What the Latest Deal With Kopi Kenangan Shows for Brands Overseas in China

If we take the barista’s more conservative estimate, Kopi Kenangan’s 300 stores would have served at least 90,000 cups a day. That’s roughly US$3.4 million in monthly revenue. Kopi Kenangan also sells other pricier drinks, so the total is probably higher.

To return Kopi Kenangan to this pre-Covid health, Tirtanata wants to move towards a “40:40:20” ratio, where 40% of orders come via aggregators like Grab and Gojek, 40% via Kopi Kenangan’s own app, and 20% from walk-in customers who order at the counter.

While food delivery platforms and other aggregators add additional costs such as platform fees, which hurt Kopi Kenangan’s profit margin, they’re often necessary to boost business in the region. Citywide lockdowns in Indonesia skewed the ratio towards delivery platforms, however. “At the moment, 70-80% of our revenue comes through Grab and Gojek. It’s healthier for us if we maintain higher own-app and walk-in customers,” he says. That’ll happen once malls and office towers—areas where a majority of its outlets operate—reopen.

The company’s app, which serves walk-in customers, was originally a loyalty tool that let people collect points and order in advance. But during the pandemic, Tirtanata added delivery.

The business of coffee

The business of coffee

A coffee chain business is easy to set up, and thus easy to replicate. Kopi Kenangan had the advantage of having moved quickly throughout 2018 and 2019, establishing itself in strategic locations and building brand recognition.

In businesses like this, Tirtanata argues, even heavyweights like KFC and Starbucks could easily get replicated. One way to defend such a business is via brand equity–delivering a memorable and consistently high-quality product and service. And of course, by being present in people’s everyday lives, which requires many physical outlets.

For Tirtanata, that’s where the need to raise capital comes in. He only had to look at Luckin for inspiration—the company raised millions of dollars in multiple fundraising rounds, becoming one of the quickest firms to reach unicorn status.

Tirtanata’s first backer, in 2018, was the Jakarta-based VC firm Alpha JWC. In mid-2019, venture capital firm Sequoia India came into the fold as lead investor in a US$20 million Series A round.

One store at a time

The capital helped Tirtanata scale the number of stores to over 300 by early 2020. Each store requires an upfront investment of IDR 500 million (US$ 34,000), he estimates. The coffee machine and grinder account for about 50% of those costs.

The company made other quick changes to improve its margins in these times.

Kopi Kenangan started selling iced coffee in one-litre bottles instead of single cups, saving packaging costs and winning over customers who would have baulked at paying delivery fees for just one cup. The company is also about to add new categories like pastries, which, Tirtanata hopes, will push up the average order value.

Besides, the small retail kiosks Kopi Kenangan operates are relatively easy to set up or shut down, giving the company flexibility in choosing locations.