The Chaayos conundrum – modernizing chai consumption in India

Research methodology The research for gathering case information on Chaayos was conducted using a combination of online research and direct interviews with the cofounders, Nitin Saluja and Raghav Verma. This multifaceted approach ensured a comprehensive understanding of the company’s operations, challenges and strategic decisions. Case overview/synopsis Founded in 2012 and headquartered in Gurugram, India, Chaayos is a café chain focused exclusively on serving customized chai in a modern café format. Cofounded by Nitin Saluja and Raghav Verma, Chaayos grew from a single outlet into a network of over 200 cafés across major Indian metropolitan and Tier I cities, including Delhi, Mumbai and Bengaluru. The company built its brand around the proposition of “Meri Wali Chai, ” offering customers 25 varieties of tea that could be personalized into more than 12, 000 combinations. Priced between US1 and US2. 2 per cup, Chaayos positioned itself as a mass-premium tea café catering primarily to urban professionals who valued quality, consistency and personalization. The company operated on a company-owned, company-operated (COCO) model and invested heavily in proprietary technology, including an automated tea-brewing machine (ChaiMonk), to ensure consistency and operational efficiency at scale. By the end of FY24, Chaayos had achieved four consecutive profitable months at the company level and significantly reduced its cash burn, yet its growth remained concentrated in metro and Tier I markets. At this juncture, Saluja and Verma faced a strategic dilemma: whether to consolidate further within Tier I cities, where café culture and purchasing power were well established, or to pursue expansion into Tier II and Tier III cities that offered long-term growth potential but were characterized by higher price sensitivity, entrenched local tea vendors, and competing low-cost chains such as Chai Sutta Bar and MBA Chaiwala. The central decision confronting the founders was whether Chaayos could adapt its pricing, operating model and value proposition to smaller cities without diluting its brand positioning and unit economics, or whether a more sustainable path forward was to continue focus on Tier I markets. Complexity academic level The case can be positioned for the undergraduate students of Business Administration and Entrepreneurship. This case is designed for MBA-level courses focusing on Strategic Marketing Management, Competitive Strategy, Retail Management and Entrepreneurship in emerging markets. It is particularly well-suited for second-year MBA and executive MBA students with prior exposure to foundational concepts in strategy, marketing and basic financial analysis.