Ep #22 | WTF are Craft Beverages? Nikhil ft. the Founders of Blue Tokai, Subko, Svami, and Mossant
A deep‑dive into how four Indian founders built specialty coffee, kombucha and tonic brands from bedroom roasters to national players, navigating regulation, pricing, distribution, branding and the future of AI‑driven creativity.
3h 25m·Guest Matt (Blue Tokai), Rahul (Subko), Anish (Swami), other founders·Host Nikhil Kamath·
Bootstrapping a Coffee Brand in India
Matt recounts how Blue Tokai started with no formal plan, a tiny tabletop roaster and a belief that Indian consumers would eventually crave specialty coffee. The founders convinced local growers to sell export‑grade beans, proved the market was ready, and grew from a bedroom operation to a multi‑city chain.
Blue Tokai launched without a business plan, targeting a niche of coffee lovers.
- The founders simply set up a 500 g tabletop roaster in a bedroom and began selling to friends and early adopters.
- They believed there were other people like them who wanted high‑quality, specialty coffee at home.
- This minimalist start let them test the market before committing capital to a full‑scale operation.
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00:05:21“we started it without a business plan ... we felt that there would be other people like us who were looking for specialty coffee” — Matt
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00:05:53“we started very small, we had a 500 gram tabletop roaster” — Matt
Early growers doubted Indian willingness to pay for premium coffee.
- When Matt approached coffee growers, they told him Indian consumers weren’t ready to pay for high‑quality beans.
- The growers suggested blending export‑grade beans with Robusta or commodity Arabica to keep prices low.
- This skepticism forced the founders to educate the market and prove the value of specialty coffee.
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00:05:35“the growers felt Indian consumers weren't ready to pay for good quality coffee” — Matt
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00:05:38“you had to cut it with Robusta or do a commodity Arabica offering in order to bring the price down” — Matt
From a bedroom roastery to a national presence in just a few years.
- The first batch was roasted in a bedroom of Matt’s wife’s parents.
- Within a few years they expanded to a 500 g tabletop roaster, then to a full‑scale roastery and a chain of cafés across India.
- Their early focus on quality and storytelling helped them scale rapidly while keeping the brand authentic.
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00:05:48“we launched it out of a small bedroom in my wife's parents house” — Matt
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00:05:53“we started very small, we had a 500 gram tabletop roaster” — Matt
Kombucha Market Evolution in India
Anish and his co‑founders describe how kombucha grew from a niche health drink to a ₹200 cr market in five years, driven by health‑conscious consumers, rapid‑commerce distribution and aggressive price competition.
India’s kombucha market exploded from ~₹30 cr in 2021 to ~₹200 cr today and is projected to hit $1 bn by 2032.
- In 2021 the segment was roughly ₹30 cr; by 2024 it reached ₹200 cr, a six‑fold increase.
- The founders expect the market to cross the $1 bn (≈₹8,000 cr) threshold by 2032.
- The growth is fueled by health‑focused millennials and the rise of quick‑commerce platforms.
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01:45:00“we were about 30 crores in 2021 so it's been growing really well it's almost tripled ... definitely going to a billion dollars by 2032” — Anish
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01:44:15“we have about 32% of the market share” — Anish
Premium pricing sustains margins but cheaper rivals force price wars.
- Anish’s kombucha retails at ₹130, while many competitors sell at ₹90‑₹99.
- The higher price enables 70‑77 % gross margins, but a recent price cut to ₹99 drove a 6× sales surge.
- The market is fragmented, with many small players competing on price rather than brand story.
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01:45:56“our kombucha costs 130 rupees versus the market at 200” — Anish
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01:45:45“there is a kombucha at 90 rupees ... a brand from Delhi does it at 99” — Anish
Regulatory limit of 0.5 % alcohol defines the kombucha category in India.
- Indian law caps the alcohol by volume (ABV) of non‑alcoholic fermented drinks at 0.5 %.
- This limit differs from the U.S., where the threshold is around 1.2 %.
- The rule shapes product formulation, forcing brands to keep fermentation levels low or market their drinks as “soft” beverages.
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00:19:05“you can't sell a product above 0.5% alcohol” — Matt
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00:19:14“in the US it changed to 1.2 or something like that” — Matt
Regulatory Landscape for Low‑Alcohol Fermented Beverages
The conversation highlights how alcohol‑by‑volume limits, sugar‑based taxation and differing international standards shape product design, pricing and market entry for kombucha, tonic water and other craft drinks.
India caps non‑alcoholic fermented drinks at 0.5 % ABV, while the U.S. allows up to ~1.2 %.
- The 0.5 % limit classifies kombucha as a non‑alcoholic beverage, avoiding liquor licences.
- In the United States the limit is higher (≈1.2 %), enabling “hard kombucha” with 5 % ABV.
- These differing thresholds affect formulation, labeling and distribution strategies.
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00:19:05“you can't sell a product above 0.5% alcohol” — Matt
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00:19:14“in the US changed to 1.2 or one or something like that” — Matt
Carbonated sugary drinks face a 40 % excise tax in India, driving pricing pressure.
- Any beverage that is both carbonated and sweet is taxed at 40 % of the MRP.
- Removing carbonation drops the tax to ~18 %; removing sugar drops it further to ~18 % or 28 % depending on the product.
- This creates a strong incentive for brands to reformulate or price‑adjust to stay competitive.
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02:00:00“we are taxed at 40% which is ridiculous ... if you remove the carbonation you're back at 18 or 28” — Anish
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02:00:20“if you remove sugar then I'm at 18% so it's a very bizarre rule” — Anish
The UK uses a tiered sugar‑tax, illustrating a progressive approach to sugary drinks.
- Beverages with <5 g sugar per litre are untaxed.
- 5‑7.9 g sugar incurs an 18‑pence per litre levy.
- >8 g sugar attracts a 22‑25 pence per litre charge.
- This model shows how governments can nudge manufacturers toward lower‑sugar formulations.
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02:03:13“UK has three slabs: under 5g sugar no tax, 5‑7.9g 18p per litre, above 8g 22‑25p” — Anish
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02:03:31“they tax these beverages per liter sold right now” — Anish
Pricing Strategy and Consumer Sensitivity
Data from the founders show where Indian consumers draw the line on coffee and kombucha pricing, how premiumization can protect margins, and why regional footfall influences acceptable price points.
Indian coffee drinkers notice price jumps above ₹250 per cup.
- Survey data indicates customers are indifferent to price until it exceeds ₹250.
- The average cappuccino sits at ₹240, just below the sensitivity threshold.
- Brands that price above this level risk losing price‑sensitive foot traffic, especially in high‑traffic urban locations.
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01:25:50“they won't notice anything up until 250 rupees” — Anish
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01:26:07“cappuccino is 240” — Anish
Premium pricing sustains high gross margins for kombucha.
- Anish’s kombucha sells at ₹130, delivering 70‑77 % gross margins.
- When the price was cut to ₹99, sales surged 6× within three months, but margins fell.
- The trade‑off illustrates that a higher price protects profitability while a lower price drives volume.
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01:46:10“we operate about 70 to 77% at this price point very high” — Anish
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01:48:00“we dropped our price from 130 to 99 and our business went up 6X instantly” — Anish
Higher‑density office‑residential zones can support higher price points.
- Areas with mixed office and residential footfall generate steady repeat customers, allowing brands to charge premium prices.
- Pure residential zones see lower weekday traffic, limiting price elasticity.
- Location strategy therefore directly influences acceptable pricing tiers.
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02:55:10“higher density areas definitely... mix of office plus residential” — Matt
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02:55:20“pure residential you need very good catchment dense” — Matt
Distribution Channels: Quick Commerce vs Traditional Retail
The founders compare the rapid‑growth of quick‑commerce platforms (Zepto, Swiggy) with the high‑cost, high‑rent reality of brick‑and‑mortar cafés, highlighting the trade‑offs in margins, logistics and brand exposure.
Quick‑commerce platforms drive ~60 % of kombucha sales, taking 20‑30 % commission.
- Quick‑commerce accounts for roughly three‑quarters of Mossant’s revenue.
- The platforms charge 20‑30 % of sales, eroding margins but providing nationwide reach.
- This channel proved essential during the pandemic when physical footfall collapsed.
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01:47:21“quick commerce is about 60% of our business and they take 20‑30% commission” — Anish
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01:47:30“quick commerce has been a good channel for us” — Anish
High real‑estate costs force coffee shops to balance size with rent viability.
- In Indian metros, a 2,000 sq ft café can cost upwards of ₹80 lakh in rent, making it hard to achieve break‑even.
- Smaller spaces (<800 sq ft) reduce capex but limit seating, potentially turning away customers.
- The founders stress locating in high‑density mixed‑use neighborhoods to maximise turnover per square foot.
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02:54:09“capex becomes too large to fit out a 2000 sq ft store and the incremental revenue is not justifying the increase in rent” — Matt
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02:55:20“pure residential is also can work but you need very good catchment dense” — Matt
Delivery adds 20‑35 % of revenue cost, influencing final consumer price.
- Delivery accounts for roughly 35 % of revenue in some locations, raising the effective price per cup.
- The added logistics cost includes rider wages, fuel and platform fees.
- Brands must decide whether to absorb this cost, raise prices, or limit delivery zones.
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02:55:38“delivery is 35% of the revenue” — Rahul
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02:55:46“delivery adds a lot of cost to the final price” — Rahul
Brand Storytelling and Authenticity as Competitive Edge
Blue Tokai, Subko and Swami each rely on a strong narrative—heritage, design, and cultural relevance—to differentiate in a crowded market, proving that storytelling can be more valuable than ad spend.
Blue Tokai built a cohesive brand identity from day one, unlike early Indian coffee chains.
- The founders created a brand book, packaging, tone of voice and visual language before opening any café.
- This early consistency helped them stand out against generic coffee‑shop chains.
- Their story emphasizes Indian roots while delivering a global‑standard coffee experience.
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00:45:01“we launched with everything sorted in your packaging, how your brand puts out content, how you serve a dish and you nail it from day one” — Matt
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00:44:49“blue tokai started with a well‑constructed world for your brand from day one” — Matt
Swami emphasizes Indian heritage in its tonic‑water branding.
- The brand name explicitly references “Indian tonic water” on the label.
- Packaging highlights the origin of quinine (cinchona bark) and Indian sourcing.
- This positioning differentiates Swami from imported tonic brands and appeals to patriotic consumers.
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02:28:11“we say tonic water from India on our front label” — Anish
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02:28:20“we don't say Indian tonic water we say tonic water from India” — Anish
Subko leverages design‑driven packaging and bakery‑coffee pairing to attract creative audiences.
- Subko pairs premium coffee with artisanal baked goods, creating a “coffee‑and‑cake” experience.
- Their visual language is curated to appeal to designers, artists and the broader creative community.
- This focus on aesthetics and co‑creation (e.g., vinyl nights) builds a cultural cachet beyond the beverage itself.
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00:46:46“we try to be more accessible ... we do coffee and baked goods together” — Rahul
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00:46:55“we have a design language and we co‑create with the bakery” — Rahul
Product Innovation: Non‑Alcoholic Mixers and Functional Beverages
The founders experiment with coffee‑based cocktails, hard kombucha, and protein‑enriched tonic waters, showing how functional ingredients can create new consumption occasions beyond the traditional café.
Coffee‑based non‑alcoholic cocktails blend classic spirits’ flavor profiles with health‑focused ingredients.
- Mossant created coffee‑based “negroni” and “old‑fashioned” mocktails using kombucha and tonic.
- These drinks mimic the ritual of bar cocktails while staying alcohol‑free.
- The approach opens coffee shops to a bar‑like evening crowd seeking sophisticated, sober experiences.
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01:09:31“we've made non‑alcoholic old‑fashioneds and negronis using coffee and kombucha” — Anish
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01:09:14“the idea is to mimic what bars do with cocktails but use coffee as the base” — Anish
Hard kombucha (5 % ABV) is a growing segment in the U.S., but India’s market is not yet ready.
- In the U.S., hard kombucha is a $4‑5 bn market, comparable to regular kombucha.
- Indian consumers still need education on kombucha itself before accepting an alcoholic version.
- The founders see a future window for a hard‑kombucha launch once the base category matures.
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01:51:15“hard kombucha market in the US is about 4‑5 bn dollars” — Anish
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01:51:12“India still needs to understand kombucha before we can launch a hard version” — Anish
Functional tonic water with protein, fiber and low sugar targets health‑conscious consumers.
- Swami is developing a “gen‑soda” that contains a small amount of protein and fiber while keeping sugar low.
- The product aims to replace traditional sugary sodas with a nutritionally superior alternative.
- Positioning as a low‑calorie, low‑sugar functional beverage aligns with the rising health‑trend among millennials.
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01:58:25“we're making a functional soda with a little bit of protein, a little bit of fiber, super low sugar” — Anish
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01:58:36“low sugar, low calorie, that's the angle we are taking” — Anish
Supply Chain and Manufacturing Choices: Local vs Imported Equipment
The founders debate the trade‑offs between cheap Chinese bottling lines, reliable Indian manufacturers, and premium European equipment, emphasizing service, spare‑part availability and scalability.
Chinese bottling machines are cheap but suffer from long‑lead‑time spare‑part issues.
- Initial capital outlay is low, making them attractive for early‑stage brands.
- However, when a part fails, it must be imported, causing costly downtime.
- The founders recommend starting with locally serviced machines before scaling to imported equipment.
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02:59:49“service becomes a big problem with Chinese machines, spare parts need to be imported” — Anish
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03:00:00“you would have to import spare parts, it's a challenge” — Anish
Indian manufacturers provide reliable service and reasonable pricing for small‑scale production.
- Local options are cheaper than European machines and have faster after‑sales support.
- Brands can source glass bottles, bottling lines and carbonation equipment domestically.
- This reduces lead times and keeps operational costs predictable for early growth phases.
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02:58:10“Indian options are cheap, Chinese options looked the best but service becomes an issue” — Anish
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02:58:20“local manufacturers have good service and quality is not an issue” — Anish
Glass bottles cost about ₹89 each; scaling requires large orders that small players struggle to secure.
- A standard glass bottle runs ~₹89, similar to a can.
- Large bottlers only supply in bulk (million‑unit runs), making it hard for startups with limited capital.
- The founders advise starting with small‑batch glass or Tetra‑Pak packaging before moving to high‑volume bottling.
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01:46:58“our bottle would be about 89 rupees if I did a can it'll cost the same” — Anish
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01:47:04“you can't get a thousand bottles from a big bottler, they only give you a million” — Anish
Talent and Labor in the Café Industry
Barista wages, the evolution from simple servers to mixologists, and the operational impact of hot‑kitchen versus central‑kitchen models are explored, highlighting how labor costs shape menu and service design.
Barista salaries now range between ₹21k‑₹28k per month, reflecting rising skill expectations.
- Entry‑level baristas earn around ₹21k, with experienced mixologists reaching ₹28k.
- The role has evolved from simple coffee making to cocktail‑style mixing and food preparation.
- Competitive pay is essential to attract talent in a market where skilled baristas are in high demand.
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02:53:01“pay scale 21k up to 28k a month” — Rahul
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02:53:10“baristas are becoming mixologists rather than just servers” — Rahul
Hot kitchens increase operational complexity and make consistency harder to maintain.
- Running a hot kitchen requires more staff, training and inventory management.
- Consistency suffers because of higher iteration rates and staff turnover.
- Many brands opt for a central kitchen with a “make‑line” to ensure uniform quality across outlets.
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02:51:55“hot kitchen can help but it's not easy to retain talent and keep consistency” — Matt
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02:51:46“we have a central kitchen and a make line, freshly assembled and prepared centrally” — Matt
Central kitchens enable scalable food prep without the overhead of full‑service kitchens.
- Food is prepared in a single location, then distributed to cafés, reducing duplicate equipment costs.
- This model supports a 45‑50 % food‑to‑revenue split while keeping labor costs low.
- It also simplifies quality control and allows rapid menu updates across all outlets.
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02:51:46“we have a central kitchen, we have a make line, it's freshly assembled and prepared centrally” — Matt
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02:51:53“central kitchen helps us keep consistency and reduces overhead” — Matt
Future of AI and Creativity in the Beverage Industry
The panel debates how AI can predict trends but true innovation comes from counter‑trend creativity, and investors focus on cash‑flow fundamentals rather than hype‑driven valuations.
AI can forecast market trends, but breakthrough products arise from counter‑trend creativity.
- AI models excel at identifying emerging patterns, yet genuine innovation often defies algorithmic predictions.
- Creative founders who deliberately go against the grain can capture premium pricing and brand loyalty.
- The panel believes that as AI matures, the value of human‑driven counter‑trend ideas will increase.
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02:21:08“AI predicts trends, but creativity is a counter‑trend; that's where real innovation lives” — Nikhil
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02:21:15“creative people will be more valuable because they do things AI can't predict” — Nikhil
Investors evaluate beverage startups on cash‑flow multiples, not AI hype.
- Investors look for sustainable EBITDA and cash‑flow generation rather than speculative AI‑driven growth.
- Brands with high margins and repeat customers are more attractive than those chasing viral AI trends.
- This disciplined approach keeps capital allocation focused on fundamentals.
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02:21:35“investors look at cash multiples, not hype, that's why I haven't invested yet” — Nikhil
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02:21:46“I find them expensive, so I stay conservative” — Nikhil
AI tools can aid product development but cannot replace authentic brand storytelling.
- AI can help with data‑driven flavor pairing and packaging design.
- However, the emotional connection forged through founder narratives and cultural relevance remains irreplaceable.
- Brands that blend AI efficiency with genuine storytelling are likely to succeed.
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02:21:45“creativity will get a premium, AI can't replicate that human story” — Nikhil
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02:21:52“AI may predict, but the brand story is what makes people choose you” — Nikhil
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