Blue Tokai coffee gets Verlinvest flavour

Verlinvest, investment vehicle of the Belgian family behind the world’s largest brewery, AB Inbevis willing to invest 200 crore rupees (about 24 million dollars) in Tokai Blue Coffee Roasters, priced at Rs 1.2 billion ($143 million) valuation — twice as much as a year and a half ago, people familiar with the matter said.

Existing investor Hemendra Kothari’s family office and Anicut Capital are also expected to join the Rs 250-crore local specialty coffee chain. roundand the residual amount will comprise a combination of primary and secondary share sales, the people said.

This will be the largest funding round for the 11-year-old company as a battle rages between some of India’s leading business houses and startups.

Announcement soon
Global giants like Starbucks and Tim Hortons also compete in this rapidly growing industry.

A formal announcement on the transaction is expected as early as this weekend, the people said.

Verlinvest did not immediately respond to ET’s queries. Matt Chitharanjan, co-founder of Blue Tokai, did not comment. In January 2023, Blue Tokai raised Rs 200 crore from A91 Partners in a Series B round, which also saw investment banker Kothari come in at a valuation of Rs 600 crore, post the investment. Earlier this year, 12 Flags Group, a consumer fund set up by former Reckitt Benckiser global head Rakesh Kapoor, joined the cap table at a valuation of Rs 1,000 crore.

Blue Tokai is also backed by Bollywood actress Deepika Padukone, Kirloskar family office Snow Leopard Ventures, Negen Capital, Mauryan Capital and White Whale Venture.

The brand operates through brick-and-mortar cafes, e-commerce and business-to-business (B2B), with the former category generating the majority of revenue.

In FY24, Blue Tokai posted revenue of Rs 240 crore and losses of Rs 15-20 crore. The losses are expected to narrow to Rs 5-7 crore this fiscal. Blue Tokai posted revenue of Rs 75 crore and losses of Rs 2.5 crore in the quarter ended June.

The company currently has 120 cafes across the country and aims to increase to 200 in the next 12 months.

Rival Third Wave Coffee has around 100 outlets but is struggling and has seen growth stagnate in recent months, according to industry watchers. Alternative drinks rival Chaayos has around 230 outlets. US coffee chain Starbucks has around 400 outlets in India, but Blue Tokai’s products are at least 25-30% cheaper than Starbucks’.

India’s coffee and bar market, estimated to be worth $17.54 billion, is projected to reach $26.17 billion by 2029, according to market intelligence and advisory firm Mordor Intelligence. India’s coffee industry is projected to surpass $4.2 billion, with retail coffee chains reaching $850 million by 2025.

Verlinvest, which has backed brands including Vitamin Water, Remy Cointreau, Future Retail, Oatly and Juicy Chemistry at various times, is one of the world’s largest consumer-focused investment vehicles offering “evergreen capital.” In 2020, the firm backed successful Indonesian coffee chain Kopi Kenangan.

In India, its diverse portfolio includes: Sula VineyardsWakeFit, Epigamia, Veeba, Byju’s, Purplle and Heads Up For Tails, among others. Last year, it funded V3 Ventures to launch its operations in India. It has a capital of 100 million euros (around Rs 900 crore) to invest in India, Europe and the US.

Coffee chains in India are growing at a faster pace than quick service restaurants (QSRs), driven by a younger consumer cohort, aspirational demand, higher disposable incomes and menu innovation.

In addition to new specialty coffee chains such as Blue Tokai, Third Wave and Subko, there are traditional brands such as Barista and Café Coffee Day, as well as relatively new global entrants in India such as UK chain Pret a Manger and Canada’s Tim Hortons, which are creating fierce competition with older global brands such as Starbucks and Costa Coffee.

Starbucks came to India through a joint venture with Tata Global Beverages; Costa Coffee is operated by Yum Brands’ Indian franchisee Devyani International. Similarly, The Coffee Bean & Tea Leaf is backed by Everstone Capital in India.