How This D2c Brand Hit 39 Margins On Quick Commerce Building A 25cr Coffee Empire

TITLE: 2KrG4n9A2Zc CHANNEL: Unknown DATE: ---TRANSCRIPT--- By the way, stuff that you don’t want to tell the world, you’ll edit it out. So if blinket seizes,

we realized that coffee lost life every 7 minutes after you ground it. We said if we packed it in zero oxygen, if we nitro flashed it before sealing, it was a simple solution to make this coffee remain fresh for the longest period. Do consumers are they able to make out if I have beani versus if I go to a cafe whom you are supplying? Will the taste be similar? will surprisingly every brand out there in the coffee category wanted to come to us to manufacture. That’s very interesting. Your first innovation was not in the coffee per se. It was in the packaging and who looks after your brand. We did form the brand initially but we never really pushed it because we didn’t have money. Two things in a coffee. The color of the coffee is an appetizing element. Any coffee anywhere in the world, the coffee is never in this color. This is not strawberry juice. See, if you’re consistent with every touch point has to be absolutely perfect. A very important question you need to ask both of you as owners is are you I thought bringing Shivan Toshan to to to the table for you guys and Beanley will be amazing. Thank you. Thank you so much. Thank you. Thank you for being a consumer. I think first out thank you for being a consumer. Uh it’s been absolutely amazing. I mean off of what uh off the bat first thing that we want to say is other than Shantu the entire Bombay shaving team has been absolutely so helpful through our journey. Uh that’s a first. That’s a first. Good. You should always say we value your business. We do value business. We value uh uh we value how much they’ve helped us through our journey. I think Nate has been absolutely his support to what we’ve been doing has been invaluable. Okay, cool. Let’s let’s let’s go into what you guys are doing. Welcome, welcome. Awesome. Thank you. So, like Rahul mentioned, it was a one product uh it was a one product uh journey. We started with one product which were the drip bags which are right here. Uh so these made coffee accessible at home. No fluff, no equipment required. And uh you just open this bag on a uh on a cup poured hot water and you had freshly brewed coffee easily available at home without any equipment without anything required. So that was the one product we started with and the small innovation that we made in in it was uh we realized that coffee lost life every 7 minutes after you ground it. So uh we went back to the drawing board and we said if we packed it in zero oxygen if we nitro flashed it before sealing. It was a simple solution to make this coffee remain fresh for the longest period. And right after we did that surprisingly every brand out there in the coffee category wanted to come to us to manufacture. Wow. So we were manufacturing for some of the biggest brands in the country including a blue kai third wave which were coming up and be becoming larger to other operators like coffee sleigh uh we did 93 lots of I mean every brand out there that you can think of in coffee probably came to be India at some point for innovative coffee products after after pourover bags we went into dip bags with that same promise that every dip bag would be packed in zero oxygen it would be nitro flush before sealing and we did the same to cold brew bags In fact, we became the first in the world to make cold brew bags. Uh I might be wrong, but I think from what we know, we were the first in the world to make it in. Yeah. Yeah. To make the cold brew bags in. And then we built India in Okay. Yeah. India’s first nitro coffee canning line. And it’s so funny, but at that point uh five were you doing all this? Like your your This was in our small little office factory which was all of,000 ft at max. Wow. 1,000 square ft is like I think a stretch stretch. It’s a stretch. 000 ft as a small trying to sound. It’s probably this size. I remember through co those five lakhs were very difficult to come by when we wanted to make build the canning line. So we we were talking to blue guy talking to Matt and I was telling him listen this is what it is and uh uh we’ll make it and we we were already working with them. So the guy on the phone by talking to matters you okay we’ll give you the money because it wasn’t it wasn’t too much money for them and it was because we were billing to them every month they could write it off also so he was like sure I’ll give you the money and that’s so sweet sometimes these doors yeah in one room we built uh we built this manual canning line and through co I think that was uh the most exciting project you’d land up at work every day to build the nitro coffee canning by the end of you were experimenting every knew how to do this like are you trained in education? No, everything was uh on the journey on the job. Wow. On the job on the go. There was no chat GPD. So it was difficult to find the right resources to you know understand how to do it but uh through a lot of trial and error we figured it out. That’s amazing. Okay. Yeah. We just learned on the job and I think that canning line is still there in office. It’s still manual. We still use it. It still exists. And to think of it now to have done that with that much money seems like such a distant dream. We uh we built a canning line out of what? Less than five lakhs. Less than five lakhs. How much does it cost to build a canning line? Uh I think if you in today’s time a similar line will uh would you back like at least 40 lakhs? 30 40 l. Do you have a patent on that? We don’t unfortunately. Okay. Okay. It’s very interesting. Your first innovation was not in the coffee per se. It was in the packaging and it was in the packaging which actually was a very different way because a lot of people focus on the beans and where is it from and so on but it’s a very interesting. Yeah. So I think for Bindi I think the uh the journey we never started by saying okay we make coffee great again or anything. We said we make coffee is going to be great. It’s going to be the best but it’s also going to be damn convenient. It has to be really easy to have your coffee. We didn’t want to complicate it. While everybody was talking about tasting notes around uh rosewood, blueberries because we were saying make it damn convenient. Yeah, let me make really good coffee. Because from the beginning, the problem the product solved for us was making good coffee convenient and we you know that was our only goal that we need to make a decent cup of coffee a you know accessible to people at home. Now we have who has what. Thank you sir. Thank you. Thank you. So there’s a whole lot of everything. There’s We’ve got So, this is an iced Americano because he said I think you don’t drink milk or have anything sweet. He has I won’t have milk. He has milk. So, this is your iced Americano. Okay. And then we’ve got if you don’t want sweet and this an ice latte. Does that work? Yes. That’s what we ask. Okay. And then so this is and sh classic. I asked him what’s your best product? Give me the one that the customers are buying the most. That’s a very interesting one to have. And which one is that? The tiramis or something I think. Yeah. So, what is this? This is the tiramisu ice latte. So, let me open that for you actually. Perfect. And then it’s got a tiramisu soft top and cheese on top. This is the Vietnamese. So, this is slightly sweet. It’s with condensed milk. Also one of our bests sellers. And this is also the Vietnamese. You offer it to everyone? Yeah. Sh can you sh you don’t have the Vietnamese you can have that I’ll try that actually you should try this also this is also very uh okay thank you but do consumers are they able to make out if I have beani versus if I go to a cafe whom you are supplying will the taste be similar will how does that work actually not uh there is uh so there is a very very large dependency on how you brew your coffee I can give you the same beans I can give you the same product and you could still get it Because a lot depends on how you brew your coffee. So, everything makes a diff difference to your final coffee, right? It’s the bean. You could use the bean and you could roast it differently, get a different result. You could use uh the same roast and brew it differently and get a completely different result. Uh so, there are a lot of things that go into making the coffee the right way. And uh yeah, it’s just it’s just about so what we’ve done at our cafes is uh we’ve we’ve boiled it down to a kind of taste profile that we like and the team also likes and we just go with that. Yeah. So you have quickcommerce where your is this the assortment that sells the most on quickcommerce porovers. Quickcommerce uh no a quickcommerce hero is this product. What is that? So this is a snacking product which is coffee snack for kids. It’s a dip. So we did it. Oh wow. So Oh wow. Yeah, you take one out. Oh, yeah. We actually did that because parents would come with their kids to Beani, give them no caffeine and want to leave. Kids would eventually grow up to have no taste of coffee. Taken right out of the playbook of Nestle. They did this in Japan. They give kids the taste of coffee, hooked them onto coffee and Japan which was one of the largest tea drinking nations in the world uh became a large coffee drinking nation by far still not purely just coffee. There’s a case study which I think that is true and they did the same for afternoon discoex in London. Oh in the 1990s so they noticed that people would go to the discoex so they made coffee a part of that ritual. Really? Yeah. Absolutely. That’s how they target. That’s why tea failed for years. Yes. That’s why tea is seen as the economy drink and coffee is like something. Oh wow. You have Okay. So you have the Choco Dips and the And then there’s a coffee range which is right. Okay. And and how big is the commerce business now? So uh if we talk GMV, we do overgrow. Okay. Per month. Per month. Okay. So you do one one and uh.5 on GM. on GV GMV net is about uh 72 or lakhs. How so? If you look at if it’s 40 40 20 it’s 1 one and.5 2.5 net will be 1 1.7 1.8. Okay. So it’s roughly a 2025 cr per year business. Let’s move to your questions. Uh so I think uh uh this is innovation versus scale. This was uh this is something that forever has been something we’ve been thinking of that uh how do we balance the two? uh how do we go between innovation and scale? So uh that’s that’s the question. Uh we’ve obviously innovated in uh in various categories and when uh when we go from category to category from channel to channel, product to product, when is it that you make a hard stop to say that now we’re going to choose scale over innovation. We’re going to go and say we’re going to scale this product and not not just look at purely the innovation which part because innovation sometimes means you’re still targeting a niche. you’re not targeting the masses, not going in for innov uh not going in for a very large market size. For example, instant coffee again was a very very large market for us but also very unforgiving market. Uh you go after this large channel without innovation, you could uh you could get it very wrong and we’ve uh we’ve seen we’ve seen that happen. It’s happened to us also going after that category get it wrong and and that that obviously has uh probably scarred us scared us a little bit from uh from scaling a particular channel beyond its means and uh so when is it that you uh when is it that you choose that sort of scale as uh as opposed to profitability and innovation at what point you do that yeah so it’s a see don’t look at innovation as niche I think that’s a fundamental starting point where I would ask you to Change your thinking. First ask the question, what can you innovate on the core? For example, let’s take coffee. What have all been innovation? A simple sugar plus dairy is a coffee maker. Okay, it makes life easy for the consumer. That’s innovation at the core. So, you’re making things easier for the consumer at the core. Next is, is there anything in the product that you can pull out dramatically and do something? Let me give you an example. Claron herbal essence. All of us and shampoos had 1% fragrance incorporation. They came with five. And suddenly the experience was very very different. Okay. Take Dove as an example. The creaminess of that product at 25% moisturizing cream is a core innovation for every soap at every ship. So is there something you can pull out as an aroma as something which is very different as a core and that’s how you build great brand. So look at core and what you can innovate. Then you look at the other stuff. Now in your case what is innovation in consumer experience is a question that you should ask. What is innovation in business model? Today’s world you can innovate in so many platforms not just the product. So don’t be limited by product. Please combining three different things and doing something differently as a business model is in itself a great innovation. Clarification. You’re just is this about saying if I’m building my own brand is scale versus if I’m manufacturer and innovator for blue Tokai and third wave is that how you are looking at it because bandwidth of the team kind of thing that if we are innovators then we are not or is there a conflicting if I’m working with blue tkai then I’m not no not really I don’t think that’s a channel we’ve stopped OEM as a as a channel we’ve stopped totally we don’t do it anymore but uh the idea is if you’re just innovating when are you scaling and yes bandwidth does be is one of the challenges obviously the second one being that uh a not so innovative product will obviously land you up with basically saying either we can do me too participation and scale it with capital and you know position and so on or we innovate in which case we become a scientist company and then if you have a scientist DNA then scaling becomes like can you focus on it I think it’s a focus question you have a huge advantage you have your own cafes That’s your innovation test lab. Just put out a new product of yours for one week there and see how it goes. You don’t need anything else and it is fly below the radar innovation. It works scale it. It doesn’t work forget it. That’s the biggest advantage of having your own outlet. We are in the business as founders of creating growth loops that work at scale. Moment you find it just then you raise money then you crack deals with your OA whatever you have to do to make their grow. Now sometimes different innovations will have different kinds of growth loops. But my push would be keep an eye if this works what are we going to do? What is what are Rahul and Sam and the Beanley ecosystem going to do to make this growth loop super fast. If it doesn’t work how quickly are we going to what’s the stop loss? How how are we going to try to not do this like not do the fair enough. Next one. Innovate. Have a clear plan. If this works what are we going to do? What do we need 6 months out? How much money do we need? Do we need to raise debt? Do we need equity? Do we need a chief growth officer? Do we need a hacker? Do we need the best Starbucks retail person possible to build this out in our from 4 to 40 stores whatever you need to like my strong view is this has to be innovation and immediate scale on one and one in 10 and then a stop loss for the other building on what Shant is saying a very important question you need to ask both of you is are you playing defense or offense most entrepreneurs start playing offense then or of them start playing defense that’s when they lose that’s a very good point offense means I’m a gorilla I will hit and run. I will take mistakes in my stride. So you look at the big brands, all big brands who play defense lose. All big brands who play offense well. That’s a good point. That’s a philosophy you need to instill in yourselves. Slightly from a not from a founder lens, but from a operator investor lens. I think it’s not either or but you have to know something which is as I say pays the rent. Okay. The cash out. there’s it pays my rent. I know it is successful. Okay. The kind of talent that is required to run that part of the it’s a business or a proposition is very different. It’s just about execution excellence. You can’t go wrong on it. And there is a certain part which is saying that’s where you will need to innovate, experiment and so on. The kind of people who do that are also very different. Okay. You can’t have the same guy who’s making sure your logistics, procurement, packaging, everything is time. Somebody who’s trying to experiment, he needs that he or she needs that freedom, creativity and so on. So to me that’s your next wave. So your first wave is saying my next 12 months or X months revenues comes from this. I’m not banking on breakthrough because some breakthroughs take time depending on the kind of innovation. If I want somebody to change their habits, it’s different. Okay? Because I’m used to doing things in a certain way. You want me to change three levels where I have my coffee, how I have my coffee and what I have not going to happen so easily. It will take time. It will take resources. So when you have scarce resources at least and that’s where it happened like Amazon also does it for the longest time AWS is the only thing which makes money ITC also cigarettes was the only thing making money but you need to know you’re taking the resources generated there and you are reinvesting it in innovation and all otherwise you’re always running into saying where will if this doesn’t break through and of course something may break through you go close to bankruptcy and then you come back and that becomes stories of uh legend but to me that is point number one and reliance also Largest companies do that. You know where your cash cow profitable stuff comes. It also helps for funding because what you go and tell investors is saying this is easy. This is repeatable. This is predictable. This is where the big growth will come from. So for somebody they just underwrite the amazing track record of the past on this two business lines and these three things are the exponential hockey stick rocket or whatever else that happens. The ties to won the coffee. Yeah. But but then next time and 3 years later one of those rockets has taken off two have failed it’s okay but your core also keeps then shifting and changing right so what your what’s your core today may not be your core 5 years later cuz you have pivoted that three times and in this space especially if you’re on Quickcom your innovations will not remain innovations for too long you have limited windows to scale cuz within a month you’ll see a blinket private label launch the same thing within two months you’ll see a Starbucks launch the same flavor you’ll be like because you can’t protect these competition will come and then your innovation the worst thing is your innovation getting misattributed to your competition. No, somebody executing it better, faster, cheaper, then you are like screwed then completely. And that’s yeah building on question points you know have a core whatever you define that core as a 100 cr entity 50 cr entity 150 cr whatever that core we always find you you know what CK Prolad said you need a lot of blocking and tackling you need managers who understand the blocking and background okay and then you have the innovation one of the things again I think I’m sensing it innovation need not be expensive if you work in an ecosystem for example work with coffee gardens work with coffee resources. Work with a coffee research center. Okay? There are many educational institutions who do, you know, agriculture research institutions which do work in coffee. Partner with them. You don’t need to do everything yourself. There’s so much material available out there. Please. By the way, have you guys traveled to Latam? No. No. The first thing you guys should do is travel across Latin America. Okay. Cuz other than Argentina, every country has phenomenal coffee. The Brazilians say they have the best. The Costa Ricans say have the best. Panama will say they have the best. So across and when you go there Starbucks owns tons of innovation facilities in Costa Rica. Okay. They experiment that they have all kinds of you know baristas and they will do different I don’t even understand. I just go and drink. That’s good. But but I think Latin America is a great hub and India is way way behind. Mexico will say we have something. So every country other than Argentina actually says they have the best coffee and you you will learn so much. So if you guys are doing coffee and haven’t been to Latin America and now is the best time to travel to places like Argentina Jan Feb across the this thing a small factoid Brazil had excess production of coffee beans. They called Nestle and said can you help us 1930s 1930s that’s how Neskea was born. Oh really? I didn’t know that. That’s how Neske was born. Wow. Nestle was invited by the Brazilian government to take after the surplus coffee beans. Oh yeah. I mean the amount of innovation that you’ll see in Latin America between coffee and alcohol, coffee and something coffee and what goes every country has and I’m sure since you have the lens you will be able to dig all of it and then say what works for the Indian palette. But Latin America is the hot bed of coffee innovation. That’s where Starbucks, Nestle, Li, everybody takes their coffee from all of these farms. And uh should also in London there is a chain now which I think has gone to New York and Watch House coffee. Yeah. Yes. Watch house coffee the coffee is 30 coffee for one coffee. Yeah. So 30 into 120 is one coffee. And then you have a Starbucks, Costa Coffee, Nero, Pretto Manager and all of them will be at three. And if you go to washers coffee, how the 3 lb to 30 lb journey happens is spectacular. What washers coffee has done. How big? It’s big. It’s now big. They have raised I think this third round or something. And wow, it’s working. They raised their first round was like they saw a few guys come more and more and they said, “Hey, you know what? Do you want to invest in us? You come here. I’m making money off you. Why don’t you invest?” So it’s a very phenomen. So you should my suggestion would be extending shift’s point not just the coffee stuff in India and uh so on but just go around you will see so many coffee auctions that happen in some of these places you learn so much from we actually did that but we limited ourselves to India we went to the coffee board in India we studied there for I think what a month smallest innovation we should never forget the power of it the example that you showed of or you said 12 and the 13th is free I saw a cafe F in was Costa Rica or Brazil they did a very different thing. You have this but it’s surprise. So you don’t tell you say yeah you can come suddenly you get the third coffee free. Absolutely. And you’re like I never expected I expected to go to 12 to get the 13th. Right. It’s a very small one and many people are like saying I was standing in the clinic like maybe today I’ll get a coffee free. No they are not like it’s not the price of the coffee. This amazing like surprise. Yeah very good point. You will be amazed how how innovation. So I’ll give I’ll give you in my world again. Sorry a lot of my examples come back to my world. I have like kind of an ostrich in the so and you’ll probably know this better than anyone else. Axe was 30 40% market share in deodorants 75 one time. Crazy like crazy. They own the deodorant market at thousand crores of the category they own 70%. At 2 3,000 they must have 40% defense right then they played defense. Then the first innovation happened on product. It was not an innovation. Daran said boss India is a longevity starved hot country deodorant goes up if you put it in water it lasts for 3 4 hours so he basically said screw all this aerosol stuff I’ll put water fragrance make it perfume and give it in a can cuz people like the form factor of a can but we’ll give a perfume now that now fog went to like a thousand cr business over a 5 10 year period raise some money etc now that was product innovation but not scientific it was just a change in the base now now the real innovation happens after that right brands like Bellavita eta I realized that deodorant but consumer could say fragrance wardrobing young consumers want like people like us will have one or two fragrances a Chanel five or cool water etc two three for different occasions today’s young 20-year-old wants 10 12 15 date whatever so now they don’t want they don’t want a 5,000 perfume they want 10 500 rupe perfumes smaller now can you break it now it’s a water and a fragrance now let’s make it 10 okay Now, now here is the innovation at 299, 10 at $6.99. Okay? In a category that’s operating one perfume for 4,000, 3,000, you’re now getting 10 for 10 for $6.99. All trial packs. If you like one and buy 100 ml at let’s say $9.99, you get 50% discount. So, the trial is free. You buy a pack of four for 29 250 rupees and you then buy the next one for 999 you get 250 off. So the trial is free. Beloved does a,000 cr business just on this. There is no innovation on the product. It’s only innovation on trials and the ability to tell customers your trial is free. That’s it. It’s a,000 cr business. The category 7 8,000 crores now. And all young consumer office you will you should see the bead that gets together when there’s a free giveaway of fragrances. Boss people are like just gunning for it like they live boss it’s crazy just nothing this so price one product change then the trial and then the category category is excluded now doesn’t even come close we have tried we our business is 100 crores fragrances we trying to get to 100,000 I’ll I’ll phrase Shantra’s very important point differently which is never look Especially when you work with young people and coffee is a young category. Always perpetually young. Never think of penetration, think consumption. Consumption is about experience of different feelings, different stuff. So the more you’re able to titilate those experiences, your consumption goes up. If you think penetration, you’ll never get ahead in these type of categories. So uh omni channel mix and how to narrow down on a channel currently how how it spread is obviously we told you about the B2B business cafe business and the cuc business. Now uh the uh the cafe business becomes a negative cash flow business for us because you get paid up front your vendor payments are over 30 to 60 days it’s one channel that’s one reason to take it up a lot more than other channels because it’s a cash flow uh choice. Second, the other two channels are uh the B2B business. Obviously, it’s continuous EIA, but good EIA, but you’re also you’re strapped for cash flow most of the time. Payments are coming in after 90 days, in some cases 60 days, but uh 60 to 90 day periods. And uh then a channel like QCOM 45 days keeps paying you. But uh here again, AITA becomes eventually at larger scales will become I think it’s not going to be something which is going to be easy to come by. So what you do in our uh so some channels obviously uh as on date look bigger than uh other channels but over time they will probably not be our best channel for example cafe today may not look like our best channel but at scale because it’s our own distribution channel I believe it’s probably going to be it’s going to be a better choice to have to have made like uh similarly for Bluetooth for example I think it was a better choice to have focused on their own distribution channel versus uh scaling on someone else. So how do you what would you suggest a brand like us do because revenue is something you want to garner for today but in the long term we do want to build our own rep uh solving for today or solving for tomorrow is the best way to put this question very strong point of view so I’ll let shintosh kind of we have a very strong point of view why don’t you go ahead we won’t be influenced by it it’s okay my view is you guys have innovator manufacturer DNA you guys create cool stuff and I think if you are in if you are in a world of creating cool stuff in a market where quickcommerce is launching five to 10 dark stores across the board per week. It is insane how quickly this can scale and then you should use your in my view you should use your in you should test those innovations in your cafes create you should use your cafes almost like brand experience outlets but your I’ll be very surprised if you if if the innovation continues like this and you are able to create great branded products at the right price it’s convenient it’s versatile it’s affordable it’s great coffee I’ll be very surprised if quick is not 80% of your business in 3 years so I would say see this is a very difficult challenge. It’s never easy. Okay. So, in my experience, let’s take you operate with five channels. So, I don’t you need reasonable presence and at least three to have leverage. Okay? If you’re only dependent on one, you’re hostage. Okay? How much should that one be is a decision you need to come to based on your philosophy of business. Okay? So, you need a triad in my book. So, let me give you let’s say back and let me give you real life example. Take FNCG 15 20 years ago FNCG said I have a brand I have distribution I don’t need to park him with modern trade got slammed got slammed in modern trade Himalaya you know body wash is number one not Hindustani right as an example okay then quick commerce came big basket came the same FNCG boy said I don’t want to partner with you I have a brand so now see what’s happened between modern trade general trade and quick commerce all the D2C brands have taken you know the pie of the breakfast of these guys because these guys are not proactive. Okay. So in my book quick commerce is convenience and as he said I think it will be big in one of the brands I work with quick commerce is 60% of our business. Okay. Next uh for example QSR 57% of QSR today is delivery. So one of the questions I asked on the Burger King board was if we started the business today would we open stores? They said no only kitchens only kitchens Jesus think about it. Okay, but it changes so much when you start thinking kitchen first instead of restaurant first, it changes everything of the way you think about menu and assortment. Woo commerce is convenience. What about innovation you’re driving? Cafe is about experience. As long as you significantly deliver on that, you’ll maintain a good healthy balance. You have to define OEM and retail. I don’t know what your strategy is. I have not picked it, but it I believe you need leverage. You should be able to have some leverage between the three big channels of yours, whatever they are, whatever contribution. And next you must ask yourself if I want to be in a channel okay let’s say many people want to be in a model store want to do shop and shops etc it must add to the premium and the brand others don’t do it token presence is not presence in a channel going back to what you said you must participate to win in that channel what about your definition of winning yes okay so you go to ambience mall today there are 20,000 kiosks on the way half of time you don’t even see They they are what are called token presence. They’re doing nothing for the brand or the revenue. Okay, that would be my Yes. If you see Disney has six parks around the world, correct? What are the parks for? Of course, they generate revenue. But it’s also it creates the memories, experiences, then you have movies. Okay. Then you have merchandise. Then you have comics, you have everything. I think the question which Disney also always says is what is the sparks for? Because at some time when they open a park, the parks bleed for 7 8 years. when they opened in China or when they opened this thing because saying the amount of capex among it takes that much time but they’re saying no it’s required okay because it is going to build a memory for the child and when he becomes a parent and so on so I think movies build onto it that’s why a roller coaster is a roller coaster or a whatever many go around but a Cinderella carousel so Cinderella has to be there in the theme park has to be there outside similarly the Nike I always sort of say Nike is available online also So people say Nike experience store matters. So in the Nike store you’re saying okay we will this is the new stuff. What is your running gate analysis? What is some analysis? So you want to go to the Nike store for a different reason. Many people Nike knows that it stores will be unprofitable. Why? Because they locate them in the highest rental. So in Oxford Street on London or Fifth Avenue the for break even of a Nike store needs footfall of a different order. They may get it. I don’t know if they get it or not. problem is they don’t say per store profitability of a Nike experience store. It is meant to create the experience. It is meant to say I will buy Nike online. I will buy two different channels. So the metric is only different. So if they say oh my you know store is not breaking even it’s like okay how many footfalls do you have? How many people actually this new machine that we introduced for running? Okay, how many people use that machine? because they know number of people who use that machine and I track them later. They are going to buy Nike shoes only because Nike and then they will sell some three other things once the guy has used the machine. Yeah. So that’s the thing when you build a brand no you have to build three things memorability shopability and repeatability memory structures are so important in this experience thing I was once talking to Nakulan who used to run ITC hotels and he gave me a fascinating insight which I’ve used in retail all my life he said sh the reputation of a hotel in a city depends on the coffee shop and the number of people who come to the coffee shop and hence his logic was the coffee shop needs to refresh itself every 12 to 18 months. in decor and this that and he consistently did it. Now when I think about it, look at a matcha, look at any of the good coffee shops in any of the five stars, they consistently do. So that’s maybe a lesson for you for your cafe. Memory structures are so important. Yeah, memory structures are so important and then you should not have like a working capital of interview to them. Creating memory structure. Then you what you would say is basically maybe whatever channels we are currently operating in it’s basically like a flywheel really because at the store where we creat you need to know this channel feeds into this feeds into this in a certain way because at the store we create experience and we build taste and maybe build some trust as well and then quick commerce obviously gets us the distribution for the products that are kind of selling the same taste. Okay. So some uh Rahul I think let’s look they have the two questions I think one on raising capital and the other one on on ESOPS. Let’s cover them together. So what is top of mind for you guys? I think ESOPS first. Let’s go ESOPS first. So uh currently obviously we don’t have uh an ESOP pool. We’ve just started building one. So uh traditional question key should we be liberal with the ESOP pool we build? How do we allocate ESOs? What do we do? What is the structure that you suggest we go in for? Who should we award with those and who not to? Yes. Uh how do you like do you think of MSOP as a retention tool? Do you think of it as a reward tool? I feel it’s a reward tool not just a retention tool. And if your company is worth 5,000 crores and let’s say there are 500 employees, what percent and let’s say Cafe Coffee Day or let’s say Starbucks is buying mainly for 5,000 crores. As promoters, what percentage of that 5,000 crores do you feel will be fairly earned by people who are not promoters in the company? Percentage is it 100 crores? Is it 1,000 crores? Is it 500 crores? 2,500 crores what number? I’d say I always love thinking about these questions outcome backed because that’s always a nice way to kind of then you start and these are all very philosophy and values based these are not mathematical questions this is values so if you’re going to sell the company if it was Starbucks of 5,000 crores what number should you think of what equ what wealth should be distributed to all your employees of that 5,000 imagine like genuinely imagine that moment happening I think at least 500 500 so 10% in an ideal world yes okay Yeah, I would say more 250 to 500 each man. Yeah. 5 to 10%. 10%. Okay. Toan’s the ESOP structuring expert. I he told me the first we had a client who was actually setting up a subsidiary within a large conglomerate and that was when we should think about ESOPS. I was a 25-year-old associate. I had no idea what ESOPS meant. But then we made a whole model and what percentage of the holding company should be held by the employees. which is a professional organization where employees held ESOPs in a new business unit. So I remember he had given me all the early esop gan and then I kind of Shankton did exactly the reverse of a mission. That’s how you succeeded. Whatever I see does the reverse simple. My view is simple. My view is it’s a reward and retention tool. Uh esops are a very badly taxed. So be more generous than you would be you would be comfortable. I think in general being 25% more generous than you you are comfortable with is a great life hack in my view whether it’s with a vendor whether it’s with an employee whether it’s with an investor like taking a small haircut on valuation for the great investor is a great long-term view right I think 500 to 500 cr is a good number 10% of your but then we issue is if you issue 10% today it dilute down so you have to keep clawing back 10%. Let it be earned by people on basis of three things. Tenure, performance, and importance to business. And these are three very different things. You can have people with high tenure, great performance, but may not be very important to business because they’re running a small part of the business. For example, you could have people with high performance, high importance to business, but only one year into the company. Right? Ideally, two out of three things should work, but three out of three means disproportionate value. 80/20 works. So of this 500 crores one person should make 200 crores who and you should like you should figure that out. It could be a CXO a team of 10 people should make the next 100 and then the rest could make the next one 300. You will see that happen and those ferettos also help in rewarding the right people and choices you guys make around who you bring into your senior team etc. 10 to 15% is a good starting point. You dilute it down to 10% for the outcome. be a lot more careful about vesting periods. I have 0 33 33 33 over a period of time. I’ve realized that 4 years is too short. Companies are built over decades. So, and people might not like me saying this, but you should have longer vesting. Some people have like 0, 5, 20, 30, 40, something like that, like where it’s more backloaded. Figure out what the right answer is. Exercise price. It’s good to have a low smaller exercise price early on. Uh but low excise price means you take aida hit or you take low you know you’ll see adjusted east of adjusted right that’s what ends up happening because you start selling stuff much cheaper over a period of time you realize that if a person is joining at 100 rupees share price you can let them buy it at 70 rupees rather than giving giving to them at 10 rupees and so on. Uh but excise price again start with fair fair price uh you know fair value for first three four years then you can kind of make it more basis the price at which people have joined um and most importantly on ESOPS alumni being proud shareholders of being esops is the best thing you can do so do not force exercise on exit that is one strong push I’ll take on the policy 10 to 15% exercise period longer tenure performance importance to business parto uh excise price initially fair value but once you start seeing P&L hits start increasing that up and most importantly once people leave uh let them hold it for 10 cuz government does not allow more than 10 years so after 10 years also you have to keep extending so right now we’ve just done our first extension people are not selling like we’ve now over the last and always let people like whenever you raise a round 5 to 10% of that round should be for buybacks you guys are generating 15% IBIDA so you can also buy back as a company or kuskar or whatever is the ability on the balance sheet buy back cuz you will then create sharks who have tasted blood the venture world and the private equity world will want to make you feel like you need hungry sharks but you need sharks who have tasted blood so small small amount vested amount cut 10% 5% along the way is good in fact in our old office we used to have an esop price chart so our price would be public and we would kind of buy back at the price that is their basis yeah I remember it used to be the uh yeah it’s a razor and you can move it up and down bases the performance remember that so that’s my my view it’s but it’s a very philosophical view it’s like writing an ESO policy is a very founder philosophy view like a lot of people have very different views on it so this is my view but you have to see where your moral compass sits on it and well I think see the a philosophy but you can also change it so it is not like once you decide you are now locked in absolutely for life so I think that’s a first thing is it is it’s an important question but it is not the be all end all of it, right? I think this question of how much should nonfounder employees generate if they stay on and company creates value is a fundamental one and there’s more for few versus few for more philosophy and so on. But what happens is somebody for creating real value will have to stay on till the founder exit happens. So it’s automatically a 10 12 year thing. Anybody who’s leaving early should will not make money fundamentally only because that’s you would not have made money. Investors would not allow that kind of a thing. So some of the way the system is there know there’s this inbuilt restriction there. I also think from an employee standpoint one is retention but from a reward many employees there is obviously this philosophy that if there is founder exit happens my best ex employees okay best can be by tenure by performance by role criticality and all should not have to work for money again. Yes. Okay. To me that’s a very foundational thing is somebody who’s been with me for long should not have to work for money. They may choose to work because you know people are young they when they’ve done their first XR ex whatever exercise and all they may still be in early 30s or early 40s they can still work but they will work for passion then okay that hard work and people who have gone through hard burns with you okay and near-death moments need to make sure that you need to make sure that they are taken care of because that’s how is going to bring those hungry committed sharks you just don’t need mercenaries you need committed things to build a brand think about reward and recognition differently I’ve never been an entrepreneur. I only run large companies and I’ve been most of my life in MNC’s. So the way I want you to think about it is I believe what could work and this is something we’ve seen with a few companies is if I would ask you what’s the value of your share today whatever it is what is it 55 56,000 something like how much 50,000 a share let’s say 50,000 a share. So let’s say 50,000 a share. You’re currently at 25 crores run rate making 15% a bit. Mhm. Correct. So 15% debit on 25 crores is 4 crores. Okay. So the first thing you need to ask yourself is how much of the 4 crores are you willing to give away to your current employees. You forget think of it as reward and recognition. Don’t worry about esops. See they also they don’t want to hang around for 10 years with you. Remember that you know. So a very simple way for you to do this and we’ve done this in South Korea works very well. Do phantom shares. Our price is 50,000. The discovery of the share price is transparent to everybody. Okay. So we have done exceedingly well in 2026 2027. Our share price is about 100,000. So for X number of for Shantu 100,000 - 50,000 he’ll get three times that. Shivkumar 100,000 - 50,000 he’ll get two times that. And for him 100,000 - 50,000 he’ll get one times that. You decide that. Okay number one. That is far easier for you to do. And then you discuss this in terms of esops and you get to 200 crores, 300 crores, then there is material value for everybody. Otherwise, it’s a pipe dream. Let me be honest with you. Most people if you go try to sell them eops, they’ll say first run your business. Correct. Let’s be honest. Okay. Next is a very important lesson I learned from very different company is think of what is your employer value proposition. Have you thought about that? You have to think about that because why should people come to work for you? If you haven’t thought about that, ESOPS is not the answer to that. ESOPS is a icing on the cake. So think of your employee value proposition. So one of the companies I’ll tell you what we did. So we are grappling with this again young founders you know 30s both the kids. So we said let’s look at the top 50 managers in your company. Okay we are discussing ESOPS all kinds of things. We said let’s do a completely different thing for that type of a manager. The senior manager in that company typically is in the age bracket 40 to 50. So we said what is that that person is interested in a decent take on salary hospitalization charges for parents education for kids okay housing loan the four components they might be five six but these four add up to 85% of their needs so we said why don’t you develop tailored packages for these 50 years so Shantanu you have two kids studying in America I give you so much education okay we constructed the same 100 rupees or same $1,000 by each person. Suddenly the commitment went up dramatically. You know why? The employee said the company has taken care of my needs. So think of your employer value proposition. For example, a number of uh consulting firms and data analytic firms do this. One of my friend’s daughter she’s got into Kelloggs. She’s got into MIT Kelloggs etc. Okay. Her company has said you go work there you got a grant of $70,000. Total fee is $130,000 or something. Okay, we give you full $130,000 for the next 2 years. You come back and work with us for a minimum of 2 three years. She’s very happy doing that. She’s got $70,000 bonus now. They’re not saying we’ll only pay you 60,000 of the balance. So, it’s how you deal with the employer value proposition. I’m learning this today by the way, like 10 years later. So, by the way, this is something that we now recognizing that ESOPS are expensive. Absolutely. They’re so expensive and it hits the now if you want to go public. We also don’t have the money baba. Ah see if somebody has to buy 5 crores from you 3 crores from you where do they have the money you’re heartless when you say that this is what we’ve seen with all young people they say yeah forget it ship this is a pipe dream I’m not interested so no but I have a small disagreement I feel like at 25 cr if you’re val 100 crores people who are joining you with a view that I’m going to take this 25 cr business at 200 crores my val to give me some part these people are actually they 0ero to one people and they are worth cuz that delusion is also needed in this like if you if you don’t have people who are delusional they will not yeah so for them it’s important to have this this thing the way you think about is a bit some percentage of profit which is basically dividending out right 20% you say every year be open and transparent 20% of our earnings we’ll distribute to all the people I think it’s a very important the statement you said you risk misallocating ownership I think there’s a fundamental issue there is ownership is not equal to esoft Okay. There are very few people who will actually have that feeling of ownership that value creation. Exactly. So there will be a few people who will say look because there are other people who will negotiate their comm structures you know will have the cutting edge basic plus variable and then ESOP is an upside. Now that’s not ownership. Yeah. Okay. They are just saying but I want disproportionate reward if things go well. And there are others who are taking that hit because they believe in the vision. They’re willing to do whatever it takes for them. It is ownership reward. Okay. Now owner ESOP is only one aspect of ownership. But there is another founder I know who thinks of it as X people are like my extended family. Okay. To the point which was being made earlier is I will get you the best access in the hospitals or because he’s saying look this is family. Now reward is one part. If I make money I will make sure they make money because it’s how I’m treating my family. Others I’m negotiating in a very basic plus variable plus uh esop kind of a thing. If you go into the PEVC world there are clear formulas. Yeah. Okay. Certain percentage should be reserved for X. If you are basic five years basic should be you should your ESOP pop should be equal to X years of basic. So those formulas are easy. Okay. And when you are at valuation of 500,000 crores valuations those formulas will kick in because your series C investors will have that template and they will say our portfolio companies we have this template. Yeah, they’re not bad templates. You need to make sure that people who are family to you, who believe in the company, believe in the ownership of ESOP should not matter. I mean that you should then make sure whatever works for my P&L, whatever works from tax code and everything. But you will make money, your education, all your worries are taken care of. Medical done, education done, abroad done, decent done but that trust has to be there and you need to make sure you demonstrate that trust. In other group again same different concept okay rewards and recognition we talked about at the end of the year Mr. used to run a huge awards night for people who’ve done well in the year. The award if we give Shantul an award it is not money it is a trophy and a picture and he has the option in the next two years to choose any course in the world 7 days full expenses great people would hunt they would all call me sh Howard is offering these three courses what do you think which one would I pick it became prestige so those are the kind of things which work for people at a very different level you know everything need not be money that’s what I’m trying to get to you think about But yes, let’s come to the next question guys. We we will close after that. I think some final thoughts also. Yes. So for a business like ours equity versus debt for a business that for us profitability is a thing today. It’s not it should always be there’s nothing wrong in it to judge the pace of it. Yeah. Yes. So uh equity versus debt and uh how do we choose the right investor? uh someone who comes on board and doesn’t push us to go mad scale uh to change the fabric of how Bindi has been built. Uh I don’t think uh we’ve been the most ex aggressive. I think in a lot of ways we’ve been one of the more conservative businesses. uh but despite that I think we’ve uh we’ve achieved uh what we set most of the time we’ve achieved our financial goals what the metrics that we set for ourselves maybe a month or two later but but despite doing that by doing that we’ve done it profitably so when we choose an investor how do we choose an investor who’s probably going to be the right person to back us right person to back this journey do you think an institution would be the right bet do you think going for like my view is very simple debt should be for working capital you very now enough be careful about the warrants so there’s enough venture debt there’s ODS from banks like you guys already have and that should like just make sure that the interest is managed through through your cash right don’t sit on a lot of inventory so I don’t know how what your expiry dates etc are for us for example we are now on 52 days of working capital mamm earth is at 9 days of working capital so we want to come from 52 to 9 is a good number for a personal care business because our expiry dates don’t exist for razors and trimmers and for other stuff with three four years right so that way we are easier but for you guys it might be more important but fundamentally look at look at people who I feel India is going to have a 10-year manufacturing wave. I think your company the more you will build is around innovation manufacturing and scaling factories and putting products in homes. So if you have a manufacturing first investor who will take you to Latin America who will take you to China who will know the 20 people to buy the best capex this is now stuff that is like people will now institutionalize that knowledge. I think they will be the right then they will also know lead time for returns. They will know how to allocate that capital for you. They will help you with that stuff. When I raised capital I’ll raise some consumer brand investors who would know how to work with channels. They would know everyone at Amazon like fireside you know 6 cents etc. That was a very valuable thing at that time. Today I think manufacturing knowledge especially given where you guys are in your DNA my view is look at investors who have a track record and have a clear thesis on investing in manufacturing at a young stage. That would be my my ad advice. Yeah. Uh only thing which I would say is irrespective of who your investor is, one thing you should I would definitely advocate for you is have an advisory board. Okay. Have an advisory board of three people or four people. Pay them by the meetings they attend, not a flat sum for the year. Okay. For example, believe it or not, many companies I’m on the advisory board of power grid. They have a statutory board which is full of is officers etc. But they saying we need different type of thinking. So they’ve called five of us to be an advisory board member. Okay. So pay them by the minute and use them strategically almost every month almost every quarter to say okay what do you think we can do better okay because see they have no interest they’re not an investor right okay a good advisory board is a very good thing for you to have but then well advised and so on it can’t just be like yeah they can’t do free don’t and say hey Shantra you are on my advisory board I pay you for any board meeting people get a lack of rupees or 70,000 I’ll pay you 50,000 rupees for meeting or whatever it is that’s all I can afford get likeminded people right thanks Yeah, I will again I think a lot of uh uh perspective from this side but um Rahul and Sam is such a pleasure to have you. I think sh I I I think you wanted to give some brand and some closing remarks. See who looks after your brand I’m so interested we should zoom in on this. Huh? This is this is good stuff. You guys do it internally in house. Okay, it shows. Okay, let me tell you why it shows. Okay. See, for example, on this pack, you have open. Yes. Okay. There’s no notch there, right? On this pack, okay, you have a notch at the bottom. It doesn’t show open. So, that’s actually that that’s a manufacturing problem. The winding has gone wrong. That is not a consumer problem. That’s what I’m trying to tell you. See, if you’re consistent with branding, every touch point has to be absolutely perfect. That’s what you said in your execution. That’s your philosophy, but you’re not following it. Okay. Number one. Next. Take a step. I think there has to be a notch here basically. Yeah. That one of the biggest problems with all sachets incidentally. Okay. Next think about it. Here you have bini registered everywhere you use bini is not registered on your cups. It’s not registered. Is missing. See these are the kind of things you know you’re building a brand. Next. Every category has a code. You’re trying to break code but you have to be clear where you want to break the code. Right? Any coffee anywhere in the world the coffee is never in this color. Remember this, this is not strawberry juice, okay? Two things in a coffee. The color of the coffee is an appetizing element. So you look at any tea, any coffee, we have great product shots. We got industrial photographers to shoot this in London etc. Things like that. Next, every coffee is about hot. I I read very carefully. You’re saying hot water. It’s not cold. You have to show hot is a simple category code thing. You cannot because you’re creating a new business and you’re a challenger doesn’t mean you can run away from category codes. Yeah. Please think through all this and you know if the brand must be coherent finally. Yeah. It must speak one thing next. The color combination of this is nowhere near whatever you do on bean. This can be any brand. Why is it beanley? There must be a coherence to your product range. Please you should see you should know it’s beanley without reading it. Absolutely. See, that is why I say brands are time-saving devices. Elephant and say, “Okay, that’s my favorite attack. I don’t need to think about anything else.” I go to a chemist, I’m zapped because it’s generic. You’re getting into generic branding. Now, you must have some coherence in your What about that coherence? That’s your decision. Okay. Have next. Think about this. Why is this upside down? No, that’s Yeah, you know, you can’t afford these. That’s what I’m going to tell you. What if there is you know a lot of people curse Steve Jobs but there’s one thing I give him great great credit for he’s he was ruthless on branding you are you supposed to give this like this no no no just that’s a conditioner model then see in conditioners we deliberately do that okay that’s shampoo this conditioner because consumers would be confused if both of shampoo both was stood in the same way right okay so you cannot afford this so you know please uh you know please think about these kind of things whatever it is And you know the front of the pack always is who am I and keep it as clean as possible. The back of the pack is why by me. I love this framework so much. Remember this always and this time tested. Okay. We’ve learned it over brands and etc. Okay. And you are a premium brand. Okay. Is this premium enough? Think about it. Is the visual imagery that you’re using premium? Okay. Next you have this thing of okay right to us etc etc why aren’t you saying that you have nine outlets come and experience us what stops you this is your newspaper you should see everything about yourself in your own newspaper right yeah okay those are the kind of things but I get it you’ll be like today we are 9 tomorrow we are 12 so like if I write But I I fully get but getting this right I’ll tell you we we as Bombay shaving company made the worst branding calls for first seven years and we paid a lot for it getting it right up front would have been the best thing having a short brand name would have been amazing we had a logo that had zero throw zero you have a very good throw logo we had a thin logo which used to work on a computer screen never worked in retail or never worked on an Amazon PDP we got colors wrong we went into every subcate so we made all the mistakes possible. What he’s saying, I swear to God, if you guys get this right now, it will save you so much time and pain later on because we have gone through that pain and it is valuation killing. It is business killing. It is consumer love killing. It erodess everything. Two more sentiment. Okay. Never say instructions. Instructions for the best begi coffee. Okay. Qualify it. It’s an instruction manual, right? Okay. Next. It’s not also try. Please also try request or have you tried you know adapt consumer language in all your communication this is your own medium love it love it I think that’s an interesting perspective because we’ve been you know like when we sit down to do all of this we we get our cues from what others are doing and how we should do it how to like you know make it seem like we do this for a living and you you know and it’s not just something that it’s been thought of on the fly. Uh but yeah, I think that’s very also like this will evolve you’ll get input from shift you’ll go to like you know there are three four really good I don’t know whether you see whole truth or you see some of these mock these guys are fantastic at creating visual communication around their products we learn from them copy is underrated boss take advice from advisory boards look at what the three four best brands that you guys look up to and then just have an expression for it to say steal with pride steal like an artist it just go amazing And one last data point for you, 25% of Indians skip breakfast, breakfast breakfast today. So anything on the go, okay, is a very good option. So think about what options you have now. Okay. Yes. Yes. Amazing. This was amazing. This is a master class for me. Sam and Rahul, thank you for coming. You guys have built something amazing. We have benefited from it for last 3 four years as consumers. Uh it clearly makes you guys look very young. Uh but I think you have a fantastic brand opportunity, large market, you have the choice of investors. Um I think I hope that the questions that you had for uh Shivan Toshan were at least adequately perspective was given to you. Um and we’re happy to like kind of connect offline on some of these things as well. But all the best as you build out the business.