Jay-Z Backed Iced Coffee Startup Puts Malaysia Expansion On Hold

From the likes of celebrity singer, Jay-Z to tennis star, Serena Williams as its global investors, Indonesia’s coffee startup, Kopi Kenangan has taken the market by storm in its home ground and is planning to do so internationally.

Having raised $20 million in an initial Series A round, and another $109 million in a recent Series B funding, the company is well on its way to establishing itself as a force to be reckoned with.

Today, it operates 324 stores across Indonesia and has reached over a million through its mobile app. It expects to have 500 stores by the end of 2020.

However, while plans of expansion was underway, the unexpected Covid-19 pandemic have had to put a stop to its plans. In a chat with our sister media, Business Today Malaysia, chief executive officer and co-founder, Edward Tirtanata shares on how the company has taken up the challenge and will continue to march forward.

“Our dine-in numbers have decreased significantly, however due to the delivery friendly nature of Kopi Kenangan, we are seeing a significant uplift for delivery revenue,” Edward says.

Kopi Kenangan recorded more than 50 percent increase in revenue from delivery friendly areas and are expected to see the trend to continue as long as the Government continues to implement PSBB.

Indonesia like many of its counterparts in the region had imposed large-scale social restrictions (Pembatasan Sosial Berskala Besar or PSBB) .

According to Edward, the policy shifted consumer habits to online deliveries and in order to accommodate to the change in trend, Kopi Kenangan’s mobile app had launched a new delivery feature as well as new products.

The new offering by the company, Seliter Kenangan, can be stored for 3-days in the refrigerator, offering their loyal base of customers convenience with less delivery fee.

And In order to minimise the impact from the pandemic as well as to curb the spread of the virus, according to Edward, Kopi Kenangan had implemented body temperature checks or both its staff and delivery partners early on.

“We are also doubling down our strict hygiene policy by implementing hourly utensils sanitisation using UV Waterless Steriliser which can kill 99.99 percent of viruses, bacteria and gems. Kopi Kenangan is the first retailer in Indonesia to implement this kind of sterilisation system,” Edward points out.

“We understand that customers want to feel secure with the product they consume,” he adds. Kopi Kenangan has also launched its SENANG (Sehat Bersama Kenangan) campaign as part of their initiative to prioritise hygiene. This included plastic tie sealed package, care cards and providing the necessary safety equipment like non-medical face masks and gloves.

“We are a brand with customer-first, employee-second and investor-third mentality,” Edwards tells Business Today

While many would to take cautious steps when it comes to rapid expansion, Edward believes it is essentially fine to open as many stores as long as there are demand for the brand in particular areas. “We use a data-driven approach upon choosing a location and we start by opening our heatmaps on where our customers are,” Edward says.

“And if we identify an area in which we don’t have any presence, then we simply open a location in that area,” he added.

Kopi Kenangan has shared with Business Today that they have identified 32 sub-districts with little or no Kopi Kenangan presence. “The only challenge is operation and that is why we would like to instil further sense of ‘ownership’ into the managers,” Edward said.

The brand has also announced plans to branch out of Indonesia and into neighbouring countries in the region. While plans to establish their presence in Malaysia has to be put on hold for the time-being, Edward believes that expanding internationally will prove to be a challenge, but he and his team plan to tackle the challenge head-on by applying their customer-obsessed culture in the process.

“We are not changing our core business model and strategy because so far we have been profitable in doing so, and coffee is still a very lucrative category due to the high repeat, margin, and LTV,” Edward tells Business Today.

“We believe as long as we bring the best quality product with reasonable pricing, we can gain a significant market share abroad.”

Kopi Kenangan has captured 1.6 percent of market share in Indonesia and while the founders believe there is plenty of opportunities domestically, their international expansion comes as a necessity as they believe the products and business model will be well received by key markets in the ASEAN region.

Currently, with the Series B round of funding, Kopi Kenangan is developing their own RTE products to be layered into their existing stores. Their tech-team based in Beijing is working on developing a loyalty and hyper-personalisation engine.

“Hyper-personalisation means re-thinking the way we look at it and incentivise our customers based on their unique transaction history. Once we have enough data, we are going to personalise even further by using a deep learning approach,” Edward shared.

Other plans in the pipeline also include pursuing the cloud kitchen concept and Internet-of-Things enabled coffee and vending machines.

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