The dynamics of how chai-walas manage this small-scale but extremely popular business, which is omnipresent in India
Tea (Chai, Chaya) is undoubtedly the singular most consumed beverage in all Indian households. India is the one of the largest producers of tea in the world.
According to the statistics available on Indian Tea Board’s website, India produced 972.77 million kilogram of tea in 2008-09. Out of this, about 20 percent, i.e. 203.12 million kilogram, was exported. This means, about 80 percent of the total produce was consumed domestically.Having said that, it is not surprising that there are millions of micro-entrepreneurs who thrive on the business of vending tea. It is not far-fetched to say that chai-walas, as they are fondly called, can be found in every nook and corner of the country—from busy urban street corners to remote villages, at bus stands, railway platforms, footpaths, outside corporate houses, marketplaces, and many more such places. Ever wondered what are the business dynamics that these micro-entrepreneurs operate in? We spoke to several such tea-vendors to understand it better.
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Thanks to a lot of customers who don’t pay their huge dues, Bhola Nath - a tea-stall owner, also scavenges for scrap metal to make up for the loss. |
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Rajesh Kumar and his brothers manage the tea-stall in rotation - while one manages the stall in Gurgaon, the others stay in Bihar to manage their farmland and look after their parents. |
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Microeconomics of the business
Most chai-walas have a push-cart or a makeshift kiosk or simply a small wooden stand that is used as a basic business setup. On an average, a single push-cart would cost him Rs 2,000 to Rs 4,000 to buy; where as it would take as much as Rs 10,000 to Rs 15,000 to install a kiosk. Besides these, there are several other elements that he needs, such as utensils, tumblers, stove or gas-burner, and cylinders. All of these assets are mostly owned by the chai-wala himself.
The business hours that a chai-wala operates in are largely dependent on the location of his unit. The profile of customers he gets is a mix of laborers, daily-wage workers, wandering ascetics to the common householders, young students, professionals, and employees of corporate companies—this again is dependent on where his shop is located.
| DID YOU KNOW? |
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The National Policy on Urban Street Vendors, 2009 recognizes street vendors, hawkers, pheriwallas, rehri-patri wallas, footpath vendors, sidewalk traders, etc, as an integral and legitimate part of the urban retail trade and distribution system. You can download the complete policy |
In smaller cities, chai-walas use oil-fed stoves, but in bigger cities, where consumption is more and requirement is extremely fast, they use LPG cylinders. We spoke to several chai-walas in Gurgaon. As it turns out, on an average these tea-vendors produce 250-300 cups of tea every day. This means that on an average day, a chai-wala needs the following amount of ingredients: 5 liters of milk, 2.5 kilograms of sugar, and 250 grams of tea-powder. The quantity of ginger and cardamom varies according to the demand. A quick calculation reveals that for a cup of tea that he prices at Rs 4 to Rs 5, the actual cost that he incurs is Rs 1.5 to Rs 2. This means, he is making a straight 60 percent profit on each cup of tea consumed. Typically, a single LPG cylinder will last him for about 15-20 days.
| USP of a chai-wala |
| Quick service |
| Customized tea flavor and type |
| Ease on the pocket |
| Availability of miscellaneous eatables |
| Availability of space to hangout, gossip, smoke, etc |
And of course, tea is not the only item that one would find at a chai-wala’s. The miscellaneous other products that he sells include cigarettes, candies, cookies, crackers, chips, etc. The profit margin on these might not be as good as tea, but it helps to keep these available in the shop to ensure that interested customers can fully enjoy their tea.
While talking to many of these chai-walas, we found out that the family members of many of these micro-entrepreneurs are actively involved in this business. This saves on the cost of employing the service of a chottu or a helper, who cleans the table, washes the cups and plates, etc.
Many of these chai-walas located in big cities are migrants, who do not have permanent home address and therefore can’t get government gas cylinder connection. For such chai-walas, LPG can be one major cost factor as they depend on gray market for supply; and they end up paying as much as Rs 800 for each refill.
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Challenges faced by these micro-entrepreneurs
One of the biggest challenges faced in this line of business is recovery of money from regular customers, who consume a lot of tea and other products from a chai-wala’s shop on a credit basis. These ‘bad-debts’ are especially huge for vendors supplying tea to corporate houses and shopping complexes.
Since most of these vendors have a small space to run their business in, the scope of expansion in the same area is fairly limited. During monsoons, the vendors who do not have a head-shelter made for their shop lose out on a good amount of business. Among other problems, dealing with authorities such as the municipality and police can get menacing.
One would think that in the days of modernized food outlets and hangouts, why would anyone want to go to this chai-wala? Especially when one can sit in an air-conditioned room and sip on tea and coffee at reasonable rates. What we could figure from the customers who are regulars at the chai-walas is that there is a sense of socializing and attachment that happens out there at the makeshift kiosks that makes it a place to frequent. Of course, the taste and smell of the tea beckons all those who have had it once!
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