Indonesian coffee chain brews plan to expand in S-E Asia

Company's expansion fuelled by technology and funding from venture capitalists

Mr Edward Tirtanata was running a cafe selling artisanal tea blends in Jakarta when he spotted a bigger business opportunity in the coffee market: There was no good mid-priced coffee targeted at those who cannot afford to splash out on high-end brews too often.

There were only two options at the time - cheap coffee from roadside stalls, or expensive brews from foreign coffee chains like Starbucks and The Coffee Bean & Tea Leaf.

To tap this middle-of-the-road market, Mr Edward and his friends set up a grab-and-go coffee outlet in September 2017, where prices start from 18,000 rupiah (S$1.80), less than half of that at Starbucks.

Unlike his upmarket cafe that has a regal-sounding name, Lewis & Carroll, the no-frills coffee takeaway outlet is called Kopi Kenangan - or coffee memories - a name that locals can relate to. It sells coffee that is distinctly Indonesian yet offbeat, with quirky names such as Kopi Kenangan Mantan, or coffee memories of my ex, an addictive concoction of coffee with milk and palm sugar.

"My friends thought I was crazy," said Mr Edward, the company's chief executive. "When it comes to branding, you have to be different."

The concept caught on with consumers and soon, word spread through social media.

Today, the start-up - less than three years old - has 222 outlets in 18 cities, in a rapid expansion fuelled by its use of technology in areas such as online orders and tracking of consumers' behaviour and preferences, as well as millions of dollars in funding from venture capitalists.

Kopi Kenangan hopes to enter other South-east Asian markets such as Thailand or Malaysia by September. The company expects to eventually come to Singapore.

It will open an additional 750 outlets over the next two years, rebranding under the name Kopi K for overseas markets unfamiliar with Bahasa Indonesia.

Last month, the company secured an undisclosed investment from funds backed by American rapper and entrepreneur Jay-Z and tennis star Serena Williams.

In June last year, it raised US$20 million (S$27 million) from Sequoia India, which has a notable track record in picking winners among Indonesian start-ups. They were early investors in ride-hailing app Gojek and e-commerce giant Tokopedia.

In 2018, the start-up secured US$8 million in seed funding from Jakarta-based Alpha JWC Ventures, which has about US$173 million under management.

"They have a big vision to become not only a unicorn, but also a global brand," said Mr Jefrey Joe, co-founder and managing partner of Alpha JWC Ventures, referring to the term used for a company worth at least US$1 billion.

Though the company now faces competition from other local coffee start-ups such as Fore Coffee, coffee consumption in Indonesia - which is still low compared with other countries - is expected to continue to increase.

Kopi Kenangan hopes to double the proportion of sales it rings up through its mobile app to 40 per cent, said Mr Edward.

Orders through the app tend to be larger than those from walk-ins. Customers who use the app are also more likely to take advantage of cross-promotion offers or add extras to an iced coffee, like an extra shot or crushed Oreo cookies.

Data harvested through online orders and the company's rewards programme makes it easier to track customers, anticipate orders and plot store openings.

"We're successful when we can use data science to predict when and where a customer is going to order even before he orders," said Mr Edward.

The company has plans to buy Internet-enabled vending equipment to help it branch out into smaller settings such as hospital waiting rooms or offices where customers will be able to order coffee and pay for it using online payment platforms such as Gojek's Go-Pay.

"Managing growth is about technology," said Mr Edward.

The success of Indonesian start-up stars like Mr Nadiem Makarim at Gojek, who is now Indonesia's Minister for Education and Culture, and Mr William Tanuwijaya, co-founder of online shopping mall Tokopedia, has made it easier to sell his company's business model.

The value of Indonesia's rapidly growing Internet economy will more than triple to US$130 billion by 2025, according to a report last year co-published by Google, Singapore's Temasek, and United States private equity fund Bain & Company.

"I have to thank all the entrepreneurs and start-up founders who came before me," Mr Edward said. "William and Nadiem proved that it's possible to have a scalable business in Indonesia."