story goes, he went from Hyderabad to Iowa, which is like... I, I don't think you could find a more opposite, you know, environment, right? Like, corn fields and ten feet of snow and, you know. And I think it was, like, him and, like, some, like a bunch of people from Hyderabad and Punjab and, like, Iran, and there was, like, this group of, like, you know, Brown people, basically, that showed up to become, like, do EE at the time, like electrical engineering in, uh, Iowa. So he-- I don't think he was a particularly good engineer, but he, um, was, was, like, fairly entrepreneurial in spirit. So he, he, uh, graduated, and then he moved to California, and I guess there was a lot of buzz about, like, semiconductors and things at the time. And, um, so he sort of, you know, he ended up working at this company, um, called Synopsys at one point, semiconductors, and got into that semiconductor space, and then that sort of like... So he's, he's, he's become sort of like a serial entrepreneur for the last thirty-odd years now. Been in, been in the Valley, and that's where I was born. So I was born in, in the heart of the Valley, actually, a place called Fremont.... um, not too far from San Francisco. Um,

Rahul Reddy 30:35 and-

Nikhil Kamath 30:35 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?

Rahul Reddy 30:48 Oh, so different, and I think-- I'll let Matt speak for himself, but for me, that's definitely part of the, the fabric of what ended up becoming this idea called Subko. For me, it was, it was always like a grappling with being this diaspora kid who was part of this South Asian community, and I was in a-- To be fair, I was in a city and in, in a region with a lot of Indians and a lot of South Asians, so there was a nice kind of contingent from, like, all over India and in neighboring countries as well. Um-

Nikhil Kamath 31:24 When you're not Indian-

Rahul Reddy 31:25 Yeah

Nikhil Kamath 31:26 ... and you're growing up in a white school, I don't know, Iowa or whichever school you were going to when you were a teenager-

Rahul Reddy 31:31 Mm.

Nikhil Kamath 31:33 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-

Matt Chitharanjan 31:43 No, no, but-

Nikhil Kamath 31:44 He's got watery eyes. [laughing]

Matt Chitharanjan 31:45 You, you, you-

Nikhil Kamath 31:45 Just when he starts speaking, we get to know. [laughing]

Matt Chitharanjan 31:47 I grew up in, like, a very, like, a village, so anybody who's not fully white is considered not white.

Nikhil Kamath 31:53 [chuckles] So are they racist if you're like-

Rahul Reddy 31:55 Yeah, you know, I, I think, I think it was always... It was an evolution, Nikhil. Like, I, 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-

Nikhil Kamath 32:12 How does it come across? You feel ashamed when they do what?

Rahul Reddy 32:16 I think initially, it's like little things. It's like your mom wants to pack you some Indian food for lunch, right?

Nikhil Kamath 32:21 Uh.

Rahul Reddy 32:21 And you're like, "Well, it smell-- like I love it, but it smells a little strong," right?

Nikhil Kamath 32:24 Mm.

Rahul Reddy 32:24 Like, people around you are, like, reacting to it. Like, okay, or it's like-

Nikhil Kamath 32:28 And when you say reacting, what are they doing?

Rahul Reddy 32:29 I mean, it's like: "What is that?" And they have this, like, terrible food that they're eating, right? Like some, like, like terrible, like, white bread sandwich or something.

Nikhil Kamath 32:35 Mm.

Rahul Reddy 32:36 And like, you know, that- 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. Um, 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, um, 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-

Nikhil Kamath 33:07 [laughing]

Rahul Reddy 33:07 ... white on the inside." [laughing] Yeah, yeah. Just like, there's people that kind of like aspire to be a coconut, right?

Nikhil Kamath 33:12 Yeah.

Rahul Reddy 33:12 And I'm like: Okay, you do you.

Nikhil Kamath 33:14 Yeah.

Rahul Reddy 33:14 Uh, that was never me. I, I-- And I think the turning point for me was we-- My dad, at one point, in-- just before the whole Y2K fiasco, my dad, 'ninety-seven to 2000, here's my Bangalore connection, [chuckles] I moved to Bangalore. So I, I, I was going... So throughout my childhood, I, we would go to Hyderabad every single summer. My, my ammamma, my thatha, 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-

Nikhil Kamath 33:44 Is it strange? 'Cause when you come back to Hyderabad-

Rahul Reddy 33:47 Yes.

Nikhil Kamath 33:47 I have an aunt, okay, 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. Uh-

Rahul Reddy 34:07 Yes.

Nikhil Kamath 34:08 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.

Rahul Reddy 34:18 [chuckles]

Nikhil Kamath 34:19 It's a dichotomy, right? Here, you're feeling superior. There, you're feeling inferior.

Rahul Reddy 34:23 Totally. So-

Nikhil Kamath 34:23 So do you like being here more because of that?

Rahul Reddy 34:27 You... I, I think, I think for me, it, it, the story ended up being embracing my roots, while also understanding that I would, I would never n- 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, uh, moving back here. But, but yeah, I think it, it is... And, and this is, you know, I'm kind of jumping around in the story, but in-- later on in my life, I, I think what I always wondered was with all of the little bit of the jives and, and you know, I think being Indian or being South Asian went through phases. So 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, and that, that was, like, another layer of pressure on me, 'cause I was like: Shit, like, 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, my sort of South Asian background, um, combined with, you know, sort of the some of the privileges I had growing up in the States, and build something to kind of, like, reimagine and reframe what, uh, 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, um, but yeah. But essentially, um, moved to Bangalore. We moved back to the Valley. I did-- I finished my high school in California, and-... Um, I think those three years in Bangalore were very impactful because we lived in this place called Dollars Colony, and, um, I went to this, like, international school, and a bunch of fun pictures of me in my uni- my uniform, and that I always laugh at. 'Cause we didn't have uniforms in the US typically, right? So here I was, like, buttoned up in uniform and very formal, and then I go back there, and I'm just, like, wearing shorts, and so 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, [chuckles] but I, 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, they've always been, like, surprised as to why, uh, you know, I relocated and moved to Bombay and all of that. So, but, but essentially, I, [clears throat] I went to do my bachelor's in Los Angeles, and I, I studied a mix of international relations, and I did a, 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, um, mainly between New York and London. Um, and funnily enough, [coughs] in a very weird, like, post-colonial way, it was, 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 diaspora community ends up having in, in the UK's fabric. And I think a lot of that, I was studying international development in my master's there and, um, started to get interested in, in various parts of the agricultural economy in, in India. And I think, um, throughout this period of time, like when I was in New York and in London, um, I'd gotten a little obsessive about specialty coffee, 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, was positioning and marketing itself from an industry perspective, um, with this whole idea of traceable farms and talking about the Global South very openly and vividly.

Nikhil Kamath 39:23 Can I ask you a question before you move on to the story of coffee?

Rahul Reddy 39:26 Sure.

Nikhil Kamath 39:27 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? Is that why you moved?

Rahul Reddy 40:19 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, 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.

Nikhil Kamath 40:51 Why?

Rahul Reddy 40:52 Because-

Nikhil Kamath 40:53 'Cause you grew up in the US. You're as American as you're Indian then.

Rahul Reddy 40:56 That's true. That's true.

Nikhil Kamath 40:57 So why not build something in the US which satisfies all of the conditions you mentioned?

Rahul Reddy 41:03 Because I think in, in what ended up being our industry, coffee, chocolate, bakes, I think, uh, the raw material is the most important element. We're, we're, we're really an agriculture business. We're a supply chain business, and for me-

Nikhil Kamath 41:16 India is not particularly known for its coffee historically, right?

Rahul Reddy 41:19 It's not.

Nikhil Kamath 41:20 Then why India?

Rahul Reddy 41:21 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-

Nikhil Kamath 41:34 Chip on the shoulder, why?

Rahul Reddy 41:35 Because as Matt said earlier, I mean, people were growing X number of metric tons of coffee a year, but they all presumed that the only market for it had to be in 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, like, 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 fermented in a lot of the global cities around the world? And 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, to the soil, to the land, to actually having real relationships with the producers, with the farmers, and establishing it here. I think that, that was very critical for that credibility to be there, so I think that was a big reason.

Nikhil Kamath 42:40 How are Subko and Blue Tokai different?

Rahul Reddy 42:42 Oh, that's a fun one. [laughing]

Nikhil Kamath 42:44 [laughing] Same price point, largely?

Matt Chitharanjan 42:47 ... No way! He's more expensive.

Aneesh Bhasin 42:49 No, no, I-

Matt Chitharanjan 42:49 He's way more expensive. [laughing]

Nikhil Kamath 42:52 What else?

Matt Chitharanjan 42:52 Uh, I think similar on the coffee side, I, I mean, so one is they obviously do more other products. They do, uh, cocoa, which we don't do. Uh, we didn't have bakery, our own bakery, until fairly recently, and that was by acquiring another brand, so that's a 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. [chuckles] They're more niche premium.

Aneesh Bhasin 43:38 Niche premium.

Matt Chitharanjan 43:39 Uh, I think the customers are slightly... I mean, I, I would say we're more-- we, we try to be more accessible. Uh-

Aneesh Bhasin 43:48 Basically calling them expensive. [chuckles]

Matt Chitharanjan 43:50 No, no, no! Not, I don't think, uh... I, I think that what I really appreciate about Subko is they've done things in a very distinct-

Aneesh Bhasin 43:58 Yeah

Matt Chitharanjan 43:58 ... and different way. But the, the communication that they have, the storytelling that they do, the whole brand is, is very different than other coffee brands that have started, uh, in, in specialty.

Aneesh Bhasin 44:09 I have an observation for both these brands because I've been-- I've had the privilege to see Blue Tokai from day one. I think I was one of their very early customers. [clears throat] And just to take you back in time, there was nothing speciality in the country that time. There was only Cafe Coffee Day and Barista, and that's about it. No concept of doing good coffee at home or any of that. And I think with Blue Tokai, 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. So 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, uh, how coffee was.

Nikhil Kamath 45:21 What else? Rahul, do you want to say something about niche and mass niche?

Rahul Reddy 45:29 Look, I, I, I think Blue Tokai 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've, I've- I genuinely believe that. Um, I think we're different in a couple key ways. Like Matt said, we started off as being like, "Okay, we're gonna try to... The way we can premiumize this segment," was we, we felt we had to provide value addition on top of something Matt was already doing well. So I think he was, he was serving 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, 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, you know, coffee brand, I felt that, um, what pairs really well with it are, are really world-class baked goods. Um, and I wanted to kind of bring both of those two things together and try to construct that, um, in unison. So I think the design language and then having the bakehouse kind of like, um, co- be co-created with, with the high-quality coffee, I think was important. Um, so I think that's a difference. Um, we do tend to kind of be, uh, maybe, like, bullheadedly committed to this idea of design and coffee coexisting. So we try to like, even from, like, micro lot of coffee to micro lot of coffee, we'll change an element of the design or the packaging, and I think these are things that, um, 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. And I think maybe that's something that we've had maybe more of a focus on than maybe Blue Tokai has. Um, so those are a few differences, I would say. Um, and now recently we make chocolate, so I think that's something that Matt doesn't currently do, so.

Nikhil Kamath 47:54 So I'm a twenty-five-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 Tokai. Next to it, there's a Subko. 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?

Matt Chitharanjan 48:24 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.

Nikhil Kamath 48:40 Do you think my audience cares that much where the coffee is roasted?

Matt Chitharanjan 48:46 They just want different, something different. So if you come to Blue Tokai, you're only going to get Blue Tokai coffees. If you go to Subko, you're only going to get Subko coffees. Where it's a good opportunity for people to sort of understand what else is out there, and I think people appreciate variety.

Nikhil Kamath 49:01 ... If I were to be honest, like, I'm no big coffee aficionado or something like that, but I, I know, like, a good coffee from a bad coffee, but beyond a point, I can't distinguish which roaster, what, all of that. Me, twenty-five years old, starting a store in Pali Hill, Bandra, will make the assumption that my clientele is largely like me.

Matt Chitharanjan 49:24 Mm-hmm.

Nikhil Kamath 49:26 It's not multi-roastery that will necessarily-- Like, I could tell, uh, some of the people we play paddle with, that this particular coffee shop has different roast from different places, uh, but it is next to a Subko, a Blue Tokai, a Bougie, a whatever else is on that road. I don't think I'll be able to draw them in with just that.

Matt Chitharanjan 49:49 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 copy person, food is something that really makes or breaks the, the success of a store.

Nikhil Kamath 50:03 Mm-hmm.

Matt Chitharanjan 50:04 For sure.

Nikhil Kamath 50:06 What if, uh, he decides to sell biryani and coffee? Do you think something like that could work?

Matt Chitharanjan 50:10 No, it's too dissonant. People who are going to coffee shops are not looking for, uh, biryani.

Nikhil Kamath 50:17 Mm-hmm.

Matt Chitharanjan 50:17 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, those do incredibly well.

Adithya Kidambi 50:25 Like a, like a, like a co-working space or such, where there's coffee-

Matt Chitharanjan 50:29 It's not-- I mean, the-

Adithya Kidambi 50:30 ... So-

Matt Chitharanjan 50:30 So one thing that we notice in our, 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 to-- I mean, we don't want to run kitchens. So if you're able to run a, a restaurant and have coffee, in the market right now, that's an amazing proposition.

Adithya Kidambi 50:52 So you sell your food with coffee?

Matt Chitharanjan 50:53 Yeah.

Adithya Kidambi 50:53 Oh, okay.

Nikhil Kamath 50:54 What's that percentage split?

Matt Chitharanjan 50:56 For us? For us, we sell forty-five percent is beverages, and forty percent is food, and then fifteen percent is the retail packets and bread.

Nikhil Kamath 51:04 And for you, Rahul?

Rahul Reddy 51:06 We're almost exactly at fifty-fifty, believe it or not.

Nikhil Kamath 51:09 Yeah?

Rahul Reddy 51:09 Yeah. Some-- Like, we've had quarters where there's a forty-five, fifty-five, you know, it's... Yeah.

Nikhil Kamath 51:16 So coffee shops are actually making fifty percent of revenue from food?

Matt Chitharanjan 51:20 Yeah.

Nikhil Kamath 51:21 All coffee shops? If you both are, I'm extrapolating.

Rahul Reddy 51:24 I think that's probably-

Matt Chitharanjan 51:26 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, uh, food from, like, a Taj Sats and then just reheating it.

Nikhil Kamath 51:40 So do you have, like, a hot kitchen in the coffee shop?

Matt Chitharanjan 51:43 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.

Nikhil Kamath 51:52 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 door?

Matt Chitharanjan 52:00 It helps in getting higher APCs, for sure.

Nikhil Kamath 52:03 What is a APC?

Matt Chitharanjan 52:04 Uh, average-

Adithya Kidambi 52:05 Average person

Matt Chitharanjan 52:05 -per person. Average check per person.

Nikhil Kamath 52:08 But the CapEx related to a hot kitchen kind of mitigates that-

Matt Chitharanjan 52:11 It's not necessarily a CapEx thing, it's more of a managing a kitchen staff. Also, you're not really able to get very high quality-- I mean, our experience, you're 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. They don't-

Adithya Kidambi 52:26 I also feel like it's a, it's a matter of iteration, right? There's like a-- There's way too much iteration-

Matt Chitharanjan 52:30 Yeah

Adithya Kidambi 52:30 ... in the kitchen these days. Uh-

Matt Chitharanjan 52:32 Yeah, you, you, you, you'll have a hard time retaining talent.

Adithya Kidambi 52:36 It's the biggest reason why food is not consistent in most places.

Matt Chitharanjan 52:42 Right.

Adithya Kidambi 52:42 Because there's just way too much iterations happening between the staff and the kitchen. It's just, it's a-

Nikhil Kamath 52:47 Do people care about that so much, consistency of food? Like, when I go into a restaurant, I often hear people talking about consistency and how the meal tasted today versus yesterday.

Adithya Kidambi 52:58 I mean, if you're going to a place with an expectation, then it matters a lot. If you're going with, 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, came the other day, uh, the sandwich was like this. I'm coming back here, it isn't the same, what's, what's the deal?"

Matt Chitharanjan 53:17 Actually, ours is a very repeat business, too.

Adithya Kidambi 53:19 Yeah.

Matt Chitharanjan 53:19 So people are coming for the same thing regularly-

Nikhil Kamath 53:22 Right

Matt Chitharanjan 53:22 ... and they notice if there's small changes, whether it's in the coffee or the food.

Nikhil Kamath 53:26 Okay, so if I'm starting-- Okay, also, guys, ask each other questions, ask me questions.

Matt Chitharanjan 53:30 Okay.

Nikhil Kamath 53:30 This is a conversation between all of us.

Rahul Reddy 53:32 Yeah. Can I, can I-

Nikhil Kamath 53:33 Yeah

Rahul Reddy 53:33 ... give you, uh, an answer to the twenty-five-year-old?

Nikhil Kamath 53:35 Yeah.

Rahul Reddy 53:36 So it's a little different-

Nikhil Kamath 53:37 Mm-hmm

Rahul Reddy 53:37 ... because I think Matt's made a ton of valid points. [clears throat] I'd tell that person, "Definitely 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 you want to portray, whether it be, 'Hey, we work with Blue Tokai, or we work with Subko, 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."

Nikhil Kamath 54:06 Like?

Rahul Reddy 54:07 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, a really key element today. So as, as-- 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. So the differentiation factor becomes less and less, to some extent, about-- Like, after, after you, 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, 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. And you get bomb Cuban cigars here, and you get, you know-

Speaker 55:25 Not bad

Rahul Reddy 55:25 -a good cup of coffee," right? For example, or, "We spin vinyl," or, "We give investment advice."

Nikhil Kamath 55:31 You spin vinyl at Subko?

Rahul Reddy 55:32 We've done it, like on a, on a recurring basis, but we don't, yeah, we don't have it as a core element.

Nikhil Kamath 55:36 You're getting the drama element of it.

Rahul Reddy 55:38 I guess you could call it that. I, I would say-

Speaker 55:40 I would say drama. I just remembered, I pl- I played once.

Rahul Reddy 55:43 [chuckles] Yeah, that's true.

Speaker 55:44 At a rec- a record store there.

Rahul Reddy 55:45 That was a while ago.

Speaker 55:46 Yeah, it was a while back.

Nikhil Kamath 55:46 You're a DJ also?

Speaker 55:48 No, but I like-

Nikhil Kamath 55:49 Adding to the bubble. [laughing]

Speaker 55:50 But I like, I like vinyl, so I, I would use a vinyl collection now.

Nikhil Kamath 55:53 Yeah.

Rahul Reddy 55:53 But Nikhil, to, 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, on-

Speaker 56:01 Yeah.

Nikhil Kamath 56:01 Yeah

Rahul Reddy 56:01 ... various social media around, you know, coffee raves, right?

Nikhil Kamath 56:03 Yeah, yeah.

Rahul Reddy 56:04 And I think there's two points to that. One 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-

Nikhil Kamath 56:15 Mm

Rahul Reddy 56:16 ... 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 once, at one point dominated-

Speaker 56:38 Yeah

Rahul Reddy 56:38 ... then naturally, you need to create... You need to be more creative. You have to. Having a good coffee and good training is, and, and even good food, is going to become the bare minimum.

Nikhil Kamath 56:50 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 veering away from nightclubs and alcohol. Like, a fifteen-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. Like you-

Speaker 57:21 How much, how much of, uh... How much, how much importance do you give to sourcing? I know you guys are, like, very, very, very specific about sourcing, which estate and this, but how does, how does a twenty-five-year-old essentially get in touch with the estate, make sure that they have lots enough to give this person-

Nikhil Kamath 57:40 Yeah, but I-

Speaker 57:40 -considering most of it gets auctioned off, if I'm not wrong, much earlier?

Rahul Reddy 57:44 No.

Speaker 57:44 No? Okay.

Rahul Reddy 57:45 But I, I, I don't think the average customer, to, I mean, to your point-

Speaker 57:48 Yeah

Rahul Reddy 57:48 ... the average customer walking into a cafe doesn't care that this coffee comes from-

Nikhil Kamath 57:51 Yeah

Rahul Reddy 57:51 ... estate ABC.

Speaker 57:52 No, but for, for the, for the, for the guy who's opening the coffee shop, how does he go looking for beans? Like, where does- how does that work?

Rahul Reddy 58:00 So you can tie up with any, um... Most coffee companies have a wholesale business-

Speaker 58:03 Okay

Rahul Reddy 58:03 ... so you can source from them.

Speaker 58:04 So would you- if I were to open a shop, I can buy coffee from Blue Tokai?

Rahul Reddy 58:07 Yeah.

Speaker 58:07 Okay.

Rahul Reddy 58:07 So can I say something? Like,

Rahul Reddy 58:09 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, the specialty coffee market. It- I think the f- I'm going to go into this, like, wave discussion, right? So there's, there's, 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. And so, let's say we're now in like, very firmly in this third wave of coffee movement now, where like, 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, like, disrupts that market, right? Like, all of these big international players are now like: "Whoa, there's a, 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, uh, roasters. Roasters 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, you have to build very strong supply chain linkages. If that's your passion, do it.

Nikhil Kamath 59:32 How much money does it take? Like, if I have- if I'm twenty-five and I have two crore rupees to start a coffee shop, roastery is not covered in that. No.

Rahul Reddy 59:40 Tough.

Nikhil Kamath 59:41 Right.

Speaker 59:42 But also, as a twenty-five-year-old, are you starting this business to just run this one outlet to earn that money from that?

Rahul Reddy 59:47 Yeah.

Speaker 59:47 Or you're starting it-

Nikhil Kamath 59:48 Yeah

Speaker 59:48 ... to kind of become a-

Nikhil Kamath 59:49 I want to start one coffee shop next to the two of you, and I want to make money.

Speaker 59:53 Okay. You're not worried about funding, like, uh, raising the capital, giving exit-

Nikhil Kamath 59:59 No, two crores, two crores

Speaker 59:59 ... and all of that?

Nikhil Kamath 59:59 I have this rich uncle who's agreed-

Speaker 1:00:00 Okay

Nikhil Kamath 1:00:01 ... to give me two crores.

Speaker 1:00:01 And he's, he's happy to, if you just pay him back on your own time.

Nikhil Kamath 1:00:04 If I make him a decent return on the cash he's given me.

Speaker 1:00:06 I see.

Nikhil Kamath 1:00:08 Yeah.

Rahul Reddy 1:00:08 Yeah, but, like, what I would say is, like, as the, as the market is maturing now, and, 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 Nikhil is 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-

Nikhil Kamath 1:00:41 Mm

Rahul Reddy 1:00:41 ... that have their own shops and also maybe supply. And I think, you know, so, so the more, 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.

Speaker 1:00:56 Yeah.

Rahul Reddy 1:00:57 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, maybe that's, 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.

Nikhil Kamath 1:01:18 Do you think that could work?

Rahul Reddy 1:01:19 Hundred percent.

Matt Chitharanjan 1:01:20 ... it would work.

Nikhil Kamath 1:01:21 Paddle and coffee?

Aneesh Bhasin 1:01:23 I have a slightly different view. In fact, I have a question for all three of you. Sorry, because you're not that much in Bombay. What does a boujee do, that they are packed all the time? Monday morning, eight o'clock, they're packed. What is it?

Nikhil Kamath 1:01:38 I feel like if you see a line somewhere, the line kind of is like a self-fulfilling prophecy almost.

Aneesh Bhasin 1:01:44 And it's, it's been like that consistently. I love the place.

Nikhil Kamath 1:01:47 Yeah, yeah.

Aneesh Bhasin 1:01:48 But when we're talking about these differentiators, there's nothing... It's good food, it's good coffee. There's nothing more than that.

Nikhil Kamath 1:01:55 Than that.

Matt Chitharanjan 1:01:55 But I think we're at a stage of the market where that's- Yeah

Aneesh Bhasin 1:01:58 ... almost sufficient.

Matt Chitharanjan 1:01:59 That's sufficient still.

Nikhil Kamath 1:02:00 Correct.

Matt Chitharanjan 1:02:00 Uh, so it's good, and I would say the other thing they have going for them is good price point.

Aneesh Bhasin 1:02:04 Very good price point, yeah.

Matt Chitharanjan 1:02:05 It's not very expensive-

Aneesh Bhasin 1:02:06 Yeah

Matt Chitharanjan 1:02:07 ... it's not too cheap.

Aneesh Bhasin 1:02:08 Yeah.

Matt Chitharanjan 1:02:08 Uh, so that's it. They-- good coffee, good food, good atmosphere at a decent price point.

Nikhil Kamath 1:02:14 They have, like there's this one thing I eat everywhere. Wherever I go, I'm eating avocado toast and eggs. They have decent avocado-

Aneesh Bhasin 1:02:21 Yeah

Nikhil Kamath 1:02:21 ... toast and eggs.

Aneesh Bhasin 1:02:22 Mm.

Nikhil Kamath 1:02:23 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. What 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 I see 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 9:00 a.m., I'm hooked to it, or 8:30 a.m., and that leaves me feeling satiated up until eleven, twelve, all the way up until I eat lunch at maybe one thirty-two. The 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 twenty-five-year-old, societally acceptable high, kills hun- hunger pang, kind of healthy because not, 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.

Nikhil Kamath 1:04:27 Do 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 hundred rupees, and people are buying, how big is that market in India?

Matt Chitharanjan 1:04:43 There's only around five thousand branded coffee shops and another equivalent amount of unbranded.

Nikhil Kamath 1:04:48 And what would that number be in terms of net sales?

Matt Chitharanjan 1:04:52 Net sales, it's around billion, is what they estimate.

Aneesh Bhasin 1:04:55 There are five thousand 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.

Matt Chitharanjan 1:05:09 Mm.

Aneesh Bhasin 1:05:09 Because 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?

Matt Chitharanjan 1:05:20 I think very few people are coming for the reasons that you mentioned, the health aspect, killing hunger-

Nikhil Kamath 1:05:24 Is that just me?

Matt Chitharanjan 1:05:25 Yeah.

Aneesh Bhasin 1:05:25 That's us, uh, Paddle people. [chuckles]

Nikhil Kamath 1:05:28 Yeah? That bubble.

Matt Chitharanjan 1:05:29 Yeah.

Nikhil Kamath 1:05:29 So most people are coming in for what?

Matt Chitharanjan 1:05:31 A place that they can sit, uh, that has something enjoyable to drink. Um, it's not... A- and so you'll, you'll segregate ver- versus like, "I like an atmosphere in this place," or, "I like the products in this place," but it's not, it's not for any functional... And I think the other thing is that it has a-

Rahul Reddy 1:05:52 But there is caffeine.

Matt Chitharanjan 1:05:53 You think?

Rahul Reddy 1:05:54 There is caffeine.

Matt Chitharanjan 1:05:55 Oh!

Aneesh Bhasin 1:05:55 There is caffeine.

Rahul Reddy 1:05:56 Yeah, yeah. I mean, as in, when I say caffeine-

Matt Chitharanjan 1:05:57 But you think that's a driver for people?

Rahul Reddy 1:05:59 Yeah, because-

Matt Chitharanjan 1:05:59 I mean, I think it's addictive, so one is, it's addictive. Uh-

Rahul Reddy 1:06:02 I think it's a driver only from the lens of like, you're do- you're, you're having a meeting, okay? What do you- 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, um, 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.

Nikhil Kamath 1:06:33 Can 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 hundred milligrams of caffeine in your coffee, and you have hundred and ten or whatever. What happens if me, the twenty-five-year-old, starts a shop next to you and puts three hundred and fifty milligrams of caffeine? Wouldn't it be more addictive?

Matt Chitharanjan 1:06:56 Yeah, it would.

Aneesh Bhasin 1:06:57 It would also get you really hopped up, I think.

Rahul Reddy 1:07:00 Yeah. Could, could go, could go down-

Matt Chitharanjan 1:07:01 The thing is, it won't taste very good, though.

Nikhil Kamath 1:07:04 Does it affect the taste of coffee?

Matt Chitharanjan 1:07:06 Well, I mean, so you would have to put in a ton of Arabica, which is the higher quality, better tasting coffee, to get three X the... I mean, you'd have to do three X the dose.

Nikhil Kamath 1:07:15 Yeah.

Matt Chitharanjan 1:07:16 Or you'd have to switch to Robusta, which doesn't taste as good.

Nikhil Kamath 1:07:19 Right. But is this something you guys have experimented with?

Rahul Reddy 1:07:23 ... we've never looked at caffeine, like, we've never looked at caffeine levels as a draw or a driver as such.

Nikhil Kamath 1:07:30 Like, you don't have regulation like him. He can't have more than half a percent of alcohol in his kombucha.

Rahul Reddy 1:07:34 No, there's no caffeine regulation. Yeah.

Nikhil Kamath 1:07:35 So you can put like a thousand milligrams if you like?

Matt Chitharanjan 1:07:38 Yeah.

Rahul Reddy 1:07:38 Theoretically, yeah.

Nikhil Kamath 1:07:39 And then have a rave party, which is called-

Rahul Reddy 1:07:41 Yeah

Nikhil Kamath 1:07:41 ... a coffee rave. [chuckles]

Matt Chitharanjan 1:07:42 Or people having panic attacks.

Speaker 1:07:44 Oh, what about cold brew? Cold brew has more caffeine?

Rahul Reddy 1:07:47 Yeah.

Matt Chitharanjan 1:07:47 Yeah.

Rahul Reddy 1:07:48 Cold brew would.

Speaker 1:07:49 A lo- a lot-

Matt Chitharanjan 1:07:50 A lot more caffeine.

Speaker 1:07:50 A lot.

Nikhil Kamath 1:07:50 A lot more?

Rahul Reddy 1:07:51 Yeah, it's like palpitations.

Speaker 1:07:52 A lot more, yeah. [chuckles]

Nikhil Kamath 1:07:53 How much more?

Matt Chitharanjan 1:07:55 You're putting more... way more coffee is-

Speaker 1:07:56 Yeah

Matt Chitharanjan 1:07:57 ... going into a dose of cold brew.

Rahul Reddy 1:07:59 There's also a lot more contact time, right, with the water? So cold brew would like maybe mingle with water for like twelve or sixteen hours, whereas espresso comes out in thirty seconds. So contact time will make a difference.

Matt Chitharanjan 1:08:13 Is there, is there, is there like a thing? Do people drink a lot more cold brew now than before, or is like a hot coffee your highest selling, uh, sort of-

Nikhil Kamath 1:08:21 People use it a lot for, like, exercise, so as a pre-workout and things like that-

Rahul Reddy 1:08:25 Right

Nikhil Kamath 1:08:25 ... so that's become common. We covered food, normally fifty-fifty split between food and beverage. If you have a hot kitchen, can help me as a twenty-five-year-old, but keeping consistency and not losing people is not easy, especially at scale. Subculture, vinyl records, uh, I don't know if you have some kind of-

Rahul Reddy 1:08:49 I would add one more thing-

Nikhil Kamath 1:08:50 Uh.

Rahul Reddy 1:08:51 - since these gentlemen are here.

Nikhil Kamath 1:08:52 Yeah.

Rahul Reddy 1:08:53 One thing that's made a big difference from the Subko lens has been, we crafted this kind of menu that we call the Speakeasy menu.

Speaker 1:09:00 Mm.

Rahul Reddy 1:09:01 And that was interesting because what we wanted to do was sort of mimic what bars had done with cocktails, but use coffee as the base, right? Simply put, and in fact, we built a lot of it with Svami Tonic at the time. And so I think this, this amalgamation now of coffee with, uh... thank you, uh, soda, like carbonated soda water, tonic water, flavored tonic water, like kombucha and coffee, these are now becoming, um, additional interesting, like, product differentiators.

Nikhil Kamath 1:09:38 Is that a novelty thing or will it stick?

Rahul Reddy 1:09:40 I think it'll stick. I, I think that people who aren't... If, if the industry is moving away from, let's say, alcohol in some, in some generalized sense, I think it makes perfect sense for coffee to still give you the, the sort of mimic the feeling and give you the benefits of drinking like, like, like an Old Fashioned without having any booze in it, right? Like, we've made- we've tried making, like, Negronis, and Old Fashioneds, and, like, all sorts of, like, very... We made a Singapore Sling the other day for this, like, Singapore event that we did-

Nikhil Kamath 1:10:10 Mm

Rahul Reddy 1:10:10 ... um, with just non-alcoholic-

Nikhil Kamath 1:10:13 Mm

Rahul Reddy 1:10:13 ... ingredients.

Nikhil Kamath 1:10:13 Mm.

Rahul Reddy 1:10:14 Um, and so I think it'll be more than a novelty.

Nikhil Kamath 1:10:18 Yeah?

Rahul Reddy 1:10:18 Yeah.

Speaker 1:10:18 Yeah, I think so, too.

Nikhil Kamath 1:10:21 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?

Matt Chitharanjan 1:10:28 I mean, as- uh, for us at least, we try to do a lot of community events in the beginning, having pop-ups, having music, having art gallery, people come and do installations.

Nikhil Kamath 1:10:42 Mm.

Matt Chitharanjan 1:10:42 So I think you have to have, like, you have to have a hook. Like, what, what Rahul was saying is very, is very true. You have to have some kind of reason for people to come.

Nikhil Kamath 1:10:50 Is it like a bar, where you bring in the women and the men follow?

Matt Chitharanjan 1:10:56 No, I don't think so. [chuckles]

Speaker 1:10:58 No, I don't think so.

Nikhil Kamath 1:10:59 So what, what hack can you tell me in terms of getting the kind of crowd in a coffee shop which would attract more people?

Speaker 1:11:07 That's a good question. [chuckles]

Matt Chitharanjan 1:11:09 [chuckles] If I had an answer to that, I would replicate it across our hundred and thirty-five outlets. But, uh, uh, I mean, for us, we've tried to just do it by product.

Nikhil Kamath 1:11:21 Mm.

Matt Chitharanjan 1:11:21 Uh, 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, or whatever, I can go to that place and-

Nikhil Kamath 1:11:34 Mm

Matt Chitharanjan 1:11:34 ... be assured a certain level, I think that works. But for, uh, like a standalone coffee shop, you'd have to have something more significant.

Nikhil Kamath 1:11:43 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.

Matt Chitharanjan 1:11:53 That you like, so I mean-

Nikhil Kamath 1:11:55 Maybe I can go to a restaurant for that reason, but not a coffee shop.

Speaker 1:11:57 Yeah, same. Same.

Nikhil Kamath 1:11:59 Right?

Speaker 1:11:59 Yeah. I, I would... I mean, as non-coffee people-

Nikhil Kamath 1:12:04 Mm

Speaker 1:12:04 ... you know, I would- I wouldn't necessarily go to a coffee shop for that repeat experience.

Matt Chitharanjan 1:12:09 But for both of you-

Speaker 1:12:10 Uh

Matt Chitharanjan 1:12:10 ... what's your standard coffee order at a coffee shop?

Nikhil Kamath 1:12:13 Americano.

Speaker 1:12:14 Yeah, uh, latte.

Matt Chitharanjan 1:12:16 But so if you knew one place had-

Speaker 1:12:18 Latte or cortado

Matt Chitharanjan 1:12:18 ... an Americano that you liked versus a place that had a cool-looking vibe, you'd choose the cool-looking vibe?

Speaker 1:12:25 I also think it depend on the-

Matt Chitharanjan 1:12:27 Mm

Speaker 1:12:27 ... on the occasion, no?

Nikhil Kamath 1:12:30 Like,

Nikhil Kamath 1:12:31 at home, I used to do Nespresso coffee for the longest time, then Rahul did some mini Subko setup.

Speaker 1:12:39 I saw the Linea Mini there.

Nikhil Kamath 1:12:40 Yeah, it's here as well.

Speaker 1:12:42 Nice.

Nikhil Kamath 1:12:43 Now I know that the Nespresso is bad.

Matt Chitharanjan 1:12:45 Mm.

Speaker 1:12:46 Yeah.

Nikhil Kamath 1:12:46 'Cause if I have a cup of this and I have a cup of that, I can distinguish.

Matt Chitharanjan 1:12:50 Yeah.

Nikhil Kamath 1:12:52 But when I'm going into a nice coffee shop, there, this distinction becomes a little bit harder, 'cause 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? You know what I mean?

Matt Chitharanjan 1:13:23 Yeah.

Rahul Reddy 1:13:25 ...Yeah.

1:13:25 Do you get this question a lot with tonic?

1:13:28 Not with tonic. I think it's more of alcohol.

1:13:31 So no one's like, "Hey, like, can you really tell the difference between the tonics anyway?"

1:13:35 You can, because, um-

Matt Chitharanjan 1:13:37 Yeah

Rahul Reddy 1:13:37 So there's a line by Fever-Tree, which I love, which is like three-fourth of your drink is the mixer.

1:13:42 Mm.

1:13:42 So by volume, it's so much that you will...

Matt Chitharanjan 1:13:44 Yeah.

Rahul Reddy 1:13:45 And why I was asking them about that coffee-

Matt Chitharanjan 1:13:46 You can, you can actually instantly tell the difference between tonics.

Rahul Reddy 1:13:48 Yeah, yeah.

1:13:49 Yeah.

1:13:49 Like, I, the other day tasted-

Matt Chitharanjan 1:13:50 Sugar-

Rahul Reddy 1:13:51 Yeah, yeah

Matt Chitharanjan 1:13:51 ... bitterness.

Rahul Reddy 1:13:52 You can.

Matt Chitharanjan 1:13:53 Whatever, second notes.

Nikhil Kamath 1:13:53 Flavor-wise, you can tell, but can you tell that this is a better quality tonic?

Matt Chitharanjan 1:13:57 It's-- I don't know if it's about better, right?

Rahul Reddy 1:13:58 Personal preference.

Matt Chitharanjan 1:13:59 I mean, taste is very, like, subjective at the end of the day, but it's not about better. But you can definitely-

Rahul Reddy 1:14:03 Yeah

Matt Chitharanjan 1:14:03 ... definitely pinpoint the difference, and then maybe you can pick what's better for you.

Nikhil Kamath 1:14:09 Why were you asking what coffee we drink?

Matt Chitharanjan 1:14:11 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, uh, decipher. But Americano, I also think you're going to a certain level of coffee shops now. [chuckles]

Rahul Reddy 1:14:34 Mm.

Matt Chitharanjan 1:14:34 But a lot of places, the Americano would be terrible. Like a five-star hotel, I'm assuming, would have a terrible Americano.

Rahul Reddy 1:14:41 Yeah.

Nikhil Kamath 1:14:41 Is what milk I have a novelty anymore?

Rahul Reddy 1:14:43 Yes, I wanted to talk about milk.

Nikhil Kamath 1:14:45 Yeah.

Rahul Reddy 1:14:45 Oh, man.

Nikhil Kamath 1:14:46 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?

Matt Chitharanjan 1:14:51 I think the quality of... I mean, so at least for us, very few people order these alternative milks. But-

Nikhil Kamath 1:14:56 How big is that?

Matt Chitharanjan 1:14:56 That's a big difference between both of you-

Rahul Reddy 1:14:58 Yeah, we get a lot (crosstalking)

Nikhil Kamath 1:14:58 How much of total sales is alternative milk?

Matt Chitharanjan 1:15:00 Two, 3%.

Nikhil Kamath 1:15:02 That's it?

Matt Chitharanjan 1:15:02 Yeah.

Rahul Reddy 1:15:03 Yours should be higher, no?

1:15:04 Much higher.

Matt Chitharanjan 1:15:04 Yeah.

Rahul Reddy 1:15:04 But you're also-

1:15:05 I don't know the exact number, but more than 10% for sure, like 15%, I think.

1:15:08 If you go to a coffee shop in Bandra, and you ask for regular milk, you get the look.

1:15:14 [chuckles]

1:15:14 Like, "Really? You want regular milk?"

1:15:17 Well, what's interesting, Nikhil, is that there are, like, these insane brands worth... I mean, this is, the, this, I think the compounded annual growth rate of alt milk is... I had the figure somewhere, but brands like Oatly, which I'm sure you've heard about-

Nikhil Kamath 1:15:32 They did very well, and then the stock has crashed.

Rahul Reddy 1:15:35 Yes, that's true.

Nikhil Kamath 1:15:36 Yeah.

Rahul Reddy 1:15:36 But I think the competition suddenly became majorly fierce.

1:15:40 A lot of-

1:15:40 There were a lot of brands in the West that are also-

Nikhil Kamath 1:15:42 Mm.

Rahul Reddy 1:15:43 They did... Initially, they, they differentiated themselves heavily on the packaging, and it was... And it was, look, for baristas, like, the way textures and stuff was, was superlative for a long time. But now there's, like, loads of interesting, you know, oat milk brands and even other milks like you mentioned, you know, macadamia nut, [chuckles] like all sorts of stuff.

1:16:02 Yeah. Yeah.

1:16:03 Um, but yeah, I mean, somewhat controversial, like the composition of the oat milk-

1:16:09 Yeah

1:16:09 ... and, you know, is it-

Matt Chitharanjan 1:16:11 Exactly.

Rahul Reddy 1:16:11 Yeah, there's a lot of, you know, there's a lot of stuff in there.

Nikhil Kamath 1:16:13 It's actually better. [chuckles]

Rahul Reddy 1:16:14 Yeah, I don't get it. I don't get the, or the-

Matt Chitharanjan 1:16:16 How many things you don't understand on the back of the label?

Rahul Reddy 1:16:18 Yeah.

Nikhil Kamath 1:16:18 See, I must say, I'm still not feeling very confident opening a coffee store.

Rahul Reddy 1:16:21 [chuckles]

Nikhil Kamath 1:16:22 You guys are, like, the masters of this business. [clears throat] Convince me to open one. I know coffee is, 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 said the crowd is a big draw. Actually, we have said the crowd is a big draw.

Matt Chitharanjan 1:16:49 You said the crowd is-

Nikhil Kamath 1:16:51 How do we-- how do you create an atmosphere artificially of good crowd?

Matt Chitharanjan 1:16:58 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, if you feel it seems like there's coffee shops opening up all over, it's very, very shallow.

Nikhil Kamath 1:17:22 But I'll tell you the problem. I have 2 crore rupees my uncle gave me.

Matt Chitharanjan 1:17:25 Yeah.

Nikhil Kamath 1:17:26 Matt and Rahul have a lot of money that investors have given them.

Matt Chitharanjan 1:17:29 Yeah.

Nikhil Kamath 1:17:30 How do I compete with you guys?

Rahul Reddy 1:17:32 I have, uh-

Matt Chitharanjan 1:17:32 Open between us. We're, we're gonna bring in people-

Rahul Reddy 1:17:35 I do something already [crosstalking]

Matt Chitharanjan 1:17:35 ... Just by virtue of being next to us, you're definitely gonna siphon off some of that crowd.

Nikhil Kamath 1:17:40 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.

Matt Chitharanjan 1:17:52 I think for restaurants, it's different. People don't want to wait for a coffee shop, and I've-- we've seen that when-

Rahul Reddy 1:17:57 Yeah

Matt Chitharanjan 1:17:58 ... we, like, we have a coffee shop, and let's say, a third wave coffee opens, a Starbucks coffee opens, a Chios opens, an independent coffee shop opens, it actually sucks in more people to that market, and everybody does better.

Nikhil Kamath 1:18:10 You think?

Matt Chitharanjan 1:18:11 I have, I mean, it's happened for, uh, many

Matt Chitharanjan 1:18:13 times for us.

Nikhil Kamath 1:18:13 Is Starbucks doing well in India? [chuckles]

Rahul Reddy 1:18:15 [chuckles] Yes and no.

Matt Chitharanjan 1:18:18 [chuckles] It's fine, yeah.

Nikhil Kamath 1:18:19 [chuckles] Go ahead.

Rahul Reddy 1:18:20 I, I mean, it's-

Nikhil Kamath 1:18:21 There was some rumor that Starbucks is shutting down-

Matt Chitharanjan 1:18:23 Yeah

Nikhil Kamath 1:18:23 ... then they came and clarified.

Matt Chitharanjan 1:18:24 That's fake. That was fake.

Rahul Reddy 1:18:24 They clarified that.

Nikhil Kamath 1:18:25 That it's fake. But how is it actually doing?

Rahul Reddy 1:18:27 But, but I was gonna... I don't have any data on how they're doing. What I would say, though, Nikhil, is the... When you say speciality, this is an interesting one. So Starbucks's 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. 'Cause price point-wise, Starbucks is even at times more expensive than we are, and, well, they are, they are who they are. They have the brand that they have, and you have to respect that. Um, but that's, that's interesting to me.

Matt Chitharanjan 1:19:11 I mean, so they've gotten to a thousand plus crores, they're at ninety-seven cities-

Rahul Reddy 1:19:15 Yeah

Matt Chitharanjan 1:19:15 ... so, I mean-

Nikhil Kamath 1:19:16 Profitably?

Rahul Reddy 1:19:18 No.

Matt Chitharanjan 1:19:19 No.

Nikhil Kamath 1:19:19 Why is that? Why is Starbucks globally as profitable as they are? I've-... 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?

Matt Chitharanjan 1:19:41 Their cost structure is also quite different in India versus other places. So they pick-

Nikhil Kamath 1:19:45 It should be better, right?

Matt Chitharanjan 1:19:46 No, because the, 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, are incredibly high.

Nikhil Kamath 1:19:56 The one thing I've noticed is in America, a lot of people buy a coffee and walk.

Matt Chitharanjan 1:20:02 Yeah.

Rahul Reddy 1:20:02 Yes.

Nikhil Kamath 1:20:03 They-

Rahul Reddy 1:20:03 That's-

Nikhil Kamath 1:20:03 -don't occupy real estate.

Rahul Reddy 1:20:04 Exactly.

Nikhil Kamath 1:20:05 In India, if you sell somebody a coffee for two hundred rupees, they're gonna sit there for an hour with it.

Matt Chitharanjan 1:20:10 Yeah. That whole behavior shifted to Zomato and Swiggy.

Aneesh Bhasin 1:20:13 I was just gonna... I saw the Zepto Cafe and all. They seem to be- Zepto Cafe seems to be doing well, from what I've heard.

Nikhil Kamath 1:20:20 Not sure.

Matt Chitharanjan 1:20:21 I think it's a hundred bucks or hundred and twenty rupees for a cappuccino on Zepto. Compare-- makes a compelling case.

Nikhil Kamath 1:20:27 Does that one thing ruin the chance for me, twenty-five years old, wanting to open a coffee shop? If I were to open in America, a hundred people will come in the morning, buy, and walk. But in India, if five people come, and I have eight tables in my store, and five are occupied, I can't service anymore?

Matt Chitharanjan 1:20:44 Yeah, it, that'll, that's a limiting factor, for sure.

Rahul Reddy 1:20:47 I, I think that that's why in this market, I feel like that all the stuff I keep saying about differentiation becomes hyper important. Because y- you're still dealing with needing it to be experiential primarily, and then everything else serving that experience. That's the way that I see it in the domestic market. 'Cause you're absolutely right. I 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, "Okay, 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 initially, even like baked goods, right? Like people... There are people that live on eating, like, croissants. [chuckles] Like, not saying they should, but they do. And so, 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 without the... whilst brands like us are trying to, like, change the culture of coffee.

Aneesh Bhasin 1:21:50 I was just going to say that, yeah.

Rahul Reddy 1:21:51 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 their habituation towards coffee, and I think, like, Matt's played a big role in that. Before him, Cafe Coffee Day played a, a very big role in that, you know? And, you know, we're trying to play a role in that.

Matt Chitharanjan 1:22:12 I also think that Indian consumers' affinity towards international brands is not what it was-

Rahul Reddy 1:22:17 Yeah

Matt Chitharanjan 1:22:17 ... fifteen, twenty years ago.

Aneesh Bhasin 1:22:17 Hundred percent.

Matt Chitharanjan 1:22:18 So-

Nikhil Kamath 1:22:19 Yeah.

Rahul Reddy 1:22:20 True

Matt Chitharanjan 1:22:20 ... the idea that I can just be an international brand and automatically I'll have a line is-

Nikhil Kamath 1:22:24 Yeah

Matt Chitharanjan 1:22:24 ... is no longer-

Rahul Reddy 1:22:25 Agreed

Matt Chitharanjan 1:22:25 -applicable.

Nikhil Kamath 1:22:25 Which is great, in my opinion.

Rahul Reddy 1:22:27 Yeah, yeah.

Aneesh Bhasin 1:22:27 Mumbai is very cooler now, right?

Rahul Reddy 1:22:29 For sure.

Aneesh Bhasin 1:22:29 And, and Starbucks is not-- Starbucks is not cool. It may be cool in a smaller town for some time, and I'm sure that town will see-

Nikhil Kamath 1:22:37 In Mumbai, it's not cool?

Aneesh Bhasin 1:22:38 I don't think so.

Nikhil Kamath 1:22:39 No?

Aneesh Bhasin 1:22:41 I think it's very functional.

Nikhil Kamath 1:22:42 Mm.

Aneesh Bhasin 1:22:42 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.

Matt Chitharanjan 1:22:50 I think in a certain subset of the population-

Aneesh Bhasin 1:22:52 That's what I'm saying, yeah, yeah

Matt Chitharanjan 1:22:53 ... But even within Bombay-

Aneesh Bhasin 1:22:54 But, but-

Matt Chitharanjan 1:22:54 ... it's like a, uh, maybe a younger crowd that-

Aneesh Bhasin 1:22:56 But when at that same place where there's a Starbucks, tomorrow, when a Blue Tokai opens or a Subko opens or a Bougie opens, I think they will take a lot of their customers.

Rahul Reddy 1:23:05 Yeah.

Nikhil Kamath 1:23:06 And you guys always open kind of next to each other, right? Like, all the coffee shops.

Matt Chitharanjan 1:23:11 Because, again, you want to be where the people are, so there's not a-- it's not... We're all kind of-

Rahul Reddy 1:23:17 We're a little different, though

Matt Chitharanjan 1:23:18 ... going for the similar real estate.

Nikhil Kamath 1:23:20 Yeah.

Matt Chitharanjan 1:23:20 Like, I remember Third Wave used to always be next to Starbucks.

Rahul Reddy 1:23:23 Yeah.

Matt Chitharanjan 1:23:23 Because they're, they're very similar in terms of the TG that they're attracting.

Aneesh Bhasin 1:23:29 No, off-topic, but one thing, I think M- McCafé-

Nikhil Kamath 1:23:32 Mm

Aneesh Bhasin 1:23:32 ... doesn't have a cool impression-

Nikhil Kamath 1:23:34 Mm

Aneesh Bhasin 1:23:34 ... but definitely better coffee than Starbucks.

Nikhil Kamath 1:23:36 Which one?

Aneesh Bhasin 1:23:37 Uh, McCafé, McDonald's.

Nikhil Kamath 1:23:39 Yeah?

Aneesh Bhasin 1:23:39 Yeah.

Nikhil Kamath 1:23:40 Really?

Rahul Reddy 1:23:40 There are people that say that.

Matt Chitharanjan 1:23:42 Yeah.

Rahul Reddy 1:23:42 There are people that say that.

Aneesh Bhasin 1:23:42 Pretty decent cappuccinos.

Nikhil Kamath 1:23:44 Isn't that in itself subjective? What is a good coffee? What is better? What is worse?

Matt Chitharanjan 1:23:49 I mean, there is an objective scoring [chuckles] system.

Rahul Reddy 1:23:51 Yeah.

Nikhil Kamath 1:23:51 Yeah.

Matt Chitharanjan 1:23:52 But ultimately, it depends on your individual preferences.

Nikhil Kamath 1:23:55 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 two thousand square feet, a hundred coffees every morning-

Matt Chitharanjan 1:24:07 But you would face so much competition

Nikhil Kamath 1:24:09 ... in India, I can't.

Matt Chitharanjan 1:24:09 You would face so much competition in the US.

Aneesh Bhasin 1:24:10 But I think

Aneesh Bhasin 1:24:11 Tier-2 is good for opening a coffee shop.

Nikhil Kamath 1:24:13 Is it?

Aneesh Bhasin 1:24:13 Yeah, I think so. There's lesser options-

Matt Chitharanjan 1:24:16 Under served-

Aneesh Bhasin 1:24:16 So you may be-

Matt Chitharanjan 1:24:16 More underserved. Still, there's enough-

Aneesh Bhasin 1:24:18 Yeah

Matt Chitharanjan 1:24:18 ... of a population who appreciates coffee, who's interested in it.

Rahul Reddy 1:24:22 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 a hundred rupees? 'Cause 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... 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, um, with pricing, like what pricing strategy might look like at Subko.

Nikhil Kamath 1:24:58 Mm.

Rahul Reddy 1:24:58 And I think my an- like, with various things happening, supply chain shocks, inflation, you know, how would you try to deal with that? Would you make things more affordable for your customers? Would you start... You know, and I, I think given the kind of brand we are trying to build, I said, "No, we would, we would maintain our standards obviously very high," but I think the customer base we have ex- expects sort of like this, this premiumization of the segment. And I'm just wondering, I'm personally not sure. There, there are multiple brands that have come up and raised a lot of capital recently who-

1:25:32 ... like, have coffee for less than, I mean-

Matt Chitharanjan 1:25:34 Yeah, I, I don't think that dropping the price, uh, increases demand so much to compensate for that.

Nikhil Kamath 1:25:40 No?

Matt Chitharanjan 1:25:40 The people who are coming for a coffee shop are, uh, more price insensitive.

Nikhil Kamath 1:25:46 What price are most people okay to spend on a coffee when they come into Blue Tokai?

Matt Chitharanjan 1:25:49 So we've done a survey-

Nikhil Kamath 1:25:51 Yeah

Matt Chitharanjan 1:25:51 ... and it's two fifty rupees is kind of the, they, they won't notice anything up until two fifty rupees. If it's above two fifty rupees, then they, then they'll start to pay attention.

Nikhil Kamath 1:26:00 Right.

Rahul Reddy 1:26:02 What's your price- pricing average?

Matt Chitharanjan 1:26:04 So cappuccino is two forty.

Nikhil Kamath 1:26:08 There come some coffee shops in Bangalore I go to outside of Blue Tokai and Subko. There's Araku, there's Lavonne. Uh, 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, [laughing] I must say.

Rahul Reddy 1:26:31 There used to be one coffee shop in, uh-

Nikhil Kamath 1:26:33 Yeah

Rahul Reddy 1:26:33 ... JP Nagar. I don't know if around the corner, Benki?

Nikhil Kamath 1:26:35 Yeah, yeah, yeah.

Rahul Reddy 1:26:36 You know Benki?

Nikhil Kamath 1:26:36 Yeah, yeah.

Rahul Reddy 1:26:38 Standard, right?

Nikhil Kamath 1:26:38 Yeah.

Rahul Reddy 1:26:38 No food-

Nikhil Kamath 1:26:39 Yeah

Rahul Reddy 1:26:39 ... no nothing, just coffee. Ninety-five bucks. Ninety-five bucks. Excellent coffee.

Matt Chitharanjan 1:26:44 Yeah. [chuckles]

Rahul Reddy 1:26:45 Pick up, move on.

Matt Chitharanjan 1:26:45 Same, same, yeah, yeah.

Nikhil Kamath 1:26:47 Wow! And there's one in, uh, Mysore now. I know people are driving from Bangalore to Mysore, that bakery. [chuckles]

Rahul Reddy 1:26:52 Sapa.

Nikhil Kamath 1:26:53 Sapa.

Rahul Reddy 1:26:53 Yeah.

Matt Chitharanjan 1:26:54 Yeah, Sapa is great.

Nikhil Kamath 1:26:55 Yeah?

Matt Chitharanjan 1:26:55 I just, I just finished that stolen.

Nikhil Kamath 1:26:56 Uh.

Matt Chitharanjan 1:26:57 Yeah, beautiful. [chuckles]

Nikhil Kamath 1:26:58 What about India's palate? Sweet, not sweet, is that changing at all? Are there any micro trend, trends there? What if I start a coffee shop and I say the novelty is no sugar whatsoever-

Rahul Reddy 1:27:08 No

Nikhil Kamath 1:27:09 ... in the entire store?

Rahul Reddy 1:27:10 There'll be four of us.

Matt Chitharanjan 1:27:11 Yeah, you won't survive. [chuckles]

Nikhil Kamath 1:27:13 No? And a very high premium price in, three fifty rupees for a coffee and above, no sugar whatsoever. Some vinyl playing, coffee rave Sunday morning.

Rahul Reddy 1:27:24 So interestingly, I would, I would... I don't know if it's a Subko thing or what, but the data that we have, year-on-year growth of pour-over coffee, just black, right? Eighty-one percent 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 it's happening.

Matt Chitharanjan 1:27:50 Yeah.

Rahul Reddy 1:27:50 And typically, nobody would add milk or sugar into a pour-over. You're paying, like, double the price. [chuckles] And so, 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. I do think there is, 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, uh, we spoke about this, uh, once. There are not too many beverages, like you said, that can give you a high, that are also that complex, that's- that also becomes a ritual, right? You m- 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. And the moment you start doing that-

Matt Chitharanjan 1:28:52 Work flow, I have to say.

Rahul Reddy 1:28:52 Yeah.

Matt Chitharanjan 1:28:52 Work flow. It's that magic work flow.

Rahul Reddy 1:28:54 And that's such a big community, right? And that's grown so much in India as well.

Nikhil Kamath 1:28:58 So

Nikhil Kamath 1:28:59 I'm obsessed with consumption trends, okay? Uh, 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 want... 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 'cause I can. Like, a Zara in India, which was growing at thirty, forty percent, 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, uh, across price points, the ones who are selling at five hundred rupees a T-shirt to five thousand rupees a T-shirt, we're seeing slowdown across all of this. Uh, 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. Uh, nobody knows the real reason. It could be that, it could be that discretionary income is going down 'cause the cost of money in the West is higher, and less money is finding its way. Uh, for a long time, especially in Bangalore, everything we bought and did was subsidized by foreign Ps 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, that is like a counter trend almost. Do you think there is a scope to incorporate that here in, say, the healthiest coffee shop next to Subko and Blue Tokai, where you guys are selling cookies and all of that, and I don't? Can I do that?

Matt Chitharanjan 1:31:28 Yeah. Yeah.

Nikhil Kamath 1:31:30 Can I say, whatever you come in-

Matt Chitharanjan 1:31:31 High protein-

Nikhil Kamath 1:31:32 Yeah

Matt Chitharanjan 1:31:33 ... protein coffees or protein-

Rahul Reddy 1:31:35 MCT and-

Matt Chitharanjan 1:31:36 Yeah

Rahul Reddy 1:31:36 ... all that.

Nikhil Kamath 1:31:36 Do you think that could work?

Matt Chitharanjan 1:31:37 Yeah, yeah.

Nikhil Kamath 1:31:38 What if I say you come into my coffee shop-... I will make sure you walk out without consuming more than two fifty calories.

Speaker 1:31:44 Hmm.

Nikhil Kamath 1:31:45 The minute you've spent two fifty calories, I block you from having anything.

Adithya Kidambi 1:31:49 I would go there. [chuckles]

Nikhil Kamath 1:31:50 You would go there, eh?

Adithya Kidambi 1:31:51 I would go there.

Nikhil Kamath 1:31:52 Right?

Speaker 1:31:54 I think it's an interesting angle. And both of you guys have marked as low calorie on, on your products, I noticed.

Adithya Kidambi 1:32:00 Yeah.

Speaker 1:32:00 Low sugar, zero calorie even, right?

Adithya Kidambi 1:32:02 I, I, I mention the full calorie content on the front label-

Speaker 1:32:07 Yeah

Adithya Kidambi 1:32:07 ... not per hundred milliliters.

Speaker 1:32:08 Not just, not just per hundred. Even, even we, even we do that.

Adithya Kidambi 1:32:11 Front label, right bottom in the center-

Speaker 1:32:14 Yeah

Adithya Kidambi 1:32:14 - total calories of the bottle right there.

Speaker 1:32:15 Hmm. It's, it's-

Adithya Kidambi 1:32:17 People should be, people should be educated about what they have there.

Speaker 1:32:19 You should just have that information.

Adithya Kidambi 1:32:20 I have no pro-- like, I have no problem something consuming anything.

Speaker 1:32:22 There's no point seeing four calories, and there's per hundred, and then there's three hundred, and then that triples up. I know your philosophy is like, less sugar is what you guys, right? Right.

Adithya Kidambi 1:32:30 Yeah, we're more, we're more less sugar better than no sugar or artificial sugar. Uh, ethos being everything consumed at a particular level is just good for you. Your body accepts sugar. It's like, 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, after, after a little while. But when you, when you completely knock it back, your body is still getting just the right amount of su- sugar it requires.

Speaker 1:33:05 Do you think Indians understand how kombucha and sugar interact, and the, and the-

Adithya Kidambi 1:33:09 No, they don't.

Speaker 1:33:09 And how the SCOBY works?

Adithya Kidambi 1:33:10 No, they don't.

Nikhil Kamath 1:33:12 Why don't you start-

Adithya Kidambi 1:33:12 But they're getting there.

Nikhil Kamath 1:33:13 Why don't you start? Let's take a break from coffee. I'm not convinced to open a coffee shop, guys. [laughing] Not yet.

Speaker 1:33:19 Yeah.

Nikhil Kamath 1:33:20 But we'll come back

Nikhil Kamath 1:33:21 to this. Should we move to kombucha for a bit? You-- maybe you start by explaining what is kombucha, 'cause most people don't know it. In south, it's bigger than north for some reason.

Adithya Kidambi 1:33:30 Yeah. Yeah, it is. Um, 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. Um, it'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 po- in the process of fermentation. Um, it was discovered by accident. I think, I think one of the stories is that five thousand years ago, there was this, um, Korean guy who just left, uh, tea outside, and then it had this-

Nikhil Kamath 1:34:11 Chinese guy, no?

Adithya Kidambi 1:34:12 Yeah, multi... different stories.

Nikhil Kamath 1:34:14 Ah, I read a few stories. [laughing]

Adithya Kidambi 1:34:16 As- A, As- Asian guy. [laughing]

Nikhil Kamath 1:34:17 Yeah?

Adithya Kidambi 1:34:18 As- Asian guy.

Nikhil Kamath 1:34:18 And then it was called kombucha in Germany.

Adithya Kidambi 1:34:20 And, uh, no, no, no, it was, it wa-- that, that is kvass.

Nikhil Kamath 1:34:23 Uh.

Adithya Kidambi 1:34:23 So it was, uh, so apparently, he left this tea outside there, and then he gave it to a Japanese emperor.

Nikhil Kamath 1:34:28 Hmm.

Adithya Kidambi 1:34:29 The emperor liked the tea, so he called that, that dude's name was Kombu.

Nikhil Kamath 1:34:33 Hmm.

Adithya Kidambi 1:34:33 So it was Kombu's tea, kombucha.

Nikhil Kamath 1:34:35 Hmm.

Adithya Kidambi 1:34:35 That was essentially the origin story for kombucha. Many cultures have m-- different fermented beverage. We have kanji, the Germans have kvass. Uh, so origin stories and fermented beverages keep changing. But essentially, kombucha essentially is fermented tea. It's fermented using this culture called SCOBY. Uh, there's, uh-

Nikhil Kamath 1:34:55 Can you explain what fermentation is?

Adithya Kidambi 1:34:57 Fermentation is the process of breaking... In the most simple way, it's the process of breaking down sugars. That's fermentation.

Nikhil Kamath 1:35:05 Sugar is bad. Why is breaking down sugar good?

Adithya Kidambi 1:35:07 Breaking down sugar is easy for your body to consume. So it'll break it into mostly organic acids and, uh, um, and basically, it's food for the bacteria, right? So the, the culture, the culture grows. So that's, 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, uh, difference in health in terms of consumption.

Nikhil Kamath 1:35:32 So what you're saying, SCOBY is a bacteria?

Adithya Kidambi 1:35:34 SCOBY is both bacteria and yeast, symbiotic culture of bacteria and yeast.

Nikhil Kamath 1:35:39 What is, what is yeast?

Adithya Kidambi 1:35:40 Yeast is what, uh... How do I say? Yeast is what they use to puff up bread.

Nikhil Kamath 1:35:46 But what is it? Again, a bacteria?

Adithya Kidambi 1:35:48 It's, it's, it's another, it's another, it's another live culture. It's another living thing, so to say.

Nikhil Kamath 1:35:52 So what you're saying is, okay, there's some bacteria.

Adithya Kidambi 1:35:55 There's some bacteria, there's some yeast. Both of it have its function.

Nikhil Kamath 1:35:57 So you take sugar-

Adithya Kidambi 1:35:58 You take sugar.

Nikhil Kamath 1:35:58 You feed the bacteria sugar.

Adithya Kidambi 1:36:00 No. So you take sugar and tea, and you put the SCOBY in it.

Nikhil Kamath 1:36:03 Hmm.

Adithya Kidambi 1:36:04 First, the yeast works. The yeast breaks down the sugar, gives rise to alcohol and, and organic acids and carbon dioxi- 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.

Nikhil Kamath 1:36:18 And why is that good?

Adithya Kidambi 1:36:19 In the process, in the process, it, it gives you a-- it generates a lot of organic acids like lactobacillus, glucono, glucobactin-

Nikhil Kamath 1:36:28 Probiotic.

Adithya Kidambi 1:36:28 Probi- probiotics, prebiotics, organic acids, all of it in one, in one product.

Nikhil Kamath 1:36:33 Why are prebiotics, probiotics, and organic acids good for me?

Adithya Kidambi 1:36:37 It's good for your gut. Essentially, how your brain controls your cognitive, your g- gut controls everything else, like how you're fighting diseases, your, uh, 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? Uh, you want, you want to keep the good... You want to keep it in balance. You want the good to always be better than the bad.

Nikhil Kamath 1:37:07 And this bacteria-

Adithya Kidambi 1:37:08 So-

Nikhil Kamath 1:37:08 - you're saying is good.

Adithya Kidambi 1:37:09 This has a lot of different bacterias. Eating those also is good for you. Eating curd is also good for you. Eating-- 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.

Nikhil Kamath 1:37:35 So when I'm eating something fermented-

Adithya Kidambi 1:37:37 Yeah

Nikhil Kamath 1:37:37 ... I'm feeding the bacteria in my gut?

Adithya Kidambi 1:37:39 Yes. Either through all of the organic acids that we produce and, uh, most-

Nikhil Kamath 1:37:44 There's some of the bad that I'm feeding the bacteria in my gut?

Adithya Kidambi 1:37:47 ... it's actually good for you.

Nikhil Kamath 1:37:48 Mm.

Adithya Kidambi 1:37:48 It's actually good for you because if-

Nikhil Kamath 1:37:50 Mm

Adithya Kidambi 1:37:50 -you're feeding, there are good-- Like I said, there are good guys and the bad guys, you know, you're feeding the good guys. You are feeding the good guys so that they can-

Nikhil Kamath 1:37:55 What are the bad guys?

Adithya Kidambi 1:37:56 -fight the bad guys. The bad guys, the bad guys, mostly, I don't know. I am not, I don't think I'm qualified enough-

Nikhil Kamath 1:38:02 Sure

Adithya Kidambi 1:38:02 ... to tell you this.

Nikhil Kamath 1:38:03 Yeah.

Adithya Kidambi 1:38:03 Yeah, so it's mostly-

Nikhil Kamath 1:38:04 Mm.

Adithya Kidambi 1:38:05 It's what lets you not fight off a disease or an infection or anything like that.

Nikhil Kamath 1:38:11 So I must say, I've been a kombucha drinker for a long time.

Adithya Kidambi 1:38:15 Yeah.

Nikhil Kamath 1:38:15 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. Uh, this new thing, uh, in the US, what is the store called? E-R-E W-

Matt Chitharanjan 1:38:27 Air- Air One.

Nikhil Kamath 1:38:28 Air One.

Matt Chitharanjan 1:38:28 Yeah.

Nikhil Kamath 1:38:29 I've been having their kombucha.

Matt Chitharanjan 1:38:30 Right.

Nikhil Kamath 1:38:30 I've had everybody's kombuchas.

Matt Chitharanjan 1:38:33 Yeah.

Nikhil Kamath 1:38:33 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.

Adithya Kidambi 1:38:42 Yeah.

Nikhil Kamath 1:38:43 So is it really healthy, or is it like, you know, having a hundred milligrams of, uh, caffeine is good for you kind of thing? [chuckles]

Adithya Kidambi 1:38:49 No, it's healthy. I'll tell you, I'll tell you how it's healthy, okay? Now, health is a very specific claim, right? I'll tell you healthy. If you were to-- you're drinking a carb-- you're-- essentially, your consumption is because you want to drink a carbonated beverage. You're replacing your carbonated beverage with this. You're better off drinking this than a standard market bought carbonated beverage. That's how it's healthier for you.

Nikhil Kamath 1:39:09 You're saying this is better than Coca-Cola?

Adithya Kidambi 1:39:11 It is better than Coca-Cola.

Nikhil Kamath 1:39:12 But are you saying if I'm drinking water and I have kombucha, it's good for me?

Adithya Kidambi 1:39:18 Water is the best. Okay?

Nikhil Kamath 1:39:20 Mm.

Adithya Kidambi 1:39:20 But, like, you know, I, I'm, I'm not going to make fad claims. Uh, water is the best for rehydration. Kombucha has its purpose, right? You're drinking, you're drinking kombucha essentially to replace that fizz factor. You're not drinking-- people are not going to get healthy and become, you know, like Superman by drinking kombucha. That's not what happens. Your, the consumption is getting changed. You're better off... Look, for example, if I were to tell you, uh, 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 a kombucha, there is no maybe effect. It's good for you. It'll do you good while you're drinking it, and it'll do you good when it's coming out. There is no maybe clause. Now, how much better, how much it's affecting you? It's a, it's a lifestyle choice, you know. You have to, you have to continually do it, and you will, you will see that change. You will see difference. It's, it's good organic acids. People say drinking apple cider vinegar is really good for you.

Matt Chitharanjan 1:40:17 Mm.

Adithya Kidambi 1:40:18 It is good for you because of-

Nikhil Kamath 1:40:19 I drink that also

Adithya Kidambi 1:40:19 ... because it's of that pH balance, right?

Nikhil Kamath 1:40:21 Mm.

Adithya Kidambi 1:40:21 Kombucha is essentially vinegar. It's tea vinegar. That's what it is.

Nikhil Kamath 1:40:23 Every morning I have hot water with-

Adithya Kidambi 1:40:26 Yeah

Nikhil Kamath 1:40:26 - turmeric, lemon, and apple cider vinegar.

Adithya Kidambi 1:40:29 Yeah.

Nikhil Kamath 1:40:29 Like, one liter.

Adithya Kidambi 1:40:30 Yeah. So what's, what, what, what difference are you seeing from-

Nikhil Kamath 1:40:33 I have no idea. [laughing]

Adithya Kidambi 1:40:34 [chuckles] Right?

Nikhil Kamath 1:40:34 I've been drinking for years.

Adithya Kidambi 1:40:35 Yeah.

Nikhil Kamath 1:40:36 [laughing] I have that, then I have black coffee, then I have something else.

Adithya Kidambi 1:40:39 Yeah. So it's, it's one, it's one of those things, right?

Nikhil Kamath 1:40:41 Yeah.

Adithya Kidambi 1:40:41 Maybe the difference is how you are today. You, you, it's, it's not something that you can measure, and it's, it isn't something that you should measure.

Nikhil Kamath 1:40:48 Mm.

Adithya Kidambi 1:40:49 It's something that you do if you want to have longevity, so to say.

Nikhil Kamath 1:40:52 There's been no studies on this? I would imagine that it's been established for so much longer, that there would've been all these health studies and-

Adithya Kidambi 1:40:57 Studies, there are studies, but not very conclusive to say if it's good for you or bad for you, right? And, uh-

Nikhil Kamath 1:41:06 The industry is not big enough-

Adithya Kidambi 1:41:08 Yeah

Nikhil Kamath 1:41:08 ... for people to create studies. Like they say, coffee is good for you because so much money is made.

Matt Chitharanjan 1:41:13 Four to five cups is, uh-

Nikhil Kamath 1:41:14 Yeah

Matt Chitharanjan 1:41:14 ... the recommended-

Nikhil Kamath 1:41:15 Yeah?

Matt Chitharanjan 1:41:16 - to get the maximum health benefits.

Adithya Kidambi 1:41:17 For kombucha?

Nikhil Kamath 1:41:18 For coffee?

Matt Chitharanjan 1:41:19 Coffee.

Nikhil Kamath 1:41:19 Yeah?

Matt Chitharanjan 1:41:20 Yeah.

Nikhil Kamath 1:41:20 Four to five black coffee.

Matt Chitharanjan 1:41:21 You gotta, you gotta amp it up, man, Nikhil. [laughing]

Nikhil Kamath 1:41:23 Okay, can we-- Maybe we should have another one then. I've shot my quota for today. [chuckles] I read about

Nikhil Kamath 1:41:28 this interesting guy, okay, online. His name is GT Dave.

Adithya Kidambi 1:41:31 Yeah.

Nikhil Kamath 1:41:32 Apparently, he's the-

Adithya Kidambi 1:41:32 The biggest kombucha dude. Yeah

Nikhil Kamath 1:41:34 ... biggest kombucha dude in the world, and he's the first kombucha billionaire who started brewing in his house when he was fourteen, fifteen-

Adithya Kidambi 1:41:43 Yeah

Nikhil Kamath 1:41:43 ... and selling it, and he made this massive brand out of it.

Adithya Kidambi 1:41:47 The only billion-dollar kombucha brand.

Nikhil Kamath 1:41:49 Yeah.

Matt Chitharanjan 1:41:49 What's the brand? What is it called?

Adithya Kidambi 1:41:50 GT. GT's.

Nikhil Kamath 1:41:52 That's his name also, right? GT Dave.

Adithya Kidambi 1:41:53 It's GT Dave, yeah. It's, yeah. So GT's Kombucha is the largest. They make-- They, they started off with kombucha, did many other things, but kombucha is what they sell the most, and, uh, very different from the kombucha that we make here.

Nikhil Kamath 1:42:06 Yeah?

Adithya Kidambi 1:42:07 In 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.

Nikhil Kamath 1:42:15 Yeah.

Adithya Kidambi 1:42:15 The kombucha that you get in the US has a different palate. It's super sour. If you've had those kombucha-

Nikhil Kamath 1:42:19 Yeah

Adithya Kidambi 1:42:19 ... it's a lot more sour. It's not-

Nikhil Kamath 1:42:20 But it feels like it's doing more in your body than the kombucha you get here.

Adithya Kidambi 1:42:23 Uh, 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 s- that vinegar tasting, doesn't fly well, because we used to make... When we used to make kombucha earlier in the day, when we just started, that was the way to make kombucha, right? There was no tech involved, there were no machines, there was none of, there was none of, none of that. So the kombucha used to come out that way.

Nikhil Kamath 1:42:48 Mm.

Adithya Kidambi 1:42:48 Takes were very, very low.

Nikhil Kamath 1:42:49 Yeah?

Adithya Kidambi 1:42:50 Yeah. And then we slowly started, we slowly started focusing, and we were, we were doing tea-based kombucha, right? We were doing, we were... That's what I want to say. We were showcasing the teas around us, like, 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. Uh, things really changed for us when we made cola. Things [chuckles] really changed for us when we made ginger and blueberry-

Nikhil Kamath 1:43:12 Mm

Adithya Kidambi 1:43:12 ... and things a little more funky and mossy and things like that. It's because that's, that's what people want also.

Nikhil Kamath 1:43:19 Mm.

Matt Chitharanjan 1:43:20 But I think it's a journey, right? Like-

Adithya Kidambi 1:43:22 It is

Matt Chitharanjan 1:43:22 ... you introduce people-

Nikhil Kamath 1:43:23 It's been a-

Matt Chitharanjan 1:43:23 ... to a certain level of that funk, and then as their palate shifts-

Adithya Kidambi 1:43:26 It will build

Matt Chitharanjan 1:43:27 You build

Adithya Kidambi 1:43:28 ... So that's the-

Matt Chitharanjan 1:43:29 Mm

Adithya Kidambi 1:43:29 ... that's the thing for us, right? Es- essentially, right now, because the category isn't there, it's about building that category.

Matt Chitharanjan 1:43:34 Yeah.

Adithya Kidambi 1:43:34 And then doing many, many pieces in this. So you'll have like a... Mostly, you'll have like a probiotic shot that will 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, uh, that chance to be built as a category, which is what we are trying to do now. Um-... which is why premiumization in that segment doesn't, like, it does- it do- it doesn't work for that because that segment hasn't been built at all.

Adithya Kidambi 1:44:01 And-

Nikhil Kamath 1:44:01 How big is it?

Adithya Kidambi 1:44:02 It's very small. It's about two hundred crores right now.

Nikhil Kamath 1:44:05 In India?

Adithya Kidambi 1:44:05 In India.

Nikhil Kamath 1:44:06 Two hundred crores, the whole market?

Adithya Kidambi 1:44:07 Yeah. Yeah.

Nikhil Kamath 1:44:08 Is that all?

Adithya Kidambi 1:44:09 Yeah, it's-- that's all.

Nikhil Kamath 1:44:10 Who has market share? How much do you guys have?

Adithya Kidambi 1:44:13 Uh, [sighs] we have a, we have a small share. I only have data from quick commerce, otherwise it's very hard to pick. On one of the quick commerce platforms, we have about thirty-two percent of the market share. Yeah. And, um-

Nikhil Kamath 1:44:24 And in the US, it's about four, five billion dollars.

Adithya Kidambi 1:44:26 It's four, five billion dollars, yeah. And-

Nikhil Kamath 1:44:28 That sounds like potential, right?

Adithya Kidambi 1:44:30 Yeah, there is a lot of potential. It's growing. I mean, we've been growing like crazy. It was, it was... I think it was about thirty crores in twenty twenty-one. So it's been growing. It's been growing really well. It's almost tripled, uh, so to say. And it's only growing more because on, on the, on the backside, just me being one of the small brands in a very crowded kombucha space, we've been growing five X almost every year.

Nikhil Kamath 1:44:54 So this sounds like a killer opportunity. Went from thirty crores to two hundred crores in four, five years?

Adithya Kidambi 1:44:58 Yeah, and it's going to-- and it's definitely going to go to a billion dollars by twenty thirty-two, is what they say.

Nikhil Kamath 1:45:04 In India?

Adithya Kidambi 1:45:04 In India.

Nikhil Kamath 1:45:05 Mm.

Adithya Kidambi 1:45:06 Uh-

Nikhil Kamath 1:45:06 So-

Adithya Kidambi 1:45:06 And also, it's... I think, like I said, right, consumption pattern for kombucha in India is very different. People are not drinking it for, to say, "Oh, oh, my God, I'm gonna get, like, 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 gonna replace it." And I, and we achieve more success by making it more accessible. That's essentially how this category is going to be.

Nikhil Kamath 1:45:30 Accessible, you mean cheaper?

Adithya Kidambi 1:45:31 Cheaper.

Nikhil Kamath 1:45:32 Distribution?

Adithya Kidambi 1:45:33 Distribution, both.

Nikhil Kamath 1:45:34 How much-

Adithya Kidambi 1:45:34 Cheaper in distribution-

Nikhil Kamath 1:45:35 How much does your kombucha cost?

Adithya Kidambi 1:45:35 ... and education last. My kombucha costs hundred and thirty rupees.

Nikhil Kamath 1:45:39 Versus the market at two hundred.

Adithya Kidambi 1:45:41 At about... Yeah, it-- different players are different. There is a kombucha much cheaper than I, I am. There's a kombucha at ninety rupees. Uh, there is a brand from Goa that does it at ninety bucks. There is a brand from Delhi that does it at ninety-nine. I'm at a hundred and, hundred and thirty rupees. Uh-

Nikhil Kamath 1:45:54 How much does it cost you to make? 'Cause it sounds like you're just fermenting tea, right?

Adithya Kidambi 1:45:58 Uh, no, it's-

Nikhil Kamath 1:45:59 Is there any raw ingredient which is expensive?

Adithya Kidambi 1:46:01 No, not at all. Not at all. It's just mostly quality of tea. We end up using fairly high, higher quality tea than, uh... I don't know. I wouldn't say higher quality. I wouldn't, I wouldn't draw a comparison, but we use a very high quality tea. I think, uh, 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, like, 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 a house in Delhi can order my kombucha in ten minutes, that was never-

Aneesh Bhasin 1:47:04 Yeah

Adithya Kidambi 1:47:04 ... 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.

Nikhil Kamath 1:47:17 Is that the biggest channel for you now, quick commerce?

Adithya Kidambi 1:47:18 That's the largest channel for us, yeah.

Nikhil Kamath 1:47:20 Mm.

Adithya Kidambi 1:47:20 It's, it's about sixty percent of our business.

Nikhil Kamath 1:47:23 And they take twenty, thirty percent?

Adithya Kidambi 1:47:25 Yeah, they take roughly about thirty percent.

Nikhil Kamath 1:47:26 What kind of gross margins do you work at?

Adithya Kidambi 1:47:28 We operate at about seventy to seventy-seven percent at this price point. Very high. Uh, but I mean, it's-

Nikhil Kamath 1:47:37 Yeah

Adithya Kidambi 1:47:37 ... we will hopefully launch better beverages, slightly more cheaper, slightly more accessible, because at a hundred and third, between, uh, between hundred and hundred and thirty rupees, there isn't really a business to be made. But sub-deck, 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 a hundred and thirty to ninety-nine. Our, uh, business went up six X instantly, within three months. It was, it was crazy. And that was, and that was the take home from there. And, you know, and it, it isn't... And I think there is a much larger business to be built if there isn't kombucha, so to say, but a better for you soda. I think 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, uh, good for you, has a little bit of protein, has a little bit of fiber, is super low in sugar, and damn delicious-

Nikhil Kamath 1:48:31 What is a functional beverage?

Adithya Kidambi 1:48:34 Functional beverage is what it's doing to your body.

Nikhil Kamath 1:48:36 You got some, right?

Adithya Kidambi 1:48:37 I got some.

Nikhil Kamath 1:48:38 You guys wanna try?

Aneesh Bhasin 1:48:39 Mm-hmm.

Adithya Kidambi 1:48:40 Yeah.

Nikhil Kamath 1:48:41 Uh...

Adithya Kidambi 1:48:42 I got some tonic waters and some kombucha.

Nikhil Kamath 1:48:45 So you guys are competition also?

Aneesh Bhasin 1:48:47 Yeah.

Adithya Kidambi 1:48:47 As long, as long as someone's not drinking Schweppes, [laughing] we're all good.

Aneesh Bhasin 1:48:52 [laughing] That is it.

Adithya Kidambi 1:48:53 Yeah.

Aneesh Bhasin 1:48:53 We're all-- We have, we have one common enemy.

Nikhil Kamath 1:48:55 Yeah.

Aneesh Bhasin 1:48:55 That's how I see it.

Nikhil Kamath 1:48:56 I'm gonna get into why, again, I should build... But this sounds exciting.

Adithya Kidambi 1:49:00 Yeah.

Nikhil Kamath 1:49:00 If I only have two crores and I'm deciding between coffee and you-

Adithya Kidambi 1:49:03 We started, we started this-

Nikhil Kamath 1:49:04 You're something more tempting.

Adithya Kidambi 1:49:05 We started this business with six lakhs, three lakhs and three lakhs. That's how much money we put into this business. Uh, I wouldn't say we made a lot of money, but I think we've built a business worth putting money into, worth people, uh, worth enough for people to consider putting money into at this point.

Aneesh Bhasin 1:49:24 How do you, how do you explain the word to people when they first encounter it?

Adithya Kidambi 1:49:28 And that's, so that's the problem, right?

Aneesh Bhasin 1:49:29 Like, the lower your price point goes-

Adithya Kidambi 1:49:31 Yeah

Aneesh Bhasin 1:49:32 ... the more you're accessing people who have no clue what this is.

Adithya Kidambi 1:49:35 Kombucha in, in, in a... So that, I think, I think that's been our learning, right? From, from, from then to now, right? Education has been sort of our biggest letdown, and education requires a lot of capital-

Aneesh Bhasin 1:49:48 Yeah

Adithya Kidambi 1:49:48 ... and a lot of time and a lot of expertise in being able to communicate that, none of which, none of which we had. And-

Nikhil Kamath 1:49:53 But you probably have the inflection point the US did at some point, right? Naturally.

Adithya Kidambi 1:49:57 Yes, naturally. No, but that's what's helping-

Nikhil Kamath 1:49:59 We seem to mimic the West-

Adithya Kidambi 1:50:00 Yeah... No, but that's what's helping us right now. That's what-- That, that is the only thing that's helping us right now, right?

Nikhil Kamath 1:50:05 Mm.

Adithya Kidambi 1:50:05 That, that culture saying kombucha-

Nikhil Kamath 1:50:07 Yeah.

Adithya Kidambi 1:50:07 -Oh, my God, okay, it's such a billion-dollar industry. Okay, people are looking into it.

Nikhil Kamath 1:50:11 How about export for you guys?

Adithya Kidambi 1:50:12 Huh?

Nikhil Kamath 1:50:13 How about export? We've talked about it.

Adithya Kidambi 1:50:14 We, we have. I think, I think, uh, Middle East is seeming really juicy right now.

Nikhil Kamath 1:50:19 Yeah.

Adithya Kidambi 1:50:20 But we're working around, uh, legislations over there, and, you know, uh, it's, it's a lot of things and all certifications-

Aneesh Bhasin 1:50:26 But you know what? In our category, logistics is expensive.

Adithya Kidambi 1:50:30 Yeah.

Aneesh Bhasin 1:50:30 So exports-

Adithya Kidambi 1:50:31 Making the product-

Aneesh Bhasin 1:50:31 -from that standpoint

Adithya Kidambi 1:50:32 ... really, really, really cheap. It's not, it's not-- Like I, like I said, anybody with a bucket can make kombucha now. Uh, can you do it to be scalable? Maybe not, but you can definitely, definitely start, and then you can learn along the way.

Nikhil Kamath 1:50:43 So is there a use case where I make a alcoholic beverage like beer, which has five percent alcohol-

Adithya Kidambi 1:50:50 Yeah

Nikhil Kamath 1:50:50 ... but it's kombucha?

Adithya Kidambi 1:50:51 It's called, it's called hard kombucha.

Nikhil Kamath 1:50:52 Yeah.

Aneesh Bhasin 1:50:52 Hard kombucha, yeah.

Nikhil Kamath 1:50:53 Yeah.

Aneesh Bhasin 1:50:53 In the US.

Adithya Kidambi 1:50:53 So that's what it is.

Aneesh Bhasin 1:50:54 There's a hard everything. [chuckles]

Adithya Kidambi 1:50:56 That's, that's the next, that's the next phase I think kombucha will hit as in general. It'll be competition to your standard breeze or-

Nikhil Kamath 1:51:03 Or beer.

Adithya Kidambi 1:51:03 Et cetera, et cetera. Or yeah, or what did you say?

Nikhil Kamath 1:51:06 Beer.

Adithya Kidambi 1:51:06 Beer. Uh, beer, beer.

Nikhil Kamath 1:51:09 How big is that market? If the US market is five billion-

Adithya Kidambi 1:51:13 I th-- So they say that the hard kombucha market is almost as big as the regular kombucha market in the US right now.

Nikhil Kamath 1:51:20 Mm.

Adithya Kidambi 1:51:20 Same about four, five billion.

Nikhil Kamath 1:51:22 Mm.

Adithya Kidambi 1:51:22 Yeah, because it's, it's also trending, right? But we believe that hard kombucha in India... In India is, is we still have time. People need to understand what kombucha is first, let alone, let alone-- We've been trying to push the kombu 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 our, for us.

Nikhil Kamath 1:51:45 Do you think there's scope in India to build that, a beer competition? Do the health benefits of kombucha with point five percent alcohol-

Adithya Kidambi 1:51:53 See-

Nikhil Kamath 1:51:53 create five percent?

Adithya Kidambi 1:51:54 ... 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-

Nikhil Kamath 1:52:00 Does have to in there.

Adithya Kidambi 1:52:01 Sugar? Yes. Calories? Yes. But that's about it. I wouldn't-- I-- But if that's the health factor-

Nikhil Kamath 1:52:09 If somebody told me there's healthy alcohol, I would probably pick it.

Aneesh Bhasin 1:52:11 But, you know-

Adithya Kidambi 1:52:11 Low, low calorie, maybe.

Nikhil Kamath 1:52:12 Yeah.

Adithya Kidambi 1:52:13 Low calorie, yeah. I th- I think, I think there is. I think in maybe in the next two or three years, there is may- maybe a little bit of scope. We won't know until we've tried.

Aneesh Bhasin 1:52:22 So if you look at hard seltzers, right? [clears throat] US, it became so popular, all your White Claws of the world and all. India, it's not really worked.

Nikhil Kamath 1:52:31 What didn't work? Seltzers.

Aneesh Bhasin 1:52:32 A lot of hard seltzers-

Nikhil Kamath 1:52:33 Mm

Aneesh Bhasin 1:52:33 ... right? With that whole promise of low sugar-

Adithya Kidambi 1:52:36 Yeah

Aneesh Bhasin 1:52:36 ... low calories and all. Also, great product, though.

Adithya Kidambi 1:52:38 Mm.

Aneesh Bhasin 1:52:38 Great packaging. But my belief is that we are not ready for that yet. I hope we are at some point, because between Third Eye Distillery and Svami, now 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, breezes worked after ten 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, and the seltzers 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.

Adithya Kidambi 1:53:14 Strong beer, they want strong beer.

Aneesh Bhasin 1:53:16 And that, too, we're, we're a strong beer-drinking country, not even a light beer-drinking country.

Adithya Kidambi 1:53:20 Yeah. Also, consumption, right? Consumption, straight drinks sell more here than-

Aneesh Bhasin 1:53:24 And that's easy to do, right?

Adithya Kidambi 1:53:25 It's easy to do.

Aneesh Bhasin 1:53:25 Yeah.

Adithya Kidambi 1:53:25 And peop- and more people are drinking at home than in restaurants. That's also... That's another, that's another side to this.

Nikhil Kamath 1:53:32 Mm.

Adithya Kidambi 1:53:32 So I don't know, maybe-

Nikhil Kamath 1:53:34 But I feel like-

Adithya Kidambi 1:53:34 ... maybe in, like, small sects of population, it might do better, but not, not if you see India as a country overall.

Nikhil Kamath 1:53:40 In the same market that they live in, craft coffee market, it might do well.

Adithya Kidambi 1:53:45 Hard? Something hard.

Nikhil Kamath 1:53:47 Hard.

Aneesh Bhasin 1:53:47 I think things like hard booch, I think... I mean, I'm, I'm very curious, but-

Adithya Kidambi 1:53:50 But selling it would be such a challenge, right?

Nikhil Kamath 1:53:52 I don't think we are anywhere close to-

Adithya Kidambi 1:53:54 That's the problem. You'll need a wine license-

Nikhil Kamath 1:53:55 Yeah

Adithya Kidambi 1:53:55 ... at least, and that's if you get lucky enough to classify it under that.

Aneesh Bhasin 1:53:59 I think it's a question of not understanding what the hell the product is, Aneesh. Like, if you ask me, I, I agree with Nikhil's thesis. Like, if you tell me I can drink booze, I can get at least five, six, seven percent, it's low in calories, it tastes decent-

Nikhil Kamath 1:54:13 It has good bacteria.

Aneesh Bhasin 1:54:14 Good bac- [chuckles] maybe good bacteria, and it's still sweet enough for me to enjoy, I-

Adithya Kidambi 1:54:21 Do you drink seltzers?

Aneesh Bhasin 1:54:23 Yeah. I don't actively, proactively buy it.

Adithya Kidambi 1:54:26 Yeah. [chuckles]

Aneesh Bhasin 1:54:26 But if it's there as an option, I would.

Nikhil Kamath 1:54:28 But seltzers don't have the bacteria.

Adithya Kidambi 1:54:30 Hard seltzers.

Aneesh Bhasin 1:54:30 The bacteria, yeah.

Adithya Kidambi 1:54:31 It's just that, to me, in India-

Aneesh Bhasin 1:54:33 Here's, here's another-

Adithya Kidambi 1:54:34 alcohol-

Aneesh Bhasin 1:54:34 Here's another... Sorry, sorry to cut you off. Here's another tidbit about bacteria, right? Uh, 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 biome is so strong, it's killing ninety-nine percent of it anyway. That one percent that goes, yes, might be beneficial to you. If you want to drink good, good bacteria, uh, 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 not-- failing to understand is, if you want good gut health, right? That's why people keep talking about bacteria, right? You need to eat more fiber, because fiber is food for the bacteria. If your bacteria in your gut is really healthy, you-- there is no requirement for you to put in more new bacteria in it, and that's not how it works.

Nikhil Kamath 1:55:21 So you're saying if I eat a cucumber, it's better for me than having a bottled kombucha?

Aneesh Bhasin 1:55:28 But your cucumber is not going to give you the same feeling as a Coca-Cola.

Nikhil Kamath 1:55:31 All right, it's not going to give me the same feeling, but it's better for my gut. [laughing]

Adithya Kidambi 1:55:35 Absolutely.

Nikhil Kamath 1:55:36 Absolutely.

Adithya Kidambi 1:55:36 Yeah, eating, eating-

Aneesh Bhasin 1:55:37 Better than anything, right? [chuckles]

Adithya Kidambi 1:55:39 Eating, eating, eating anything in its rawest, most truest forms is much better for your body than anything else.

Nikhil Kamath 1:55:44 Mm.

Adithya Kidambi 1:55:45 Fundamentally, yes, it is.

Nikhil Kamath 1:55:47 But, you know, I might be a small-

Adithya Kidambi 1:55:50 Yeah

Nikhil Kamath 1:55:50 ... proportion of your target audience, but I would probably pick a kombucha with five percent alcohol over a beer. 'Cause everything in life is placebo beyond a point.

Adithya Kidambi 1:56:00 We have a very funny story, okay?

Nikhil Kamath 1:56:01 Mm.

Adithya Kidambi 1:56:01 So when we just opened in, uh, we opened in twenty nineteen.... Uh, had this big plan, take over the world. Pandemic hit, everything, everything fell flat on its face.

Nikhil Kamath 1:56:13 Mm.

Adithya Kidambi 1:56:14 The only, 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 bitter-ish, dry kombucha, just for these guys who were ordering because they missed a beer.

Aneesh Bhasin 1:56:35 You've done any hoppy ones?

Adithya Kidambi 1:56:36 Huh?

Aneesh Bhasin 1:56:36 Hoppy?

Adithya Kidambi 1:56:36 Yeah, we have a hoppy one, yeah. We have, we have one with Citra hops in it.

Aneesh Bhasin 1:56:40 Oh, nice!

Adithya Kidambi 1:56:41 Yeah.

Aneesh Bhasin 1:56:41 You have that here?

Adithya Kidambi 1:56:42 No.

Nikhil Kamath 1:56:43 And did you control the quantum of alcohol in it at that point?

Adithya Kidambi 1:56:47 Absolutely. Absolutely. It'll only taste like beer, but it doesn't, it doesn't get you high. It doesn't get you high at all.

Rahul Reddy 1:56:52 Yeah. Do you think if we did a kombucha together-

Adithya Kidambi 1:56:56 Uh-huh.

Rahul Reddy 1:56:56 -and we tried to do, like, a unique flavor that corresponded to, like, cacao or coffee-

Adithya Kidambi 1:57:02 Mm-hmm.

Rahul Reddy 1:57:03 -premiumized it, and then put it into that US market as an export product?

Adithya Kidambi 1:57:06 As hard?

Rahul Reddy 1:57:07 No.

Adithya Kidambi 1:57:08 Just as this?

Rahul Reddy 1:57:08 Yeah.

Adithya Kidambi 1:57:09 It does really well.

Rahul Reddy 1:57:10 You think?

Adithya Kidambi 1:57:10 Because it has a story to it, right? Yeah, absolutely.

Nikhil Kamath 1:57:13 Like an Indian story of-

Rahul Reddy 1:57:14 Like I was just talking to him-

Adithya Kidambi 1:57:15 Indian story

Rahul Reddy 1:57:15 ... like, if we did, like, an Indian-

Nikhil Kamath 1:57:17 Cascara kombucha.

Rahul Reddy 1:57:17 Cascara kombucha, cacao kombucha, could we like-

Nikhil Kamath 1:57:20 Safflower kombucha.

Rahul Reddy 1:57:20 Yeah, could we, like, can that and export that?

Adithya Kidambi 1:57:22 We've actually done a... We've done a couple of those for some people. It turns out really, really good.

Nikhil Kamath 1:57:27 Yeah?

Adithya Kidambi 1:57:27 It's, cascara, I think, is, like, so underrated, right?

Rahul Reddy 1:57:30 Yeah.

Adithya Kidambi 1:57:30 I don't know why more coffee shops are not focusing on selling cascara. It's just, it's just amazing.

Rahul Reddy 1:57:34 Hard supply chain.

Nikhil Kamath 1:57:35 Cascara is a-

Adithya Kidambi 1:57:35 We have to make.

Rahul Reddy 1:57:36 Hard supply chain.

Nikhil Kamath 1:57:37 What is cascara?

Aneesh Bhasin 1:57:38 It's the fruit of the-

Nikhil Kamath 1:57:39 I've had it, but what is it?

Aneesh Bhasin 1:57:41 The... So coffee is a, a cherry, so you take the skin of that, which normally gets, uh, treated as a by-product. 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, or like a tea.

Nikhil Kamath 1:57:56 What happens to it normally?

Rahul Reddy 1:57:58 Discard.

Aneesh Bhasin 1:57:59 Yeah, I guess-

Nikhil Kamath 1:58:00 They use it as fertilizer on the-

Rahul Reddy 1:58:01 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.

Nikhil Kamath 1:58:07 Right.

Rahul Reddy 1:58:07 Pulp typically will be removed, or this process is where it stays on the seed, but the skin itself, when it dries up-

Aneesh Bhasin 1:58:15 Yeah

Rahul Reddy 1:58:15 ... it's like this beautiful, like, rooibos tea.

Aneesh Bhasin 1:58:18 Yeah.

Rahul Reddy 1:58:19 You know? That's the way I describe it.

Nikhil Kamath 1:58:21 So we're going down the same path where I'm a twenty-five-year-old girl-

Adithya Kidambi 1:58:26 Yeah

Nikhil Kamath 1:58:26 ... but want to open a kombucha business.

Adithya Kidambi 1:58:28 Yeah.

Nikhil Kamath 1:58:29 And you're going to eventually tell me why I should do it or not do it.

Adithya Kidambi 1:58:32 You should totally do it, because there needs to be... I, I feel like-- So I define craft with three words, okay: authenticity, innovation, and quality. The more, the better. And, uh, 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.

Nikhil Kamath 1:58:59 Mm.

Adithya Kidambi 1:58:59 And all of them-- And I've been, I've been, I've been going to Thailand a bunch of times over the last five years, and I see this brand repeated. It's not like I, 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 country.

Nikhil Kamath 1:59:21 Do you think it's because we have less discretionary spend per capita, that there are lesser options?

Adithya Kidambi 1:59:28 Maybe. Which is, which is, which is why you come back to accessibility, right?

Nikhil Kamath 1:59:31 Mm.

Adithya Kidambi 1:59:31 With time, you have to make it cheaper for people to be able to, uh, make it a part of their daily lifestyle.

Nikhil Kamath 1:59:38 Mm.

Adithya Kidambi 1:59:38 And that's what Coke and Pepsi have done really, really well, right? They've played with the food angle. They made sure you're- it's super accessible. They made sure their distributing, distribution is great. They made sure that even after paying forty to forty percent in tax, it's twenty bucks, twenty-five bucks-

Nikhil Kamath 1:59:54 What is this forty percent in tax?

Aneesh Bhasin 1:59:55 I really want to talk about that bit.

Nikhil Kamath 1:59:56 Yeah, yeah, tell us.

Aneesh Bhasin 1:59:57 Because out of all the enthusiasm in this space-

Adithya Kidambi 1:59:59 No, go for it. You, you should, you should, you should say this. [clears throat]

Aneesh Bhasin 2:00:01 One caution for anyone to get into beverages is to understand taxation in India. We're taxed at forty percent, which is ridiculous. I think we're one- we're either the only country or one of the two countries that has such a rule against carbonated and sugar beverages. So if I have sugar and carbonation, I'm at forty percent. If I remove the carbonation, I'm back at twenty-eight or eighteen, depending on the product.

Adithya Kidambi 2:00:26 Yeah.

Aneesh Bhasin 2:00:26 Or if I remove, uh, sugar, then I'm at eighteen percent. So it's a very bizarre rule because if I take a Tetra Pak of juice, that will be very harmful in terms of sugar and, you know, a lot of how our juice, packaged juice and all are. That is considered as a healthier product.

Nikhil Kamath 2:00:45 And what kind of taxation? This is on the sale value?

Aneesh Bhasin 2:00:48 Yeah, [clears throat] on, on-

Adithya Kidambi 2:00:49 On the MRP

Aneesh Bhasin 2:00:49 ... MRP, right?

Adithya Kidambi 2:00:50 Your MRP includes the tax.

Aneesh Bhasin 2:00:51 So forty percent is a very large amount. When we were launching Svami, that time it was eighteen percent sales tax. We assumed that everyone, your Schweppes, Pepsi, Coke, will increase their prices. Most of them didn't, they absorbed it. For us, it was a big challenge, right?

Nikhil Kamath 2:01:08 But you were at eighteen percent, it went to forty.

Aneesh Bhasin 2:01:11 When we were launching, that time it was eighteen.

Nikhil Kamath 2:01:13 Yeah.

Aneesh Bhasin 2:01:13 By the time we launched, it be- it had already become forty percent, so it changes your cost card drastically, right?

Nikhil Kamath 2:01:18 'Cause the government applied a tax on Coke and Pepsi, but they just-

Aneesh Bhasin 2:01:21 Any carbonated beverage-

Adithya Kidambi 2:01:22 They basically put a blanket on it

Aneesh Bhasin 2:01:23 ... which is sweet. And [clears throat] it's bizarre because, again, you can have a Roohafza, or you can have a packed juice that can have far more sugar, can do far more damage to you, but that's at a lower tax.

Nikhil Kamath 2:01:36 But what happens if you remove the sugar from your tonic, then tonic doesn't sell. What happens if you use a stevia or-

Aneesh Bhasin 2:01:44 We are... Doesn't matter.

Adithya Kidambi 2:01:44 Doesn't matter what's in it-

Aneesh Bhasin 2:01:46 Doesn't matter

Adithya Kidambi 2:01:46 ... it could be anything.

Aneesh Bhasin 2:01:47 Could be anything.

Nikhil Kamath 2:01:47 Oh.

Adithya Kidambi 2:01:47 It could be even date syrup.

Rahul Reddy 2:01:48 Yeah, it could be anything.

Aneesh Bhasin 2:01:49 Doesn't matter.

Adithya Kidambi 2:01:50 Yeah.

Aneesh Bhasin 2:01:50 If it, if it tastes sweet, it is forty percent.

Adithya Kidambi 2:01:52 It's forty percent.

Aneesh Bhasin 2:01:53 Which is just-

Rahul Reddy 2:01:54 It's a blanket.

Nikhil Kamath 2:01:54 So what you are saying is you should tax it by virtue of the percentage of sweetness in the drink?

Aneesh Bhasin 2:02:00 Yeah, either you have slabs, right?

Nikhil Kamath 2:02:02 Mm.

Aneesh Bhasin 2:02:02 There has to be some method to this.

Adithya Kidambi 2:02:04 So this has been done before, and this is working really well. UK has a sugar tax.

Rahul Reddy 2:02:08 Yeah.

Nikhil Kamath 2:02:08 Mm.

Adithya Kidambi 2:02:08 Now, when they say sugar tax, it's not that-... So they have, they have three slabs, okay? Uh, beverage under five percent, five, five grams of sugar. Beverage between, I think five grams, correct me if I'm wrong, Svami, beverage between five grams and seven point nine grams of sugar, and beverages with more than eight grams of sugar. Now, they tax these beverages per liter sold, right? Now, for a, for a beverage between f- uh, five grams and seven point nine grams, I think they charge eighteen pennies or pence to the, to a liter.

Nikhil Kamath 2:02:41 Mm.

Adithya Kidambi 2:02:42 And anything after that, I think they do twenty-two or twenty-five, if I'm not wrong.

Nikhil Kamath 2:02:45 So I get it, higher tax-

Adithya Kidambi 2:02:47 Yeah.

Nikhil Kamath 2:02:47 More sugar-

Adithya Kidambi 2:02:47 Higher tax, more sugar, higher tax.

Aneesh Bhasin 2:02:48 And, and the other thing is people have circumvented this sugar thing also. So for a, for the longest time, you would use apple juice as a, as sugar and not refined sugar-

Nikhil Kamath 2:02:57 Or date syrup.

Aneesh Bhasin 2:02:58 -and circumvent the thing. So now the government made it a blanket thing that if your product tastes sweet, we don't care what-

Adithya Kidambi 2:03:05 Yeah

Aneesh Bhasin 2:03:05 ... sugar,

Nikhil Kamath 2:03:06 Mm.

Aneesh Bhasin 2:03:07 apple juice, aspartame, whatever you're using, it's forty percent.

Adithya Kidambi 2:03:11 Sweet means tax.

Nikhil Kamath 2:03:13 Should it be-

Adithya Kidambi 2:03:13 And, and-

Nikhil Kamath 2:03:14 -by virtue of how much sugar or how many calories?

Adithya Kidambi 2:03:17 It should be sugar.

Aneesh Bhasin 2:03:18 To me-

Adithya Kidambi 2:03:19 It should be sugar

Aneesh Bhasin 2:03:19 ... that can be circumvented, like I'm saying, right? So I don't think it should su- Uh, to me, calories is a much more defining factor here than sugar.

Adithya Kidambi 2:03:28 So here's the... Here's, here's, here's, here's my two cents on this, right? Uh, there was a time when Coke and Pepsi were doing really, really well. It was like the world-- It was the time of the World War-

Nikhil Kamath 2:03:36 Uh.

Adithya Kidambi 2:03:36 -where sh- where people needed sugar, those empty calories, so to speak.

Nikhil Kamath 2:03:41 Right.

Adithya Kidambi 2:03:41 They needed sugar. They were-- There was a lot of drought, et cetera, et cetera, why- which is why this, this kind of worked, okay?

Nikhil Kamath 2:03:48 Mm.

Adithya Kidambi 2:03:48 In, uh, today's world, we don't need sugar. What we, what this country is deficit of now is protein. So I-- 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.

Aneesh Bhasin 2:04:00 But sugar can be circumvented. Now I'll use date syrup. Sure. I won't say sugar.

Adithya Kidambi 2:04:03 Sweet.

Aneesh Bhasin 2:04:03 Uh, there you go.

Adithya Kidambi 2:04:05 Not, not sugar. Anybody, any, any, any sweet-

Nikhil Kamath 2:04:07 Any sort of sweet at some point.

Aneesh Bhasin 2:04:08 Yeah. So I'll tell you what this does. This is just hampering innovation in the country.

Nikhil Kamath 2:04:13 Mm.

Aneesh Bhasin 2:04:13 Because now, if I want to launch a product, I need to work backwards from MRP, right? I want to launch a product today that I want to scale. So MRP becomes a very defining factor.

Nikhil Kamath 2:04:25 Mm.

Aneesh Bhasin 2:04:26 Now I need to work backwards because forty percent of that is going into taxation. It's a very big component, and then until that changes, it's gonna hamper a lot of younger people coming into this space, unfortunately.

Nikhil Kamath 2:04:39 Mm.

Aneesh Bhasin 2:04:40 But India is ripe for people to get into this space because, again, who are your biggest players? Coke, 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.

Nikhil Kamath 2:04:55 But, but do you feel like-- So it's two hundred crore market. To me, it seems from the outside there's so many kombucha brands.

Adithya Kidambi 2:05:02 Yeah.

Nikhil Kamath 2:05:02 So are new entrants stealing market share, or are they expanding the market?

Adithya Kidambi 2:05:06 So it's very, it's very fragmented, right? There'll, there'll be a new player that comes into the market. He'll know three or four restaurants that he'll want to sell to.

Nikhil Kamath 2:05:12 Mm.

Adithya Kidambi 2:05:13 It's, uh, it's, you know, it's, it's like a, it's like a peer-to-peer thing, right? You know him, he'll get his kombucha there, [mumbling] will 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.

Nikhil Kamath 2:05:30 Right.

Adithya Kidambi 2:05:31 Uh, 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'll, it, it, it will take that time, and it will, it will come to one point where it becomes an-- just another beverage for you to consume. But, yeah.

Nikhil Kamath 2:05:46 So if I want

Nikhil Kamath 2:05:47 to start a kombucha brand-

Adithya Kidambi 2:05:48 Mm-hmm.

Nikhil Kamath 2:05:48 -how much money do I need?

Adithya Kidambi 2:05:51 I started with six lakhs, so you can start with six lakhs. You have to hustle your way through.

Nikhil Kamath 2:05:54 Can you articulate the process for me?

Adithya Kidambi 2:05:55 Okay. The first thing that we needed to do was to understand-

Nikhil Kamath 2:05:58 I want to compete with you.

Adithya Kidambi 2:06:00 Okay. The first thing that we needed to understand was regulations and legislations, like you said, taxations and regulations. Regulation, most important, keep the alcohol below zero point five percent. You have to do that. Understand taxation of your product, depending on how you're manufacturing this product. If you, if you've got this right, you can create this brand.

Nikhil Kamath 2:06:21 Mm.

Adithya Kidambi 2:06:21 Next, obviously, is voice, which essentially is: what is the problem that is- 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, which still isn't available.

Nikhil Kamath 2:06:33 Mm.

Adithya Kidambi 2:06:34 That's the problem that we were starting with.

Aneesh Bhasin 2:06:35 Very less health benefits.

Adithya Kidambi 2:06:37 Yeah.

Aneesh Bhasin 2:06:37 Maybe there is a-- maybe there is room for a new entrant to come in to push-

Nikhil Kamath 2:06:42 Mm

Aneesh Bhasin 2:06:42 ... health as a more objective-

Nikhil Kamath 2:06:44 Mm

Aneesh Bhasin 2:06:44 ... sort of play to do kombucha.

Nikhil Kamath 2:06:47 Mm.

Aneesh Bhasin 2:06:47 We had a much larger vision of building beverages-

Nikhil Kamath 2:06:50 Mm

Aneesh Bhasin 2:06:51 ... uh, which is why we, we, we, we kept talking about sodas and how we are the replacement. We are the next-- We are the new kid on the block, and we're the next-gen soda. Uh, but 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.

Nikhil Kamath 2:07:09 Mm.

Aneesh Bhasin 2:07:10 But your taxations, rules, and everything will be vary according, based on how you produce this product.

Nikhil Kamath 2:07:14 What he's saying, he has a point.

Adithya Kidambi 2:07:15 Yeah.

Nikhil Kamath 2:07:15 Like, there is a new better chocolate brand called SuperYou.

Adithya Kidambi 2:07:21 Yeah.

Nikhil Kamath 2:07:21 Ranveer Singh, the actor's brand.

Aneesh Bhasin 2:07:23 I like SuperYou.

Nikhil Kamath 2:07:24 Yeah, we're a partner with him. Uh, if anybody came in and tried, "Here's a protein bar with twenty grams of protein," which costs two hundred rupees in India, didn't really work. But him having come and said: "Here is a better KitKat," it costs sixty rupees, has eight, nine 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.

Aneesh Bhasin 2:07:54 Makes a lot of sense.

Nikhil Kamath 2:07:54 I love the cheese.

Aneesh Bhasin 2:07:56 Yeah.

Nikhil Kamath 2:07:57 They were slightly savory flavor.

Aneesh Bhasin 2:07:58 A great way to get protein in.

Nikhil Kamath 2:08:00 Yeah.

Aneesh Bhasin 2:08:01 Yeah.

Nikhil Kamath 2:08:01 So maybe the kombucha story is similar to that story.

Aneesh Bhasin 2:08:04 Yeah.

Nikhil Kamath 2:08:04 It's not healthy.

Aneesh Bhasin 2:08:05 Yeah.

Nikhil Kamath 2:08:05 Healthier-

Aneesh Bhasin 2:08:06 Yeah

Nikhil Kamath 2:08:06 ... than what you're having right now.

Aneesh Bhasin 2:08:08 Yeah. I would say not only kombucha, right? You take the whole non-alcoholic category.

Nikhil Kamath 2:08:12 Uh.

Aneesh Bhasin 2:08:13 So, Svami, we started off as mixers. Very-- We saw a very clear white space in the market.... There was only Schweppes. Rahul and me, one of my co-founders, we were gin drinkers.

Adithya Kidambi 2:08:26 I don't know. [scoffs]

Aneesh Bhasin 2:08:28 The taste was getting killed-

Adithya Kidambi 2:08:29 Mm.

Aneesh Bhasin 2:08:29 -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 mixers is a part of it, can be so vibrant, and again, it's better for you, right?

Adithya Kidambi 2:08:47 Yeah.

Aneesh Bhasin 2:08:48 And there are several categories within. There's gut health, there's hydration-

Adithya Kidambi 2:08:52 Mm.

Aneesh Bhasin 2:08:52 There can be nutrition, protein.

Adithya Kidambi 2:08:54 Protein, yeah.

Aneesh Bhasin 2:08:55 And-

Adithya Kidambi 2:08:55 Multi... Yeah, multi-

Aneesh Bhasin 2:08:56 And there's so much to build-

Adithya Kidambi 2:08:58 Collagen. Collagen, which is like-- which, which as a beverage choice has not even entered the market yet-

Aneesh Bhasin 2:09:02 So we-

Adithya Kidambi 2:09:02 But we go to-

Aneesh Bhasin 2:09:03 I'm surprised you said this.

Adithya Kidambi 2:09:04 Yeah.

Aneesh Bhasin 2:09:04 So we, we constantly have a lot of R&D happening.

Adithya Kidambi 2:09:07 Yeah.

Aneesh Bhasin 2:09:08 And for some reason, I've been very thinking of beauty, actually.

Adithya Kidambi 2:09:12 Yeah, yeah.

Aneesh Bhasin 2:09:13 And we are experimenting with that category as well. So beverages doesn't just have to be mixers and a kombucha or... There's so much can be done in this space. That's a wide open space.

Nikhil Kamath 2:09:26 What's happening in places

Nikhil Kamath 2:09:27 like Japan, Korea, and all that? What are people drinking?

Aneesh Bhasin 2:09:29 Japan is so crazy that if you see how many products Suntory makes-

Adithya Kidambi 2:09:33 Yeah, it's insane.

Aneesh Bhasin 2:09:34 Right?

Adithya Kidambi 2:09:34 It's insane.

Aneesh Bhasin 2:09:34 And Suntory is setting up-

Adithya Kidambi 2:09:35 Coffee

Aneesh Bhasin 2:09:35 ... shop in India now. Uh, there's non-alcoholic-

Nikhil Kamath 2:09:38 Originally was-

Adithya Kidambi 2:09:40 Originally, yeah.

Aneesh Bhasin 2:09:40 Yeah, but they-

Adithya Kidambi 2:09:41 Originally

Aneesh Bhasin 2:09:41 ... I think they do about three to five billion in non-alcoholic beverages.

Adithya Kidambi 2:09:45 Yeah. Yeah, I think the largest manufacturer of RTD coffee.

Aneesh Bhasin 2:09:48 Yeah, yeah.

Adithya Kidambi 2:09:49 In Japan.

Aneesh Bhasin 2:09:49 You look at their range, everything from hydration to energy-

Adithya Kidambi 2:09:52 They have covered everything.

Aneesh Bhasin 2:09:53 Everything.

Adithya Kidambi 2:09:53 Everything.

Aneesh Bhasin 2:09:54 Same with Korea.

Nikhil Kamath 2:09:55 Mm.

Aneesh Bhasin 2:09:55 There's so much innovation in beverages, so there is a lot of innovation to happen.

Nikhil Kamath 2:09:59 Mm.

Adithya Kidambi 2:09:59 When it comes to beauty, I think Thailand is, like, up there-

Aneesh Bhasin 2:10:02 Yeah

Adithya Kidambi 2:10:02 ... with vitamin, collagen, the number of supplements-

Aneesh Bhasin 2:10:04 Oh, I just got these collagen-

Adithya Kidambi 2:10:06 Yeah

Aneesh Bhasin 2:10:06 ... little tubes back.

Adithya Kidambi 2:10:07 Yeah.

Aneesh Bhasin 2:10:07 Like those-

Adithya Kidambi 2:10:07 The, the tetra packs

Aneesh Bhasin 2:10:08 ... yeah, sort of things.

Adithya Kidambi 2:10:10 Yeah.

Aneesh Bhasin 2:10:10 They're not bad at all.

Rahul Reddy 2:10:11 I would, I would

Rahul Reddy 2:10:12 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 ca-- kind of foreign as an unfamiliar category. We've all discussed that.

Nikhil Kamath 2:10:27 Mm.

Rahul Reddy 2:10:29 Primarily, I know you maybe have a couple of flavors that don't... 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?

Aneesh Bhasin 2:10:43 Yeah.

Rahul Reddy 2:10:43 Or like hops or any of these like, these, these more for... So then it becomes-- it begs the question: Is, is creating, like, Indic flavor profiles the answer-

Aneesh Bhasin 2:10:53 Hundred percent

Rahul Reddy 2:10:53 ... at the end?

Adithya Kidambi 2:10:54 Oh, yeah.

Rahul Reddy 2:10:54 Like, at the end.

Aneesh Bhasin 2:10:55 Most definitely. Most definitely.

Nikhil Kamath 2:10:56 So what are you thinking, flavors like?

Adithya Kidambi 2:10:57 That's why collagen works the most.

Rahul Reddy 2:10:58 So, I don't know, jaljeera kombucha.

Aneesh Bhasin 2:11:00 Yeah, hundred percent.

Adithya Kidambi 2:11:01 Oh, hundred percent.

Rahul Reddy 2:11:01 Right?

Aneesh Bhasin 2:11:02 Yeah.

Rahul Reddy 2:11:02 Like that's what I want Nikhil to make-

Aneesh Bhasin 2:11:03 A hundred percent

Rahul Reddy 2:11:03 ... jaljeera kombucha.

Aneesh Bhasin 2:11:04 Dude-

Adithya Kidambi 2:11:04 Yeah

Aneesh Bhasin 2:11:04 ... think of flavors that don't have-

Adithya Kidambi 2:11:06 Ethnic, ethnic-

Aneesh Bhasin 2:11:06 That don't need education

Adithya Kidambi 2:11:07 ... ethnic kombucha.

Nikhil Kamath 2:11:08 And sell it even abroad.

Adithya Kidambi 2:11:09 Yeah.

Nikhil Kamath 2:11:10 It's like why Radico is doing so well.

Rahul Reddy 2:11:11 Exactly.

Adithya Kidambi 2:11:12 So here's the, here's, here's the, here's the thing, right?

Nikhil Kamath 2:11:15 Mm.

Adithya Kidambi 2:11:16 The reason why we don't talk about-- why, why we don't play too much on the health card is because we want to end up building something like this, the next global Indian beverage.

Nikhil Kamath 2:11:25 Mm.

Adithya Kidambi 2:11:25 There is a wide space, there is nobody doing it. And-

Nikhil Kamath 2:11:29 What is the current global Indian beverage? Tea?

Adithya Kidambi 2:11:31 No, Thums Up.

Nikhil Kamath 2:11:33 Really?

Adithya Kidambi 2:11:33 I mean-

Aneesh Bhasin 2:11:34 Nothing. There is no Indian beverage.

Adithya Kidambi 2:11:35 There isn't one.

Aneesh Bhasin 2:11:35 There's nothing.

Adithya Kidambi 2:11:35 But Thums Up comes closest.

Nikhil Kamath 2:11:37 Okay, let's say we five Indians have to sit together and screw [censored] . [chuckles]

Adithya Kidambi 2:11:42 Yeah.

Nikhil Kamath 2:11:43 What do you think the answer is gonna be? Is it gonna be a kombucha? Is it gonna be like an Indian tonic? Is it gonna be coffee?

Adithya Kidambi 2:11:49 Ethnic, ethnic soda. Slightly functional, ethnic soda.

Nikhil Kamath 2:11:53 Like? I remember back in the day-

Adithya Kidambi 2:11:55 Like a Coca-Cola

Nikhil Kamath 2:11:55 ... when we were young, we used to have Bori soda.

Adithya Kidambi 2:11:57 Yeah.

Nikhil Kamath 2:11:58 Remember that?

Aneesh Bhasin 2:11:58 [chuckles] Yeah.

Rahul Reddy 2:11:59 [chuckles] Yeah.

Nikhil Kamath 2:11:59 Like, there used to be a ball, you push it down and drink it.

Rahul Reddy 2:12:01 Yeah, the Bori. Yeah, exactly.

Aneesh Bhasin 2:12:02 Because between-

Nikhil Kamath 2:12:02 Is there like a bottling lobby in India?

Aneesh Bhasin 2:12:05 Yeah, there is.

Adithya Kidambi 2:12:05 Hundred percent.

Aneesh Bhasin 2:12:06 There's a distribution lobby also.

Rahul Reddy 2:12:07 And a canning mafia.

Aneesh Bhasin 2:12:08 Yeah, I was just gonna come to that-

Nikhil Kamath 2:12:10 Yeah.

Aneesh Bhasin 2:12:10 ... and it's becoming worse now.

Rahul Reddy 2:12:11 It's crazy.

Nikhil Kamath 2:12:11 Yeah, let's go canning mafia-

Adithya Kidambi 2:12:13 [chuckles]

Nikhil Kamath 2:12:13 ... because if I'm starting a kombucha coffee tonic brand, I'll need to deal with them, right?

Aneesh Bhasin 2:12:18 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 the-- 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 NDA and all you might sign-

Nikhil Kamath 2:12:38 Mm

Aneesh Bhasin 2:12:38 ... your one recipe can go wherever, right?

Adithya Kidambi 2:12:41 [chuckles]

Aneesh Bhasin 2:12:41 You 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 it is-

Nikhil Kamath 2:12:53 Some listed large players-

Aneesh Bhasin 2:12:54 Yes

Nikhil Kamath 2:12:54 ... are doing very well.

Aneesh Bhasin 2:12:55 And-

Nikhil Kamath 2:12:56 And somebody told me it's a deal of relationship with local politicians-

Aneesh Bhasin 2:13:00 Yeah

Nikhil Kamath 2:13:00 ... who gets the bottling in that area.

Aneesh Bhasin 2:13:01 Yeah, yeah. And it is gonna only become tougher and tougher.

Adithya Kidambi 2:13:04 Yeah.

Aneesh Bhasin 2:13:05 So-

Nikhil Kamath 2:13:05 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.

Aneesh Bhasin 2:13:21 Yeah.

Nikhil Kamath 2:13:21 Why does the bottling industry work like that?

Aneesh Bhasin 2:13:24 Not only that, go, go to raw material. Now, with canning-

Nikhil Kamath 2:13:27 No, tell me first about bottling.

Aneesh Bhasin 2:13:29 So it's just money, right? Just so much money at stake.

Nikhil Kamath 2:13:33 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-

Aneesh Bhasin 2:13:46 No, that, that's not done now.

Adithya Kidambi 2:13:47 That's not coming back.

Nikhil Kamath 2:13:47 No?

Aneesh Bhasin 2:13:48 That is not coming back.

Adithya Kidambi 2:13:49 They're trying, but that's not gonna come back.

Aneesh Bhasin 2:13:50 So the biggest raw material will be your pi-- your glass bottle.

Nikhil Kamath 2:13:54 Mm.

Aneesh Bhasin 2:13:54 Actually, your can costs the same now.

Adithya Kidambi 2:13:55 That's the largest cost, yeah, almost.

Aneesh Bhasin 2:13:56 So for-- I can give you our economics. My bottle would be about eight, nine rupees. If I did a can, it'll cost the same. It'll only save me on-

Adithya Kidambi 2:14:04 Logistics

Aneesh Bhasin 2:14:04 ... freights.

Nikhil Kamath 2:14:05 Same for you, eight, nine rupees?

Adithya Kidambi 2:14:07 Same, yeah, same.

Aneesh Bhasin 2:14:08 And this also, you will beg, borrow for them to give you quantities-

Nikhil Kamath 2:14:12 Mm.

Aneesh Bhasin 2:14:13 ... smaller quantities, because they will otherwise not talk to you. Luckily, we're at a scale where that's now not a-

Nikhil Kamath 2:14:17 Who is they?

Aneesh Bhasin 2:14:19 A bottle manufacturer.

Nikhil Kamath 2:14:21 Who is the bottle manufacturer?

Adithya Kidambi 2:14:22 There are many.

Aneesh Bhasin 2:14:23 There are many. There are three, four big players.

Adithya Kidambi 2:14:25 Yeah.

Aneesh Bhasin 2:14:25 Uh, there's-

Nikhil Kamath 2:14:25 Who are the big ones?

Aneesh Bhasin 2:14:26 There's Piramal-

Adithya Kidambi 2:14:27 Piramal

Aneesh Bhasin 2:14:27 ... there's Sun that we use. There are a few.... yeah, in Hyderabad, uh-

Nikhil Kamath 2:14:31 So wait, you're telling me you will go to them and say, "I want a million bottles," they won't give you?

Rahul Reddy 2:14:36 No, they'll give you.

Aneesh Bhasin 2:14:37 Million, they'll give you.

Adithya Kidambi 2:14:38 The problem is getting a small quantity of it.

Nikhil Kamath 2:14:40 See, that's the thing, right?

Aneesh Bhasin 2:14:40 Distributed in this people, you can buy it.

Nikhil Kamath 2:14:41 Now, if you are a, if you are a, if you're a twenty-five-year-old starting this business-

Aneesh Bhasin 2:14:44 But I want a custom bottle

Nikhil Kamath 2:14:44 ... that becomes really hard, because-

Adithya Kidambi 2:14:46 Yeah

Nikhil Kamath 2:14:46 ... what are you gonna 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.

Aneesh Bhasin 2:14:51 But anyways, my advice would be, actually, this is a double-edged sword. Do you launch a product in a glass bottle or a can or an alternate packaging, right? A Tetra Pak or a pouch or something. So the reason-

Nikhil Kamath 2:15:01 Tetra Pak is good for the planet also.

Aneesh Bhasin 2:15:03 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-

Nikhil Kamath 2:15:15 Mm

Aneesh Bhasin 2:15:15 ... for us to, for us to crack. Canning, you can't say the same. Canning is super technical, hence is very hard. I'm sure he has some experience, and you have some experience doing production of coffee out of it.

Rahul Reddy 2:15:24 I don't see that much of a difference-

Aneesh Bhasin 2:15:25 And-

Rahul Reddy 2:15:25 ... but again, procuring cans-

Nikhil Kamath 2:15:27 Anybody can go get it bottled if I have a big order. What's the mafia then?

Aneesh Bhasin 2:15:32 Now, a lot of your bottlers or contract manufacturers are being bought over by bigger companies, so they may not even manufacture for you anymore, because their, their entire allocation will be to a-

Rahul Reddy 2:15:42 Right

Aneesh Bhasin 2:15:42 ... a particular brand.

Nikhil Kamath 2:15:43 Is it that hard to make glass bottles if you had to do it?

Aneesh Bhasin 2:15:46 No, I'm not talking about glass bottles.

Rahul Reddy 2:15:48 Glass bottles.

Aneesh Bhasin 2:15:48 I'm, I'm now talking about a-

Adithya Kidambi 2:15:50 End product. End product packaged in a, in a glass bottle.

Aneesh Bhasin 2:15:52 I today want to make a tonic water, right? I'll go to four, five contract manufacturers and say, "I want a rosemary tonic water."

Nikhil Kamath 2:16:01 Mm.

Aneesh Bhasin 2:16:01 They'll make, 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. Those 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.

Nikhil Kamath 2:16:21 I've heard of- 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-

Aneesh Bhasin 2:16:29 That's the reason

Nikhil Kamath 2:16:30 ... where they've denied me of, yeah, where they've denied me of manufacturing. They've said, "No, don't come." I think it's, 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, way too many. But they are from incumbent corporations as well.

Aneesh Bhasin 2:16:47 Yeah, yeah, yeah.

Nikhil Kamath 2:16:48 Nobody new has come up with a energy drink.

Aneesh Bhasin 2:16:50 I won't do energy. If, if, if I was to rethink everything, and I'm twenty-five 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're at two ends of the spectrum, right? Either Red Bull or you have Sting now. It's very difficult to compete on either ends. So energy will be-

Adithya Kidambi 2:17:17 You have energy drink at ninety-nine rupees, you have energy drink at twenty bucks.

Nikhil Kamath 2:17:19 How did Sting do it?

Adithya Kidambi 2:17:21 Twenty bucks.

Aneesh Bhasin 2:17:22 It's cheap and distribution.

Adithya Kidambi 2:17:24 Cheap. It's so cheap.

Nikhil Kamath 2:17:25 Who owns Sting?

Aneesh Bhasin 2:17:26 Sting is uh-

Adithya Kidambi 2:17:27 Varun Beverages.

Aneesh Bhasin 2:17:28 Your, uh-

Adithya Kidambi 2:17:29 It's PepsiCo, no, it's Varun Beverages.

Aneesh Bhasin 2:17:30 Pepsi.

Adithya Kidambi 2:17:31 A bottle there.

Nikhil Kamath 2:17:33 So they did it because of the means they have.

Aneesh Bhasin 2:17:36 Yeah.

Nikhil Kamath 2:17:36 A small twenty-five-year-old like me will not be able to.

Adithya Kidambi 2:17:38 No way. You-- I don't think a small twenty-five-year-old can ever make a beverage under eighty bucks or ninety bucks.

Aneesh Bhasin 2:17:43 But, but you know-

Adithya Kidambi 2:17:44 It's very hard

Aneesh Bhasin 2:17:44 ... a lot of people are consuming Sting. Firstly, it's a twenty rupee product. Now, again, extrapolate, forty percent 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.

Nikhil Kamath 2:18:03 Mm.

Aneesh Bhasin 2:18:04 And to somewhere, that's gonna, gonna screw with your system.

Nikhil Kamath 2:18:08 People are using it as meal replacement?

Aneesh Bhasin 2:18:10 A lot of people are ... A lot of their audience is that.

Adithya Kidambi 2:18:15 It's a lot of-

Aneesh Bhasin 2:18:15 Twenty rupees-

Adithya Kidambi 2:18:16 It's a lot of blue-collar workers who are using that as a means to get their energy. The guys who are doing, uh, hard labour, so to say. This is, this is, this is something that they are using, auto drivers, uh, construction workers. All of this-- the consumption is a lot in that sector.

Aneesh Bhasin 2:18:30 If I look at the full beverage space in India, this includes coffee.

Nikhil Kamath 2:18:33 Mm.

Aneesh Bhasin 2:18:35 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. Turn the label around, the cold brew in a can has coffee flavours added to it, right? So to me, in India, all the bigger players will, will not actually innovate. They will try and do everything to cus- 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.

Nikhil Kamath 2:19:11 So

Nikhil Kamath 2:19:12 say we are all starting independent brands, you four, including me, the twenty-five-year-old. How do we get people to pick us over them? And I don't mean the rich, I mean, like, more people.

Adithya Kidambi 2:19:25 I think, I think story-

Aneesh Bhasin 2:19:26 Branding-

Adithya Kidambi 2:19:27 ... story will play a fair, decent price-

Nikhil Kamath 2:19:28 But if they have more marketing money, how do you compete with brands?

Aneesh Bhasin 2:19:31 I don't think it's about marketing money anymore, and, and this was my thing about a coffee shop. A lot of people have a dream, dream to open a restaurant.

Nikhil Kamath 2:19:39 Mm.

Aneesh Bhasin 2:19:39 Uh, I think at some point my dream is to open a coffee shop, and-

Adithya Kidambi 2:19:43 You're going to work with him, I mean. [chuckles]

Nikhil Kamath 2:19:44 Yeah. [chuckles]

Aneesh Bhasin 2:19:46 I'll work with both of you, of course. Uh, 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.

Nikhil Kamath 2:20:06 Mm.

Aneesh Bhasin 2:20:06 And they will have an agency working for them, and they'll have some market research working for them, and so much- so many other things in the system, that you actually may not really know your customer. Today, as a twenty-five-year-old, you have a fresh start. Think what's happening in your system, uh, 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.

Nikhil Kamath 2:20:42 Yeah.

Aneesh Bhasin 2:20:42 Every, every brand, and this happens on the internet right now, right? Right from a clothing brand to a underwear brand, "Most comfortable underwear ever." Everyone says the same thing.

Nikhil Kamath 2:20:51 Mm.

Aneesh Bhasin 2:20:52 "The most comfortable black T-shirt ever." Everyone will say the same thing, but at some point, your genuine storytelling and your product will have to differentiate.

Nikhil Kamath 2:21:02 If I were to start a coffee shop, after all that you have heard, what should my story be?

Aneesh Bhasin 2:21:08 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, uh, nitro brew. I would have a concise coffee menu, uh, food menu, but I would have really good music.

Nikhil Kamath 2:21:48 Mm.

Aneesh Bhasin 2:21:48 Really good music starting in the morning. If you walk into-

Nikhil Kamath 2:21:53 Like banging music, like-

Aneesh Bhasin 2:21:54 Banging music!

Nikhil Kamath 2:21:55 Yeah.

Aneesh Bhasin 2:21:55 I want, I want energy.

Nikhil Kamath 2:21:56 Yeah. Tell

Nikhil Kamath 2:21:57 us a bit about your business, Aneesh.

Rahul Reddy 2:21:59 So-

Nikhil Kamath 2:21:59 Now we know that coffee, these boys have the biggest market, which is about projected one point two billion dollars soon. Craft coffee. His market is two hundred crores. How big is your market?

Aneesh Bhasin 2:22:13 So my market is... Hey, you gave me the numbers. [chuckles] Say it again.

Rahul Reddy 2:22:18 For the, for the-

Aneesh Bhasin 2:22:19 For the non-alc market.

Rahul Reddy 2:22:20 For the non-alcoholic beverage, okay, this was, this was, uh, one thousand three hundred and seventy-six billion rupees.

Nikhil Kamath 2:22:31 It's a very complicated-

Aneesh Bhasin 2:22:32 Yeah, it's a-

Nikhil Kamath 2:22:32 Yeah. Yeah

Aneesh Bhasin 2:22:32 ... billion rupees is a little complicated.

Rahul Reddy 2:22:34 But that's the data that was shown to me by the computer.

Nikhil Kamath 2:22:36 So that's like one lakh thirty-seven thousand crores, about twenty billion?

Aneesh Bhasin 2:22:42 Yeah.

Nikhil Kamath 2:22:42 Seventeen, eighteen billion.

Rahul Reddy 2:22:43 Yeah, about, yeah, about twenty billion.

Nikhil Kamath 2:22:45 Could it be that big?

Aneesh Bhasin 2:22:46 It would be that big-

Rahul Reddy 2:22:47 Yeah, it's huge

Aneesh Bhasin 2:22:48 ... but, but, I would never-

Nikhil Kamath 2:22:50 Uh

Aneesh Bhasin 2:22:50 ... ever start for myself or advise someone to start a tonic water company.

Nikhil Kamath 2:22:56 Mm.

Aneesh Bhasin 2:22:56 Like Svami is not a tonic water company, we're a non-alcoholic product company.

Nikhil Kamath 2:23:00 But you are drinks that go with alcohol?

Aneesh Bhasin 2:23:02 Yes. The majority portfolio currently are mixers.

Nikhil Kamath 2:23:05 I love the name, by the way.

Aneesh Bhasin 2:23:07 Thank you.

Nikhil Kamath 2:23:07 Yeah, it's very cool.

Aneesh Bhasin 2:23:09 Yeah.

Nikhil Kamath 2:23:09 Like, I have this similar story in a friend of mine called Abhishek, who runs Radico, where I'm an investor.

Aneesh Bhasin 2:23:14 Yeah.

Nikhil Kamath 2:23:14 I love the [beep] fact that here is an Indian, making Indian whiskey, which has not aged, and people in international airports are picking up that non-aged whiskey-

Aneesh Bhasin 2:23:27 Yeah

Nikhil Kamath 2:23:27 ... and paying more money-

Aneesh Bhasin 2:23:28 Yeah

Nikhil Kamath 2:23:28 ... than a Glenfiddich twelve-year-old bottle.

Aneesh Bhasin 2:23:30 I love that, too, and right now is the moment for Indian whiskeys, right?

Nikhil Kamath 2:23:33 Yeah.

Aneesh Bhasin 2:23:33 It's... So there's a couple of markets that we export to. We were very clear that our product cannot be cheaper on, at a 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 a international shelf.

Nikhil Kamath 2:23:55 Why is that?

Aneesh Bhasin 2:23:56 Because that perception that India, Indian product will be a cheaper product has to go.

Nikhil Kamath 2:24:01 Do you think all perception is price? If something costs you twenty rupees to make-

Aneesh Bhasin 2:24:06 A good chunk of it

Nikhil Kamath 2:24:07 ... you can sell it at fifty, hundred, two hundred, three hundred, whatever. It's all perception?

Aneesh Bhasin 2:24:12 I think a large part is perception. Just to be very clear, not that we are-

Nikhil Kamath 2:24:16 Impacting

Aneesh Bhasin 2:24:17 ... perception.

Nikhil Kamath 2:24:18 Yeah.

Aneesh Bhasin 2:24:18 Uh, we are as modest on gross margins as we can be. But-

Nikhil Kamath 2:24:21 What is your gross margin?

Aneesh Bhasin 2:24:22 We are at about sixty percent, with our own production. But at a international level, I was talking about because whiskeys came up, right? I don't want to see a Indian brand cheaper than a Glenfiddich. Why should it be, right? In fact, if anything else, it is more craft in a lot of ways, it should be more expensive. Uh, why is a Stranger & Sons... A Stranger & Sons will be more expensive than a lot of gins in the UK, and they should be.

Nikhil Kamath 2:24:48 Yeah.

Aneesh Bhasin 2:24:48 Why should they be cheaper?

Nikhil Kamath 2:24:49 And why should they not have Indian names like Svami?

Aneesh Bhasin 2:24:51 Yes.

Nikhil Kamath 2:24:51 Why should it be Stranger & Sons? Who is Stranger?

Aneesh Bhasin 2:24:53 So Stranger & Sons went with [laughing]

Nikhil Kamath 2:24:56 [laughing]

Rahul Reddy 2:24:56 Okay, funnily, funnily enough, the name is pretty much almost by the same team. Like, I'll tell you Svami's name. We went through a lot of iterations for Svami's name.

Nikhil Kamath 2:25:05 Right.

Aneesh Bhasin 2:25:07 I have a very good story now that, you know, we wanted one word, Indian, not more than two syllables-

Nikhil Kamath 2:25:12 Yeah

Aneesh Bhasin 2:25:12 ... something a waiter could say easily. Export-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-

Nikhil Kamath 2:25:24 Mm

Aneesh Bhasin 2:25:25 ... and we were so frustrated about names that Rahul, my co-founder, who also said that Stranger came up with the name.

Nikhil Kamath 2:25:30 What were some of the other names you went through? Give us one or two. One.

Aneesh Bhasin 2:25:36 I'll give you the most bizarre one.

Nikhil Kamath 2:25:37 Mm.

Aneesh Bhasin 2:25:38 Space Goat. [goat bleating]

Nikhil Kamath 2:25:38 Space Goat. [chuckles]

Rahul Reddy 2:25:40 Space Goat.

Aneesh Bhasin 2:25:41 Yeah.

Rahul Reddy 2:25:41 Nice.

Aneesh Bhasin 2:25:42 Correct?

Nikhil Kamath 2:25:43 'Cause you spaced out.

Rahul Reddy 2:25:43 We had a, we had a similar thesis around the nomenclature.

Aneesh Bhasin 2:25:46 Yeah?

Rahul Reddy 2:25:46 I think we spoke about this when we-

Aneesh Bhasin 2:25:47 Yeah, yeah

Rahul Reddy 2:25:47 ... did, like, an interview as well.

Aneesh Bhasin 2:25:49 Yeah.

Rahul Reddy 2:25:49 Um, I think to your point, Nikhil, like, so Subko is this kind of like portmanteau, like play on words, right? So short for subcontinent to define the region, and means for everyone, for all in, like, multiple Indian languages. And I, I was just gonna 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 rooh afza cold brew.

Aneesh Bhasin 2:26:16 That sounds good.

Rahul Reddy 2:26:16 Like, so, 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, like poddy-infused sourdough bread do really well in the cafes.

Aneesh Bhasin 2:26:27 Mm.

Rahul Reddy 2:26:27 So we're like, "Okay, how do we apply this to beverage?" And then so we started creating stuff like rooh afza cold brew, for example, and it, and it, and it latched on because I think if the positioning is contemporary, nostalgic, global implication-

Adithya Kidambi 2:26:43 ... all together in one place, which I think Svami has achieved as well. Like, I think it, it definitely can work.

Aneesh Bhasin 2:26:49 So we've been very-

Nikhil Kamath 2:26:50 How big is Svami now, just for context?

Aneesh Bhasin 2:26:51 Svami should do about thirty, thirty-five CR next year.

Nikhil Kamath 2:26:56 Right.

Aneesh Bhasin 2:26:56 Looking at that, 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?

Nikhil Kamath 2:27:10 What is tonic? Where did that name come from?

Aneesh Bhasin 2:27:13 So basically, malaria was-

Nikhil Kamath 2:27:16 Yes

Aneesh Bhasin 2:27:16 -a big issue.

Nikhil Kamath 2:27:17 From quinine, right?

Aneesh Bhasin 2:27:18 Yeah. And the Britishers realized that quinine is one cure for malaria. I think for a good hundred and fifty 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. They would add it to their gin. Too bitter, you added sugar, and that's a rudimentary gin and tonic right there. Indian-

Nikhil Kamath 2:27:43 So tonic is quinine and sugar?

Aneesh Bhasin 2:27:45 At a very base level, yes.

Nikhil Kamath 2:27:46 Quinine is what? Salt, high sodium water?

Aneesh Bhasin 2:27:49 Uh, no, quinine is from this tree. Uh, it's a bark of a tree.

Nikhil Kamath 2:27:53 Really?

Aneesh Bhasin 2:27:54 Yeah. And-

Adithya Kidambi 2:27:55 It's called cinchona-

Aneesh Bhasin 2:27:56 Cinchona

Adithya Kidambi 2:27:56 ... and they extract quinine from cinchona.

Nikhil Kamath 2:27:58 Ah.

Aneesh Bhasin 2:27:59 Uh, and in fact, we did a lot, a lot of trials about which-

Nikhil Kamath 2:28:04 Mm

Aneesh Bhasin 2:28:04 -quinine to 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. On our front label, like this says Soda Water from India, 'cause we want to say we are from India, and we are very proud about that.

Nikhil Kamath 2:28:28 Right.

Aneesh Bhasin 2:28:28 So with Svami, 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.

Adithya Kidambi 2:28:54 Yeah. It's very hard to get-

Aneesh Bhasin 2:28:56 You have-

Adithya Kidambi 2:28:57 -into this.

Aneesh Bhasin 2:28:57 You have everything to play around with today, right?

Nikhil Kamath 2:28:59 So what are you doing, tonic, then soda?

Aneesh Bhasin 2:29:01 So our core range is mixers, which is your tonics, gin- ginger ale can be both, lemonade can be mo- both. Uh, we have a lemonade that, to me, lem- fresh lime, sweet and salted, is the national drink of India.

Nikhil Kamath 2:29:15 Yeah.

Aneesh Bhasin 2:29:15 Most consumed beverage, I think-

Nikhil Kamath 2:29:17 Same

Aneesh Bhasin 2:29:17 ... at every level. So we did one version of that that's slightly more elevated at a fifty-five rupee price point. Eventually, at scale, we want that to come down to about forty. That'll be a better price point.

Nikhil Kamath 2:29:27 So what is the problem you're having? You're competing with the Club Soda, the Bisleries who are selling at twenty-five rupees.

Aneesh Bhasin 2:29:34 So soda is not a problem because largely soda will be a cheaper product. And a lot of people-

Nikhil Kamath 2:29:39 How much is your soda?

Aneesh Bhasin 2:29:40 Our soda is, uh, thirty, uh, fifty-five right now, but in a bigger packaging and all, we'll get down to thirty-five to compete with your Bisleries and all. We don't-

Nikhil Kamath 2:29:49 But what is the differentiation in soda if it's carbonated water?

Aneesh Bhasin 2:29:52 Take a sip. Get a glass. The amount of work we've done on the-

Nikhil Kamath 2:29:56 Mm

Aneesh Bhasin 2:29:57 ... water profile of this.

Adithya Kidambi 2:29:59 Can I try? Actually, I-

Aneesh Bhasin 2:30:00 Yeah

Adithya Kidambi 2:30:00 ... drink a lot of soda.

Aneesh Bhasin 2:30:02 It's a little-- It won't be cold right now.

Nikhil Kamath 2:30:05 It doesn't taste... You know, that almost bitterness that comes with the other soda? This is lesser.

Adithya Kidambi 2:30:12 Mm.

Aneesh Bhasin 2:30:13 We-

Nikhil Kamath 2:30:13 And it's not as bubbly either.

Aneesh Bhasin 2:30:15 We worked on the water profile so much on this, right?

Nikhil Kamath 2:30:19 So

Nikhil Kamath 2:30:20 if I want to start a tonic brand or a soda water brand, and I want to create a differentiation, what can it be?

Adithya Kidambi 2:30:27 Flavor.

Nikhil Kamath 2:30:28 Because it's such a commodity-

Adithya Kidambi 2:30:28 Flavor is where you create the most amount of difference.

Nikhil Kamath 2:30:31 It's, it's very minute flavor changes, right?

Aneesh Bhasin 2:30:33 No-

Adithya Kidambi 2:30:33 I would, I would create-

Aneesh Bhasin 2:30:33 Not really

Adithya Kidambi 2:30:34 ... I would create-

Aneesh Bhasin 2:30:35 So I-- So what we've done with Mossant is we know, we know Svami is sort of the market leader in the craft tonic sort of space. So what we've done is we've tried to do some com- 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, not, not necessarily a gin. We've done a rosemary, which is a more savory. There is only one other brand which is-

Adithya Kidambi 2:30:59 One of our first products was a rosemary product.

Aneesh Bhasin 2:31:01 Oh, really? Did you launch it?

Nikhil Kamath 2:31:01 So you guys are also competition in some ways.

Aneesh Bhasin 2:31:04 With this one segment.

Adithya Kidambi 2:31:05 Mm. Yeah.

Aneesh Bhasin 2:31:06 Maybe-

Nikhil Kamath 2:31:06 Tonic

Aneesh Bhasin 2:31:06 ... maybe more to come in the future. [laughing] It'll be fun.

Adithya Kidambi 2:31:09 Mm.

Aneesh Bhasin 2:31:09 Again, I will-

Adithya Kidambi 2:31:11 Yeah

Aneesh Bhasin 2:31:11 ... happily-

Adithya Kidambi 2:31:12 Yeah

Aneesh Bhasin 2:31:12 - promote any other homegrown brand-

Adithya Kidambi 2:31:15 Yeah

Aneesh Bhasin 2:31:15 - as long as I can get someone to move away from a Schweppes.

Nikhil Kamath 2:31:18 No, I'm with you, like, I am the biggest proponent of homegrown brands ever.

Aneesh Bhasin 2:31:22 Yeah, yeah.

Nikhil Kamath 2:31:23 Like, I will go to the extent of paying more for an Indian brand if I could.

Aneesh Bhasin 2:31:26 Yeah, yeah. 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.

Adithya Kidambi 2:31:35 It's tough.

Aneesh Bhasin 2:31:36 It'll be tough.

Nikhil Kamath 2:31:37 Mm.

Aneesh Bhasin 2:31:37 There have been times when they'll ask you for a fifty percent commission. So between your forty percent GST and your fifty percent commission and all, good luck to you. [chuckles]

Adithya Kidambi 2:31:45 The grass is always greener on the other side, right? They'll give you volumes that nobody else can give you as a new entrant. Because you're not, you're not, you're not pitting against shelf space, you're pitting against thumbnails. That's a big difference. It makes a, makes, makes a... It makes a huge change.

Nikhil Kamath 2:31:59 Is quick commerce sustainable? I ask the same question to my friends who run restaurants. I'm re- reviewing the industry from a investor use case. It didn't work in the West. West went the way of big box retail. Uh, quick commerce had, like, a tiny spike, but it died.

Aneesh Bhasin 2:32:19 I think the moment-

Nikhil Kamath 2:32:20 I'm trying to figure out if it's gonna be different in India.

Adithya Kidambi 2:32:21 I think it's sheer volume, no?

Aneesh Bhasin 2:32:23 But debatable.

Adithya Kidambi 2:32:25 It's just like, it's sheer volume.

Aneesh Bhasin 2:32:25 I just think the moment quick commerce... And right now, a lot of them are behaving that way, that we will be your discovery.

Nikhil Kamath 2:32:32 Mm.

Aneesh Bhasin 2:32:33 Then they own you.

Nikhil Kamath 2:32:34 Then they'll start competing brands.

Aneesh Bhasin 2:32:36 Yeah.

Adithya Kidambi 2:32:36 Yeah.

Aneesh Bhasin 2:32:37 So-

Adithya Kidambi 2:32:37 They, they always do that. That's the, that's the game anyways.

Aneesh Bhasin 2:32:39 So they will come into 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?

Nikhil Kamath 2:32:50 And they've had the same playbook with restaurants-

Aneesh Bhasin 2:32:52 Yeah

Nikhil Kamath 2:32:52 ... and you guys have seen it.

Adithya Kidambi 2:32:53 I think they, they will also now get into seeing which category and which product is doing well and start white labeling the same.

Nikhil Kamath 2:32:59 But Amazon has-

Aneesh Bhasin 2:33:00 Yeah

Nikhil Kamath 2:33:00 ... done that for years.

Aneesh Bhasin 2:33:00 Yeah.

Nikhil Kamath 2:33:00 And-

Aneesh Bhasin 2:33:01 So I mean-

Nikhil Kamath 2:33:02 why expect otherwise?

Aneesh Bhasin 2:33:03 Yeah.

Rahul Reddy 2:33:03 So I, I feel like slightly opposition to this. I feel like unfortunately, for us, it will very much stick around and, 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.

Nikhil Kamath 2:33:24 But not getting it in ten minutes.

Rahul Reddy 2:33:25 No, never. Right? But, but the behavior that they got used to and adapted to was that it was okay to order the day before, right? Whereas in India, it basically went from not really ever ordering groceries online to immediately ordering it and getting in ten minutes.

Aneesh Bhasin 2:33:39 Yeah.

Rahul Reddy 2:33:40 So I feel like now the, the consumer expectation is for that to be the norm.

Aneesh Bhasin 2:33:45 I'm not saying eco-, uh, quick-

Rahul Reddy 2:33:47 So

Aneesh Bhasin 2:33:47 ... commerce is going anywhere. In fact, for, for my product, to me, Amazon doesn't make much sense.