$270 Million Coffee Empire in Indonesia: The Journey Unveiled - Kopi Kenangan | Edward Tritanata | EO

Kopi Kenangan sells coffee to Indonesians priced out of Starbucks

Kopi Kenangan is a coffee chain built for Indonesians who cannot afford Starbucks. A latte there costs close to 30% of a day's wage, so the company dropped the large cafe format for small grab-and-go stores and spent the rental savings on better coffee at lower prices. That model carried it to around 900 stores in two countries in six years and roughly $270m raised, and it survived COVID without cutting pay while the founders took a Rp 1 salary. Tritanata now says he wants a global brand within five to ten years.

Takeaways

• A latte index shaped the business. A Starbucks latte costs about 2% of a US daily wage but close to 30% of one in Indonesia. Kopi Kenangan runs small grab-and-go stores instead of large cafes, moving rental cost into cost of goods sold to sell better coffee more cheaply.
• Roughly $270m funded rapid expansion. Investors include Jay-Z, Serena Williams and Sequoia Capital. A Sequoia investor told Tritanata a good company raises money when money is the only constraint to growth, which he says held true when the first large round closed.
• COVID halved revenue and tested the culture. In April 2020 revenue fell close to 50% because stores sit in malls and offices. Tritanata promised salaries and bonuses while he and his co-founders took a Rp 1 salary, and the app grew from zero to about 3m users.
• Location and price matter as much as taste. Tritanata cites focus group discussions run with Nielsen and Kantar. Location counts because people will not travel far for a daily necessity, and Kopi Kenangan cut the sugar in its Malaysian drinks by 30% to match local preference.
• A bankruptcy call reset his ambition. Tritanata was failing in school and spent his days in internet cafes until Northeastern University, where he graduated magna cum laude. His mother's phone call about the family's potential bankruptcy changed his attitude. He now wakes at 5:30 am.

How the store count grew

1. The first store opened in 2017, and expansion began in 2018.
2. Store counts went from one in the first year to 56 in the second and 226 in the third. There are now around 900 stores in two countries.
3. A coffee shop's catchment area runs two to five kilometres, so new stores opened deliberately near Starbucks and The Coffee Bean & Tea Leaf, including a second store half a kilometre from the first.
4. The clustering tested whether stores would cannibalise each other and took market share from larger chains. Tritanata says Kopi Kenangan is now bigger than Starbucks in Indonesia.