Ever since we moved office to this part of town – the whole of the team has become almost completely addicted to the corner tea-stall. The shop is your regular road-side tea kiosk managed by this ol man- who is the brewer, accountant, salesman and the delivery boy- all packed in one.
It may come as a surprise but our “baba” (as he is fondly called) is an astute business man. His concepts of tracking demand , recovering Variable/Fixed cost are so well engrained, that he doesn’t deliver at our office if there are fewer than “X” people- coz he wont be able to recover the cost of the rickshaw he hires to reach the office. He also calls us on Friday nights to check and confirm if we are open on Saturdays and how many cups are required.
Baba also makes one of the best teas that I have ever had- He knows that this is the trade secret that keeps him in business inspite of his irregularity of delivery.He told us that he once had an assistant who “stole” his recipe and started his own shop- right across the road from Baba’s previous establishment. That explains why Baba is so scared to expand his “team”.
Baba charges Rs 5/- per cup of tea has a regular demand of atleast 200 cups of tea twice a day for atleast 5 days a week- which translates to a weekly sales of Rs 10000/-. Not bad for a road-side vendor you might be thinking ! Baba has been able to achieve this scale coz he selected a neighborhood that had “few” offices in a largely residential locality.
This had the twin advantage of:
a. Ensuring that there were few large customers (like us) with sufficiently high demand
b. There will be little or competition coz its a primarily residential area. Other tea vendors are close to business or corporate hubs.
Assuming his profit margin to be 40% Baba is currently at Rs 16000/- per month take home. Much better than a lot of call center execs huh? But Baba’s business is stuck at this level of scale for quite some time now.
Here are the reason(s):
1. Most corporates want the tea delivery once each in the 1st and 2nd halves of the day. Given that they are wide spread- Baba cannot deliver to too many offices, by staggering the time of delivery. He has already experimented with just sending his kettle with the rickshaw chap- but there were some trust and logistics issue involved.
2. Corporates that grow mostly start investing in a vending machine or eventually move to a more “corporatish” locality.
3. Baba is adamant to not hire a “chottu” to scale up his operations coz of the bitter experience in the past. And am sure there are no IPRs in their business yet.
So what if anything can this brilliant brewer do to grow even further in his quest to get more nicotine down more throats ?