JAKARTA: On its first day of business, Kopi Kenangan sold 700 cups of coffee. Within three months, it broke even.
Two years later, it has 230 outlets across Indonesia, from Medan in North Sumatra to Makassar in South Sulawesi.
Mr Edward Tirtanata, CEO of this fast-growing coffee chain, decided right at the start that its coffee has to be affordable in order to survive in the competitive market.
At an average of 18,000 rupiah (US$1.30) a cup, the pricing of Kopi Kenangan is between the street stalls’ coffee of about 3,000 rupiah and international chains’ 50,000 rupiah.
“I used a simple logic in my pricing strategy when we first started three years ago.
“A nice cup of coffee cost between 35,000 and 40,000 rupiah. If you bought one cup a day, that’s 1.2 million rupiah a month, which came up to 30 per cent of minimum wage in Jakarta.
“However, a cup of Starbucks in the United States for a month is just 6 per cent of its minimum wage. There’s a big difference. That’s why I decided to price my coffee in a way that a month of consumption will only cost less than 10 per cent of our minimum wage,” he explained.
The initial success has given the entrepreneur and his business partners courage to dream big. They want to grow both in Indonesia, which has a robust coffee culture as the world’s fourth largest coffee producer, and elsewhere in Asia.
To realise their expansion dream, they raised US$8 million in seed funding and another US$20 million in Series A funding.
But more impressive than that was getting Jay-Z and Serena Williams’ venture companies on board as their investors.
With their funding, Kopi Kenangan is on the right track to achieve its ambition – 1,500 stores in Indonesia and abroad by 2021.
FROM TEA TO COFFEE
Mr Tirtanata, a Jakarta native, has always dreamed of following his parents’ footsteps to become an entrepreneur.
After graduating from Northeastern University in Boston, Massachusetts, in 2010 with a degree in finance and accounting, he returned to Indonesia and dived right into the business arena.
“Back then I did many things. Nobody knows this, but I used to sell clothes at Tanah Abang (biggest textile market in Southeast Asia).
“I also tried to start a consulting company,” the 31-year-old said.
He tasted his first real success when he dabbled into food and beverage business with the opening of a tea lounge in 2015 named Lewis & Carroll, after famous authors C. S. Lewis and Lewis Carroll.
Two years later, he partnered two of his friends Mr James Prananto and Ms Cynthia Chaerunnisa to start a coffee chain with 150 million rupiah.
Their goal was to offer local high-quality coffee at a price cheaper than international coffee chains.
For the brand name, they settled with Kopi Kenangan, which translated into Coffee of Memory, with beverages cheekily named Memories of an Ex, Memories of an Ex who is Getting Married and Memories of the Past.
Mr Tirtanata knew the strategy worked when customers giggled as they scanned the menu.
In addition to that, the partners decided that the taste and quality of the coffee had to be exceptional. Their signature cuppa would be milk coffee with palm sugar.
“If you are selling milk coffee, the milk is just as important as the coffee. Most likely, a cup of beverage is 70 per cent milk. That’s why I always choose the best milk,” Mr Tirtanata said.
Their stores are compact with a small seating area as the concept was grab-and-go to cater to the needs of busy cosmopolitans.
WINNING OVER JAY Z AND SERENA WILLIAMS
With eight outlets under its belt a year after Kopi Kenangan started its operations, the business owners began to plan for the next steps.
They had a meeting with local capital firm Alpha JWC Ventures and received US$8 million funding two weeks later.
Why was Kopi Kenangan appealing for the investors?
“It is very simple. This business is highly replicable. It is going very fast. If you take a long-term view, you can see that this business is worth a lot in five or 10 years.
“So why won’t you invest in us while we are still very small? That’s how most start-ups pitch to venture capitalist.
“Our business is simple enough and our numbers are very robust and strong. That’s why they decided to invest in Kopi Kenangan,” Mr Tirtanata said.
Looking back, it was his most memorable experience to date.
“I didn’t think I could get US$8 million. Most of our friends just laughed at me when I said I wanted to ask for US$8 million … it was pretty cool,” he said.
With the injection of the new funds, Kopi Kenangan opened more stores, grew its team and ventured into research and development.
In June last year, Kopi Kenangan raised another US$20 million in Series A funding through Sequoia India, the investing firm that has backed Traveloka, Gojek and Tokopedia.
As a result, other venture capital firms watching Sequoia India closely also noticed Kopi Kenangan. On the heels of the funding came an investment of an undisclosed amount from Arrive, a subsidiary of rapper Jay-Z’s entertainment management company Roc Nation.
“It reached out to us via LinkedIn,” Mr Tirtanata revealed.
Tennis superstar Serena William’s venture company Serena Ventures also became an investor on the invitation of Roc Nation.
Funding from the two celebrities’ companies were a big boost to Kopi Kenangan’s growth.
“In order to achieve our dream of 1,500 stores by 2021 and be a multinational brand, we need strategic investors, investors with a branding presence all over the world.
“Jay-Z and Serena Williams have built such an amazing personal brand. We can learn a lot from them, so there is a lot of strategic elements why we picked Jay Z and Serena Williams as our investors,” Mr Tirtanata said.
However, he was quick to add that he has never met the superstars in person, just the representatives of their venture companies.
“I JUST WANT TO WIN”
Kopi Kenangan harbours the ambitious plan of expanding to other countries, beginning with Asia.
“If you go to Europe, America or Singapore, you see a cup of Java, a cup of Sumatra, being sold as premium coffee at cafes.
“But you don’t see an Indonesian style cafe abroad. So our vision is to export a cup of Java or Sumatra to the world as a brand, not as a commodity,” Mr Tirtanata said.
He stressed that Kopi Kenangan is not a franchise. Each outlet is directly owned by him and his partners.
Its rapid extension came with a great need for manpower and the business partners are hoping to solve this by opening a barista academy.
Mr Tirtanata is also aware that they need to keep evolving in order to survive, hence constantly introducing new beverages is crucial.
In the next 10 years, he wants Kopi Kenangan to be one of the most valuable food and beverage brand in Southeast Asia.
“I suck at losing, I don’t want to lose. I just want to win,” he said.