India’s TeaBox Raises Seed Funding From Accel To Build An Online Starbucks For Disrupting Global Tea Market

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In a world rediscovering its old tea drinking habits, finding a freshly-brewed cup of the hot beverage is still very tough, especially if you are a tea aficionado based in the U.S. or Europe. For the world’s second most popular beverage after water, the distribution and production models are still very ancient, perhaps waiting for their own version of Starbucks to happen.

Now TeaBox, a speciality e-commerce startup based in the North Eastern town of Siliguri in India, is raising around $1 million in seed funding led by Accel Partners India to serve fresh tea packages across Russia, US, China and Japan. Another investor participating in this round is Horizen Ventures.

By using an e-commerce platform that allows tea drinkers in these countries to browse, select, and order their favorite variant of the beverage, TeaBox is removing the traditional distribution layers of resellers and marketeers. From around 3-6 months it took earlier for tea from a plantation in Darjeeling to reach customers in Europe or the U.S., it now takes less than a week.

After around two years of testing the idea and building a growing customer base in markets like Russia and the U.S., TeaBox is now coming out of its stealth mode to replicate the model for targeting consumers in China and Japan going forward.

“We are running this as a technology company instead of a traditional tea business,” the startup’s founder Kaushal Dugar said in an interview. Dugar, who comes from a family of tea growers involved in the business for over 80 years, started TeaBox in 2011.

Since it was launched, TeaBox has shipped around 10,000 kg of teas, equivalent to around 5 million cups across 65 countries. This year, the shipment could treble to around 30,000 kg of teas or up to 14 million cups when served. In its top four markets of Russia, US, Canada and Australia, TeaBox’s average order value is around $110 for each package.

Dugar, a former KPMG consultant, said in over 200 years of the tea industry, the processes have remained ancient, still relying on manual log books for keeping stock, managing orders, etc.

“The question I asked while starting was why can’t we deliver tea in a week instead of going through months of production, packaging and distribution,” he said.

TeaBox procures tea within first few hours of production, selects the most popular variants, packs them in 100 gms vacuum boxes, and ships them through a FedEx or BlueDart to consumers directly.

One of the biggest challenges facing the global tea industry is making tea accessible and affordable for consumers. TeaBox is hoping that by applying the speed of e-commerce to the existing supply chains, it can build an “online teahouse”.

To be sure, most of the tea plantations in India, which is now the world’s second largest tea producer, still rely on existing relationships with Unilever and Tata Global Beverages for distributing their products. But some of them including Goomtee Plantation in Darjeeling are beginning to work with TeaBox for better prices and getting their own branding done after years of being invisible exporters.

“The Tatas and Unilevers are blenders and packeteers – so they can never provide good recoginition to individual gardens and boutique properties. The major blenders buy medium quality teas to make a standard tea so that they can offer a consistent blend at all locations 12 months in a year,” said Ashok Kumar, the owner of Goomtee Plantation.

For tea growers, reaching out directly to the consumers is tempting because they are able to differentiate better in what’s fast becoming a commoditized market.

“Quality tea producers, just like fine wine producers, would like to differentiate characteristics according to terroir,variety, growth period, climate and finally processing refinement – which is not possible in the blender/packeteer model,” Kumar added.

For Accel, which is among the early investors in India’s biggest e-commerce company Flipkart, TeaBox is an ambitious bet.

“Traditional commerce has not created enough channels for delivering choices to consumers directly. E-commerce is now creating cross-border impact in these niche, but old legacy businesses,” said Prashanth Prakash, a partner at Accel India.

In Russia, the fastest growing market for TeaBox, many customers are ordering tea worth $600-$1,000 every month. To serve them even faster and beat regulatory delays, TeaBox plans to set up a fulfillment centre later this year in Russia.

TeaBox is attempting to tap a growing demand for freshly-brewed tea globally. Starbucks’ acquisition of Teavana in 2012 was a sign that consumers in the U.S. and elsewhere were increasingly seeking to revive their old drinking habits. For its part, Starbucks is combining the offline experience stores with an online business that allows customers to shop for its exclusively branded products. The biggest challenge for TeaBox will be to build a global supply chain and internal technology platforms systems that can help it create a Starbucks experience for tea drinkers.