Sure, the D2C (direct-to-consumer) buzz is growing louder in the local market — thanks to the deepening reach of online platforms like Amazon and Flipkart, which new-age firms are leveraging, and wide internet accessibility enabling them to set up their own digital storefronts. But amid a deluge of brands which more or less bring the same proposition to the table: the promise to offer clean, often times vegan and cruelty free products, Goa-based entrepreneur Tarun Sharma and his team have deftly crafted the marketing pitch to garner some eyeballs for their brand mCaffeine.
The proposition in this case also is similar but the brand, which primarily targets millennials, has grabbed their attention by building their play around caffeine, a term very synonymous with coffee, a beverage millennials love. mCaffeine's products are heavily infused with coffee, green tea and chocolate, all of which contain caffeine, a natural stimulant. It positions itself as a caffeinated personal care brand. The ploy may have worked. Today, mCaffeine gets orders from places like Begusarai, Gwalior, Asansol and certain parts of Jharkhand. In fact, 55% of its customers come from tier two and three cities. Of this, 30% comes from tier three cities. This is reason enough to believe that coffee holds sway well beyond its key producing regions of Southern India.
For a generation to whom coffee was literally introduced by Cafe Coffee Day — the brand almost romanticised the concept of coffee drinking through its catchy tagline ‘a lot can happen over coffee’, and which thrives on the Starbucks culture, this should not be surprising to understand. And mCaffeine has just exploited this millennial psyche.
“Coffee is still very aspirational. People hang out over coffee. Because of this cafe culture, caffeine’s psychological connect is very high among the millennials who are our core target,” co-founder & CEO Tarun Sharma tells Fortune India.
The company, which has positioned its brand as gender neutral, aims to largely reach consumers in the 18-25 years age bracket. Sharma says this is the set of customers the brand “intends to talk to more.” However, its user base does expand to the 35-year age band.
Having already scaled its online presence, the strategy now is to build on its offline footprint. The brand, which is well over five years old, forayed offline through general trade channels six-seven months back and currently reaches 5,000 stores. It targets broadening the reach to 25,000 stores by the end of FY23. Initially, the aim was to touch about 10,000 offline points of sale by the end of next financial year but the significant upward revision to the target comes on the back of consumer traffic growth. Offline business, though it currently contributes only 7% to its total revenues, is growing faster, claims Sharma. It also plans to tap into modern trade channels starting April.
“Three large retailers had reached out to us and they have closed the onboarding. We will go live in the first week of April,” says Sharma.
About 45% of its revenues come from its own online website and sales generated from e-commerce marketplaces make up the rest 48% of its revenues. Offline launch is a business plank that almost all D2C brands have resorted to or are aiming for — in a diverse market like India, consumer preferences widely vary and most locals still have a knack for offline shopping. Users are very much receptive to the idea of touch and feel. Besides, international foray into a clutch of markets across South, West Asia and Europe is on the cards.
mCaffeine, however, is in no rush to rush to market with a series of product launches. The firm plans to add about 15-20 new products every year. “For any brand, revenue by product density should be very high which essentially means if I have to touch a ₹1,000 crore level, I should not launch 1,000 products. I should launch products that consumers want but then perfect them and then launch rather than just bombarding the market with a number of products. Our number of SKUs are limited, at about 40-50 now,” explains Sharma.
R&D, in fact, is allocated the bulk of the firm’s budget share. Call it the benefit of the D2C model which provides room for consumers to directly interact with brands, mCaffeine claims to have introduced some lip care products including mask and scrub, nudged by customer demand. The focus will primarily be on hair care, body care and face care categories.
Sharma says the company is profitable at the unit level. For young brands that are yet to make any significant dent in the market, the importance attached to growth typically outweighs that of overall profitability at least in the initial building years. And there's a lot left to be untapped in the D2C market. Analysts and industry players say that far from being crowded, there is space for more brands. India has been a brand starved country when it comes to localised products meant to cater to local tastes, they argue.
“Over the last few years, internet has democratised the flow of information and in real time. Today, for instance, I can know what Christiano Ronaldo is doing because of Instagram. Consumers became more discerning but brands had failed to kind of match up to the pace in terms of innovation. Brands like us and other challenger brands latched on to this gap and said we are D2C, we will be extremely close to our customers,” says Sharma.
The millennials are not just seeking functional products, their tastes have evolved and they want to expand their product basket to include experiential products like a body scrub which earlier was used only during specific occasions like a wedding function. “Millennials need emotional connect too,” says Sharma whose brand messaging is ‘addicted to good.’