- Jan. 03, 2022 -
Kopi Kenangan is Indonesia's leading coffee chain brand, valued at $1 billion after recently completing a $96 million Series C funding round.
As young people begin to appreciate locally produced coffee, coffee has become increasingly popular in Indonesia over the past few years.
Indonesia is the world's fourth-largest producer and exporter of coffee, behind Brazil, Vietnam and Colombia. Coffee beans produced in Indonesia are well known among coffee lovers around the world, such as Mocha Java, Sumatra Mandheling, Sulawesi Toraja, and so on. According to Statista data, Indonesia's coffee industry revenue is expected to be about $9.5 billion in 2021, and the market size is expected to grow at an annual rate of 9.8% by 2025.
Coffee chains such as Kopi Kenangan, Kopi Janji Jiwa, Fore Coffee and Kedai Kopi Kulo have been established over the past four years and operate on a grab-and-go model. With food delivery apps like GoFood and GrabFood, customers can order from the app, choose their own store or takeout.
The companies have similar business philosophies: they usually have their own signature ice cream coffee, while offering multiple types of coffee, tea, chocolate drinks, being active on social media, often offering discounts, etc.
Unlike Starbucks or local brands Excelso, Kopi Kenangan and other stores are generally smaller, with limited seats, simple décor, no WiFi, most of the business from takeaway and take-away orders, mostly in the greater Jakarta district and Java.
Lower prices and high-profile social media pitches are the competitive magic weapons for these new brands. A single cup typically sells for between IDR 18,000 and IDR 22,000 (about $1.26 to $1.53), half the lowest price for a single cup at Starbucks. "(Price) is a very important factor. Brand loyalty does not exist in the Indonesian market, and customers often opt for promotions and discounts. Sandeep Sharma, an analyst at investment research firm Third Bridge, told KrASIA.
The outlook for the coffee industry and the grab-and-go business model have captured investor interest. In November, Jiwa Group, the parent company of Kopi Janji Jiwa, received investment from Openspace and Capsquare Asia Partners, and Hey Kafe from Trihill Capital. Other regional companies, such as Singapore-based Flash Coffee, are also in the spotlight of investors, receiving $15 million in financing for expansion in Asia.
Kopi Kenangan enters the Unicorn Club
Kopi Kenangan is Indonesia's leading coffee chain brand, valued at $1 billion after recently completing a $96 million Series C funding round. The round was led by Tybourne Capital Management and participated by Horizons Ventures, Kunlun Capital, B Capital and Falcon Edge Capital.
The chain currently employs 3,000 people and has more than 600 stores in 45 cities. Its rival Kopi Janji Jiwa has 800 stores and Kedai Kopi Kulo has 250 stores.
Kopi Kenangan not only sells on food delivery platforms like GoFood and GrabFood, but also has its own independent mobile app, which is the highest-rated and most downloaded coffee app in Indonesia. Kopi Kenangan has sold 40 million cups of coffee in the past 12 months and is expected to sell 5.5 million cups per month in Q1 2022. Kopi Kenangan is said to have more than doubled its annual sales year-on-year and is optimistic about future earnings.
Kopi Kenangan is targeting the market between street coffee and Starbucks, emphasizing convenience and low prices. Kopi Kenangan's shops are small and simple, usually only 10-20% the size of a traditional coffee shop. CEO Edward Tirtanata told KrASIA in an interview that smaller stores mean lower rents and single store operating costs, and that after reducing costs, companies can invest more in technology, coffee machines, and high-quality raw materials.
Kopi Kenangan has also ventured into other food and beverage sectors, starting bread and pastry brand Cerita Roti in December 2020 and Chigo, a takeaway fried chicken shop in 2021, as well as family-friendly restaurant Rumah Kenangan and specialty coffee shop Kenangan Heritage.
Ruth Davina, Public Relations and Communications Manager at Kopi Kenangan, told KrASIA: "Kopi Kenangan was founded with the vision of becoming Indonesia's largest local coffee chain. Over time, we have found it necessary to explore beyond coffee, enriching our products while also providing quality options for customers in different market segments. ”
The company has also ventured into the non-food and beverage sector, launching coffee-based body scrubs and lip scrubs in partnership with local skincare brand Somethinc, and signing a partnership with SDF International to sell its official peripherals in Indonesia. SDF International is licensed by the Korean K-pop combination BTS and bag brand Built NY.
"It's a natural development for coffee chain brands to explore side sources. For example, Starbucks has a large amount of revenue in addition to coffee from other products such as food and derivatives. Sharma added: "Kopi Kenangan has a good brand image and a lot of capital to upgrade and try new products. ”
Crowded markets
The coffee market is becoming more and more crowded, but Edward Djaja, CEO of Hey Kafe, says there's plenty of room for brands to compete in the coffee industry.
"In the past few years, the development of online takeaway platforms has led to a rapid increase in demand for takeaways. The take-and-go model is perfect for these customers. He told KrASIA that 80 percent of Hey Kafe's sales come from takeaways. Founded in June 2020, Hey Kafe plans to launch the mobile app in the second quarter of 2022.
Third Bridge analyst Sharma is also optimistic about the growth of this industry. "There are still many opportunities in the industry, but the retail strategy will change. Many coffee shops were located in shopping malls or office areas before the pandemic and are now beginning to move into residential areas. Many brands, including Kopi Kenangan, have even opened shops at gas stations. I think this trend will continue. ”
Brands will also continue to use online channels to grow and compete with established starbucks chains. "Digital-first products and technical support will help them get more customer information for retention," Sharma says. ”
He added that the brand's next step will be to expand beyond Jakarta and Java. Kopi Janji Jiwa is setting up shop on smaller islands like Maluku and Papua. I think more players will also be looking for market share outside of big cities. ”
Editor's note: This article is from KrASIA, originally titled Kopi Kenangan becomes unicorn with USD 96 million from first close of Series C by Brandon Lee; Title Opportunities are brewing in Indonesia's grab-and-go coffee scene Written by Khamila Mulia
Wen | Shi Yi
Editor| Zhao Xiaochun
Pictured| Unsplash, Kopi Kenangan official website