A casual cup of chai latte in New York in 2000 was the beginning of something big for Martin Buggy and Melissa Edyvean. In just under a decade the creators of Bondi Chai have turned their passion for “liquid doughnuts” into a thriving micro-business with an annual turnover of $2 million.
Their premium chai latte product is now sold on supermarket shelves in Australia and in countries around the world, from India to the Netherlands.
It’s an achievement that was recognised this month when it was named the NSW Micro Business of the Year 2014 in the Telstra Australian Business Awards. It is now automatically a finalist in the National Telstra Business Awards which will be held in Melbourne on Thursday.
For the couple it’s a far cry from the days when cafe-owners showed little interest in their product. “It’s a vindication of our belief that it was going to be a great product and that it was going to take its place in the cafe culture in Australia,” says Buggy. “A lot of people said it wouldn’t when we first started.”
Chai latte was virtually unknown a decade ago. But as Australia’s food and cafe culture has flourished, demand for hot drinks in cafes has escalated. In late 2012 a BIS Foodservice Coffee and Beverages report showed the market for out-of-home (and work) coffee was growing rapidly, with units purchased rising from 1.8 billion in 2010 to 2.1 billion in 2012, a jump of almost 20 per cent. It predicted there would be further growth of 10-15 per cent by 2014.
More recently, an IBISWorld report forecast Australia’s cafes and coffee shops would reach 6613 in 2013-14, growing at an annual rate of 5.3 per cent in the five years to 2013-14.
With that growth has come demand for an alternative for non-coffee drinkers, a niche that the creators of Bondi Chai were only too happy to mine.
Initially, they had an Australian importer/agency agreement with the US brand of chai that they fell in love with in New York. Then in 2004 the US brand-owners sold out and the new owners scratched Australia from their sales strategy.
That was the start of a massive learning curve for the couple who were running their own PR and marketing company and had no background in the food manufacturing industry.
With just $150,000 credit they kept the business as lean as possible. No expensive investment in plant and equipment or employees.
Instead they contracted companies to manufacture, pack, warehouse and distribute their product and ran the entire operation via the internet from their home office.
In the first month after their June 2005 launch they sold just 17 kilograms. But by year-end they were getting enough interest to bid farewell to PR and concentrate on building Bondi Chai.
Following the advice of the previous brand-owners of the US chai, their aim was to build Australia’s taste for chai latte through its cafe culture, well before tackling the harder yards of supermarket shelves and exporting.
“They said don’t go anywhere near retail until chai latte is established in your country; your brand is starting to become known and you’ve got a war chest big enough to withstand the hundreds of thousands of dollars hit that you’re going to have to get when you walk into a supermarket,” says Buggy.
Bondi Chai has been on the shelves in Woolworths since April last year and is also stocked by Coles. But Buggy emphasises the move into supermarkets wasn’t driven by business development. “It was a brand equity development move. We now needed to bring our brand out from under the bushel that we’d been hiding it under for all these years.”
At this stage about 75 per cent of sales still come from the food service industry in Australia and overseas. If you travel to the home of chai, it can be found in places from Kathmandu to the Oberoi Hotel Patisserie and Delicatessen in New Delhi.
So what’s next? They still see plenty of scope for growth in Australia and they haven’t stopped working the food shows and festivals.
“We’ve handed out more than 20 million little 20 millilitre samples of our product over the years and that’s created consumer pull-through at cafe level and now ultimately generated this base to work with in moving into supermarkets,” says Buggy.
They are also keen to keep developing their export markets. “There are 380 million people in Europe and most of those countries are milk-drinking countries. Wherever there’s a milk-drinking culture then chai latte just slots straight in.”
