Wagh Bakri to take branded tea lounges to tier-II cities

It may not be the best of times to launch a tea lounge, but the Gujarat-based ₹800-crore Wagh Bakri Group has decided to scale up its retail operations. It is now venturing into Tier-II cities with its six-year-old tea retail format.

“We intend to scale up, and will have 10 lounges in a year, but it may take another five years before we make money on the venture. There are consumers who are passionate about tea and are willing to pay ₹70 for a cup,” says Parag Desai, a fourth generation entrepreneur and Executive Director of Wagh Bakri Tea Group.

Having launched its second Wagh Bakri Tea lounge in Mumbai, the company has a total of three lounges with its largest one in Delhi (at 2,500 sq ft). Now, it intends going beyond the metro markets, with tea lounges planned in Pune, Ahmedabad and Nagpur.

“We do not believe in franchises, and will be renting out properties to launch our tea lounges in Tier-II cities where there will be better opportunities. Our teas are premium and we offer a seven -star ambience at our lounges,” he added.

The company is also contemplating taking its tea lounges across the border into other South Asian countries, once the new Government firms up its policies.

“Since the new Prime Minister has invited SAARC (South Asian Association for Regional Cooperation) heads, we could look at these countries both in terms of building distribution and setting up our tea lounges in the future. Uncertainty in Government policies has been holding us back, but we will take a call after the budget,’’ he said.

With 40 different varieties of teas and Indian snacks, the average price of a single cup of tea ranges between ₹70 and ₹100 at its existing Wagh Bakri lounges in Delhi and Mumbai.

With coffee retail chains reeling under massive losses, does the future of tea retail have better prospects? An unperturbed Desai maintained: “Coffee chains like Costa and Barista may be winding up due to low spends, but we expect consumer to start spending once the economy improves.”

Considering that the packaged tea segment has been stagnant for the past two years, Wagh Bakri has been trying to induce demand with fresh campaigns.

The annual advertising and marketing spend at the company is around ₹40 crore.

Despite being the third largest packaged tea company, it has yet to go national and is currently consolidating its distribution in the western and northern markets.