Mar 3, 2025 · 3h 25m · wtf
Ep #22 | WTF are Craft Beverages? Nikhil ft. the Founders of Blue Tokai, Subko, Svami, and Mossant · Nikhil Kamath
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Host Nikhil Kamath convenes the founders of Blue Tokai, Subko, Svami, and Mossant to break down the operational, financial, and cultural realities of building craft beverage brands in India. The panel delivers practical insights on cafe unit economics, bottling logistics, regulatory taxes, quick commerce, and localized brand storytelling.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nikhil holds 24.5% of the talking time here. How this is scored →
Nikhil as informed peer 4.1 Guest teaching 5.9 Guest disagreement 1.9 Nikhil pushing back 2.5
speaking balance: gold is Nikhil, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 2:34:30 Anish vs Aditya on Quick Commerce Reliance
Anish strongly rejects Aditya's optimism about quick commerce, insisting that relying on delivery platforms destroys brand sovereignty once platforms squeeze margins or launch private labels.
Hardest push from Nikhil ▶ 39:20 Nikhil Probes Diaspora MotivationNikhil directly pushes back against Rahul's narrative, questioning if returning to India was simply driven by easier social status and escaping Western alienation rather than pure business merit.
Biggest teaching moment ▶ 1:59:55 Anish Educates Nikhil on 40% Beverage TaxAnish breaks down the absurdities of the Indian GST regime where carbonation and sweetness trigger a 40% tax rate, shocking the host and illustrating why beverage startups struggle.
Nikhil holds their own ▶ 1:19:40 Nikhil Unpacks Starbucks India Unit EconomicsNikhil applies rigorous equity research analysis to explain why Starbucks struggles with profitability in India, citing prime real estate costs combined with table hogging versus US walk-away culture.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nikhil as informed peer | Guest teaching | Guest disagreement | Nikhil pushing back | Why |
|---|---|---|---|---|---|---|
| Matt Chitharanjan on Roots, Finance, and Founding Blue Tokai | 3 | 5 | 1 | 2 | Nikhil opens by probing Matt's background, heritage, and career shift from hedge fund trading to roasting coffee. Matt calmly explains the early days of Blue Tokai and how Indian estate growers were initially skeptical of selling specialty Arabica domestically. | |
| Aditya's Journey Through Hospitality, Australian Culinary School, and Bangalore | 3 | 3 | 2 | 3 | Nikhil teases Aditya about his upbringing and culinary school in Australia, playfully calling him a rich kid. Aditya pushes back amiably, clarifying his middle-class background, educational loans, and early restaurant hustle in Bangalore. | |
| The Inception of Mossant Fermentary and Commercializing Kombucha | 2 | 6 | 1 | 1 | Aditya introduces Mossant Fermentary's origin story, discussing the science of kefir, gut health, and the strict 0.5% alcohol regulatory hurdle for non-excise retail beverages in India. | |
| Blue Tokai's Growth Metrics and Venturing into the Japanese Market | 3 | 4 | 1 | 2 | Matt details Blue Tokai's 400 crore run rate and experimental entry into Japan's specialty coffee scene, followed by Anish sharing his transition from army kid and photographer to wine apps and craft drinks. | |
| Rahul Reddy: Navigating the Indian Diaspora and the Vision Behind Subko | 4 | 6 | 2 | 3 | Nikhil questions whether returning diaspora founders do so because they are treated better in India versus the West. Rahul reframes his thesis around agricultural provenance, proving world-class design and roasting directly at source. | |
| Crafting Distinct Brands: Comparing Blue Tokai and Subko's Visions | 3 | 5 | 2 | 2 | Matt and Rahul compare the differing positioning of Blue Tokai (mass-premium accessibility) and Subko (niche premium, design-forward, integrated craft bakehouse and chocolate). | |
| Cafe Unit Economics: Food Ratios, Kitchen Operations, and Subcultural Niches | 4 | 7 | 2 | 4 | Nikhil challenges the guests on how a new 25-year-old cafe entrant can survive against them. Matt and Rahul educate Nikhil on the critical 50/50 revenue split between food and beverage, central kitchen logistics, and subcultural branding. | |
| The Rise of Coffee Raves, Third Spaces, and the Bougie Cafe Phenomenon | 4 | 6 | 2 | 2 | The panel discusses the emergence of sober coffee raves and high-traffic cafes like Bougie, noting how Gen Z treats daytime cafes as third spaces replacing traditional nightlife. | |
| Coffee Psychology: Satiety, Caffeine Dynamics, and Consumer Behavior | 5 | 5 | 3 | 3 | Nikhil theorizes that caffeine acts as a hunger suppressant and socially accepted high, asking if boosting caffeine levels to 350mg would create a moat. Matt and Rahul point out practical extraction limits and cold brew dynamics. | |
| Mocktail Speakeasies, Atmosphere Creation, and the Plant Milk Trend | 4 | 6 | 1 | 2 | Rahul describes creating non-alcoholic speakeasy coffee mocktails with Svami tonic, while the group analyzes the operational adoption and niche volume share of oat and almond milks. | |
| Commercial Realities: Underserved Markets, High Rentals, and Starbucks in India | 6 | 6 | 2 | 4 | Nikhil analyzes why global coffee giants like Starbucks struggle with profitability in India compared to the US, drilling down on real estate dwell-time dynamics where Indian customers occupy tables for hours. | |
| Price Sensitivity, Specialty Brewing Growth, and Functional Coffee Concepts | 6 | 6 | 3 | 3 | Nikhil shares macroeconomic insights on post-COVID consumption slowdowns across retail sectors. Rahul highlights the 81% surge in pour-over black coffee consumption and home brewing. | |
| The Science of Kombucha: Fermentation, SCOBY, and Gut Microbiome | 3 | 8 | 2 | 3 | Aditya gives a masterclass on fermentation science, clarifying how yeast and bacteria in a SCOBY metabolize sugars into organic acids and probiotics, while debunking miracle health fads. | |
| Kombucha Market Dynamics: Flavors, Quick Commerce, and GT's Legacy | 4 | 7 | 1 | 2 | Aditya reviews the Indian kombucha market size (200 crores) and the influence of pioneer GT Dave, highlighting how 10-minute quick commerce delivery expanded Mossant's reach. | |
| Exploring Hard Kombucha, Seltzers, and Coffee Cascara Innovation | 5 | 6 | 2 | 2 | The guests explore the potential of hard kombucha, hard seltzers, and coffee cascara tea, noting the tough licensing barriers and India's cultural preference for strong beer over light RTDs. | |
| India's 40% Beverage Tax: How Policy Dampens Startup Innovation | 4 | 8 | 3 | 3 | Anish and Aditya educate Nikhil on India's punitive 40% GST bracket on carbonated sweetened beverages, explaining how this stifles startup innovation compared to tiered international sugar tax models. | |
| Market Positioning, Health Wave, and Expanding Non-Alcoholic Categories | 5 | 5 | 1 | 2 | Anish outlines Svami's pivot from mixers to a broader non-alcoholic wellness umbrella including collagen and hydration, while Rahul suggests crafting ethnic Indian flavor profiles like jaljeera. | |
| Mass-Market Disruption, Ingredient Transparency, and Coffee Shop Dreams | 4 | 6 | 2 | 2 | Anish criticizes mass-market beverage giants for using deceptive clean labels and additive flavors, arguing that authentic storytelling and cleaner formulations represent the real differentiator for new brands. | |
| Market Valuations, Provenance Branding, and the History of Tonic Water | 4 | 6 | 1 | 2 | Anish explains Svami's naming origins, provenance branding ('Tonic Water from India'), and historical cinchona bark quinine extraction for malaria prevention. | |
| Craft Soda Water Profiles, Menu Differentiation, and Homegrown Unity | 4 | 6 | 3 | 3 | Anish and Aditya debate quick commerce dependency versus dark-store commissions, with Anish warning that over-reliance on platforms creates vulnerability when platforms launch private labels. | |
| Horeca Discovery, Regional Palates, and First-Mover Fallacies | 3 | 7 | 3 | 2 | Anish details the ground-level HoReCa tasting strategy that established Svami in bars, while offering a direct camera warning to young entrepreneurs that first-mover claims are meaningless without brand equity. | |
| Coffee Shop Unit Economics, Real Estate, and Equipment Sourcing | 5 | 7 | 2 | 3 | Matt and Rahul outline precise cafe startup unit economics: optimal 1,000 sq ft size, capex estimates (80L to 1.5Cr), barista compensation bands, and commercial espresso machinery sourcing. | |
| Bottling Machinery Choices and Global Beverage Intelligence | 3 | 6 | 2 | 2 | Aditya and Anish advise against buying Chinese bottling equipment due to maintenance and pressure issues, recommending local Indian engineering suppliers like Hymec. | |
| Authentic Content Creation, Micro-Influencers, and Grassroots Distribution | 7 | 4 | 1 | 2 | Nikhil leads the discussion on marketing authenticity and investment thesis, explaining why he backed Subko and sharing macro thoughts on AI, geopolitical trade protectionism, and quick commerce unit economics. |
Statements from this episode (45)
Blue Tokai co-founder: Coffee growers doubted Indian consumers would pay for specialty coffee
“Even when we went and talked to the growers, they felt that Indian consumers weren't ready to pay for good quality coffee, that you'd have to cut it with Robusta or do a commodity Arabica offering in order to bring the price down so that you could get acceptan…”
Kamath: Subko founder Rahul Reddy is opening a store in Dubai
“I met Rahul last week in, ah, Dubai. Where he's starting a new store, and I checked it out.”
Kamath: Passion and talent are outputs, not inputs
“I think personally that passion and talent are two forms of the same word. We often think passion or talent are inputs. Like if you're passionate about coffee, you get into coffee and then you realize you're talented and you have a good outcome. I feel like pa…”
Rahul Reddy: India is the fifth to seventh largest coffee producer globally
“Well, it's anywhere between the fifth and seventh largest producer of coffee in the world, despite not being known for it.”
Matt Chitharanjan: Blue Tokai is mass-premium, while Subko is niche premium
“We, I would say, are more mass premium. They're more niche premium. I think the customers are slightly, I mean, I would say we're more, we try to be more accessible.”
Rahul Reddy: Subko would not have succeeded without Blue Tokai
“Look, I think Lutokai has changed The palette of coffee consumption in India. And that's, I mean, without that having happened, Subco wouldn't have had a shot, to be honest.”
Matt: Food makes or breaks the success of a specialty coffee shop
“I think food is unfortunately something that's very, I mean, I say this as a copy person, food is something that really makes or breaks the success of the store.”
Blue Tokai: 45% of sales are drinks, 40% are food
“For us, we sell 45% is beverages, 40% is food, and then 15% is the retail packets and bread.”
Reddy: Subko's revenue split is almost exactly 50/50 food and beverage
“We're almost exactly at fifty-fifty, believe it or not.”
Reddy: In mature markets, coffee quality alone no longer provides cafe differentiation
“As a country or a city's coffee culture gets more mature, The standard that people expect is already high. So the differentiation factor becomes less and less to some extent about like after, after you show that you have a certain, you know, standard... Can di…”
Reddy: Good coffee and food will become bare minimum for cafes
“Having a good coffee and good training is, and even good food is going to become the bare minimum.”
Kamath: 15-year-olds will spend more time and money in cafes than nightclubs
“Like a fifteen-year-old today in three years is much more likely to spend time in a coffee shop versus a nightclub and spend more of his money there.”
Chitharanjan: Average cafe customers do not care which estate coffee comes from
“The average customer walking to a cafe doesn't care that this coffee comes from the state ABC.”
Chitharanjan: India has around 5,000 branded and 5,000 unbranded coffee shops
“There's only around 5000 branded coffee shops and another equivalent amount of unbranded.”
Subko's Reddy: Coffee-based non-alcoholic mocktails will endure long-term
“I think it'll stick. I think that people who aren't, if the industry is moving away from, let's say, alcohol in some generalized sense, I think it makes perfect sense for coffee to still give you the sort of mimic the feeling and give you the benefits of drink…”
Blue Tokai operates 135 outlets across India
“If I had to do that, I would replicate it across our 135 outlets, but”
Subko: Alternative milks make up roughly 15% of sales
“Much higher. I don't know the exact number, but more than 10% for sure. Like 15%.”
Chitharanjan: Competing cafe clusters expand foot traffic for all players
“Let's say a third wave coffee opens, a Starbucks coffee opens, a Chaios opens, an independent coffee shop opens, it actually sucks in more people to that market, and everybody does better.”
Starbucks India reached over 1,000 crores in revenue across 97 cities
“I mean, so they've gotten to a thousand plus crores, right, 97 cities, so.”
Rahul Reddy: Starbucks must build daily coffee habits for India profitability
“And that's pivotal for a brand like Starbucks to actually succeed at the scale and the profitability that they're ultimately looking for is Can't only be limited to like, Hey, we're aspirational. It has to be about changing their habituation towards coffee.”
Chitharanjan: International brand status no longer automatically attracts Indian consumers
“I also think that Indian consumers affinity towards international brands is not what it was. 1520 years ago. So the idea that I can just be an international brand and automatically I'll have a line is no longer applicable.”
Chitharanjan: Blue Tokai survey shows ₹250 is the consumer price sensitivity threshold
“So we've done a survey and it's two 50 rupees is kind of the, they won't notice anything up until two 50 rupees is above two 50 rupees, then they, then they'll start to pay attention.”
Reddy: Subko pour-over coffee and retail bean sales grew 81% year-on-year
“The data that we have year on year growth of pour over coffee, just black, right? 81%. From last financial year to this one. Same thing with the retail beans.”
Kamath: Zara and H&M sales growth in India is flatlining
“Like a Zara in India, which was growing at 30, 40% or a H&M a year ago, is now either not growing or flatlining.”
Kamath: Kombucha market in South India is larger than in North India
“In South, it's bigger than North, for some reason.”
Kamath: Super You protein chocolate is sold out across retail categories
“Super U. Yeah, we're a partner with him. If anybody came in and tried, here's a protein bar with 20 grams of protein, which costs 200 rupees in India, didn't really work. But him having come and said, here is a better Kit Kat. It costs 60 rupees, has eight, ni…”
Rahul Reddy: Quick commerce in India will stick around and dominate
“I feel like, unfortunately for us, it will very much stick around and dominate because If you look at the US, which I'm familiar with, people have been ordering groceries, let's say in the US online for like a decade now. But the behavior that they got used to…”
Matt Chitharanjan: Building a coffee brand without physical cafes is very difficult
“Without a cafe, it's very difficult to have a coffee brand without a cafe.”
Chitharanjan: Record coffee bean prices only add 2–3 rupees per cafe cup
“In a coffee shop, even now, coffee prices are at a 50 year high right now. You know, add two, three rupees to the cost of a cup of coffee. So it's very easily absorbed in a coffee shop. In a packet of coffee, it's not very easily absorbed.”
Reddy: Climate change could position Indian Robusta as a global winner
“With the effects of climate change kicking in, there are a lot of theories that say that India might emerge a winner because the taller altitudes growing regions will get hotter, which will make Arabica less and less viable. So, theoretically that means that R…”
Chitharanjan: 1,000 sq ft is the optimal coffee shop footprint
“2000, the capex becomes too large to fit it out. And the incremental revenue is not justifying the increase in rent as well. Below 800, then tables become occupied, and people don't want to wait for a coffee shop, though. If they see it's full, they'll just go…”
Chitharanjan: Delivery generates 35% of Blue Tokai's revenue
“We're at 35% of the revenue is delivery.”
Chitharanjan: Indian coffee machines lag behind Chinese and European rivals
“Quality and consistency is not comparable to the equivalent Chinese or European manufacturers.”
Chitharanjan: General restaurants cannot effectively drive specialty coffee discovery
“You rely too much on the person who's brewing it. Yeah. And in most places, coffee is seen as a, okay, I invested in the machine, any random person can make the coffee, they're not gonna put the same care and effort that a coffee shop would.”
Reddy: Subko spent zero rupees on performance marketing over five years
“We've actually spent zero rupees ever in the last five years. On performance.”
Blue Tokai spends roughly 4% of revenue on marketing and content
“We, ad spends is one and a half percent.
Then the team would be another three percent or so.”
Kamath: Zerodha has run zero ads in 15 to 16 years
“Like us, inherently, we, we've never done ads, and I don't mean in like one, two years, but I'm talking about like, 1516 years.”
Kamath: Novelty sells in the short run, brand specificity sells long term
“See, in the short run, novelty sells. In the long time, I think specificity like that sells.”
Kamath: AI's inability to predict counter-trends makes creatives more valuable
“I feel like any model will eventually either predict random or trend, not necessarily counter trend. And most innovation generally comes from counter trend thinking. So creative people will likely become a lot more valuable.”
Kamath passed on quick commerce because current valuations are too expensive
“At the end of the day, as an investor, I look at companies as a multiple of the EBITDA or net cash that they're throwing out. In today's equation, I find them expensive. Hence, I have not invested.”
Kamath: Mass market Indian consumers switch brands over five-rupee differences
“The category of people in India, which can afford to pay a premium is still very low. Very, very low. I think we are very, very price conscious. It's almost like annoyingly price conscious. If you're selling something at 50 rupees and you're not in the craft s…”