Coffee is fast becoming India’s favourite caffeine fix. Legend traces coffee’s arrival in India to a Sufi saint in the 17th century. For years after the first beans were planted in the Baba Budan Giri Hills of Chikkamagaluru, Karnataka, coffee was mostly consumed at home or in some cafés. This began to change in the 1990s with the advent of homegrown chains like Café Coffee Day. Others followed in its footsteps—with the foremost being Blue Tokai Coffee Roasters that spotted the opportunity in 2012. Today, coffee culture has spread across the country, powered by young Indians. What started as a trend is now a full-fledged business story.
Behind this rise is a mix of access and middle-class aspiration, growing awareness about specialty coffee, more independent cafés as well as multinational chains, and a stronger brew-at-home culture. Social media has helped push coffee into the mainstream, online delivery has made it easier to order in, and wider availability of brewing equipment and quality beans has turned it into a daily ritual. The result is a generation that sees coffee as more than a beverage—shaped by purists chasing that perfect shot of caffeine.
Blue Tokai Co-Founder and COO Shivam Shahi speaks with Business Today Group Editor Siddharth Zarabi and Consulting Editor Aabha Bakaya on specialty coffee, shifting consumer habits, and how the pandemic triggered a surge in consumption. It also zooms in on Gen Z, which is increasingly choosing coffee over tea. Edited excerpts:
SZ: Take us back to the beginning. How did Blue Tokai start?
A: It started 13 years back. The idea was simple. India was growing good, specialty coffee, but most of it was getting exported. Domestic consumption was minimal. We went to the source. We saw ample amounts of good coffee that Indian farmers were growing, but no one was trying to create a brand around that, because everyone felt India was a tea-drinking nation. Instead, it was treated as a commodity play. Cafés back then were run as a space where people would meet. We thought there was an opportunity, and maybe over 10-20 years, things would work in our favour because building anything around coffee takes at least two-three decades.
AB: What did starting up look like?
A: We started doing our research, went to farmers. They were hesitant—asking us what we were trying to do. There was no demand in the Indian market and we wanted specialty-grade beans. We were the first to start specialty coffee in India. Before us, there was no player focusing on such quality stuff. After a lot of convincing, we managed to get a couple of sacks (of beans) from growers as an experiment because they had zero hope that this would pick up in India. We started with a very small, two-kilogram roaster at home, began selling online, and in very odd community-driven places because there was no demand. You had to educate the consumer. People who were well-travelled were the ones who appreciated quality. They became our first set of consumers.
SZ: When did you realise that this could become a scalable business?
A: After about two years, when we were still a home-run business, we realised this opportunity was big. If not us there would be someone else who would pick up the opportunity, as coffee is one of the most consumed beverages globally. We raised funds, although it was a big task—we were initially unsuccessful in convincing potential investors.
AB: Your first café was at an unusual location. Why Champa Gali in Delhi?
A: At the end of 2015, we raised our first small cheque from the Kirloskar Family Office. We then selected the oddest possible location to start. Champa Gali used to be a chicken farm. The rent was low, there was no one around, and we could control the environment, and do what we wanted. We built up that location, set up our first live roaster, and started online sales to hotels. That is how our cafe journey started.
SZ: How would you describe that stage of India’s coffee culture?
A: If the current decade is called the ‘third wave of coffee’, that was the second wave.
SZ: Where is the growth coming from today?
A: We are focusing on going deeper into a city. Most of our outlets are in Delhi NCR—around 85. There are 48 in Mumbai, and around 20 in Pune and Kolkata. This wave is global, it is a lifestyle, and it is present wherever there are young people and the earning is decent. People were very sceptical about Kolkata, but we have the most successful business model there.
AB: Is coffee finally beating tea, at least among the youth?
A: There is no fight. In my opinion, anything that can be made at home, and that you have grown up with becomes slightly less premium. Fetching a good price for that product outside the home and making it a viable business model will be challenging.
AB: Your cafés turn profitable very quickly. What’s the operating logic?
A: You must balance expenses. Do not rely on marketing to develop your business, because the product will always win, no matter what. In a café, 40-45% expenses are rental, marketing, and discounts. You must control that. We do not care about visibility; we care about neighbourhoods. Make your product right and convenient for the consumer. More than 95% of our stores have been profitable in the first month.
SZ: Did Covid change the consumption behaviour of youth?
A: Coffee consumption in India has surged post Covid, not just in cafés but through deliveries, as people got accustomed to ordering in. Lifestyle habits have changed too; Indians are going out more often, and coffee shops fit seamlessly into this rhythm, whether it is a 7 a.m. run, a mid-morning meetup, or an afternoon break. Today, coffee consumption here is still measured in grams per person, compared to kgs in other countries. Even a small shift in habit represents a massive opportunity. There is enough room for multiple players to grow and for this category to create at least one unicorn.
AB: Are you building towards unicorn status or an IPO?
A: We never reverse engineer. This is a business driven by patience. What we are trying to build is an Indian coffee brand that is going to be famous for good quality across the globe. I do not want to be in a situation where a person who has trusted me loses money.
Most of our early-stage investors have reinvested. All the big players have reinvested because we do not overpromise or oversell. People have trusted us with their money and that is going to happen in the public markets too. The moment we gain the confidence of not disappointing anyone will be the time for an IPO.
AB: Is the market overcrowded or is this just the beginning?
A: India just has 2,300 cafés. In Shanghai or New York, you have more than 10,000 cafes. So, it is a heavily underpenetrated market. You may see this as an overcrowded market, I see this as just the start.
SZ: What about coffee bean prices?
A: The prices of coffee beans have risen 50–60% this year. It is not just Blue Tokai, most players have not been able to pass this increase to consumers. While prices are likely to remain elevated in the near term, we are hopeful that they will stabilise. The specialty market is still young, and both consumers and firms are adapting to these fluctuations. Overall, this price rise reflects global trends in supply, quality, and demand.
AB: What are some operational challenges in running this business?
A: Managing people is our biggest challenge. Our staff comes from varied backgrounds, and getting them to adapt to Blue Tokai’s standards isn’t solved with a 21-day training course—it takes time, experimentation, and even professional guidance. On top of that, we don’t outsource anything: breads, fillings, croissants, cookies, everything is made in-house. Building this takes years, which is why patience is key—profitability doesn’t happen overnight.
It is not just about selling coffee, it’s about creating experiences, educating consumers, and supporting growers along the way.
@szarabi, @aabhabakaya
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