Indonesian grab-and-go coffee chain Kopi Kenangan on Tuesday announced the closing of a $20-million growth funding round from Sequoia India, confirming an earlier report by DEALSTREETASIA.
In a statement, the company said it plans to use the fresh capital to accelerate growth and possibly expand across Southeast Asia.
Founded in 2017 by Edward Tirtanata and James Prananto, Kopi Kenangan says its sweet spot lies between the high-priced coffee served at international coffee chains and the instant coffee sold at many street stalls.
Today, the coffee chain has 80 stores in eight cities and serves close to one million cups of coffee each month. Following the fresh funding, it targets to open 150 outlets by the end of this year and expand to 1,000 stores across Indonesia by 2021.
Indonesia has the lowest coffee consumption per capita in the region, despite being the world’s fourth-largest coffee exporter. This, according to Kopi Kenangan co-founder and CEO Tirtanata, is due to the lack of large, affordable coffee chains catering to the local palate.
“Our mission is to bring high-quality coffee, made with the freshest local ingredients to consumers across Indonesia – and the rest of Southeast Asia, too,” Tirtanata said in a statement.
He and fellow co-founder Prananto believe the startup can significantly disrupt the F&B segment with its new retail model that combines the convenience and choice of online shopping with the touch and feel of brick-and-mortar stores.
Consumers can order their coffee for pick up through the Kopi Kenangan app, which the company launched in April, to avoid having to stand in a queue at one of the company’s many small pop-up and kiosk-style stores – or have their coffee delivered by food delivery players such as GrabFood and Go-Food.
In terms of its products, Kopi Kenangan differentiates itself from competitors by taking on a classic Indonesian iced coffee recipe, using locally-sourced ingredients, such as organic palm sugar, which gives it a distinctly fresh taste and aroma. The company is also adding other Asian favourites to its menu, including Thai tea, bubble tea and even Teh Tarik (pulled tea), a local favourite tea served with sweet condensed milk.
Coming into its second year of operation, the company says it is already profitable, which according to new investor Sequoia is a feat for a business in its category.
“Most food retail businesses struggle despite high gross margins due to operating costs like rent, manpower and wastage etc. Kopi Kenangan has implemented robust backend systems to track inventory in real-time and moves excess items across stores, cutting wastage to almost zero. Its stores are 10-20% of the size of a normal café, significantly cutting cost per store,” Sequoia Capital investment advisor Rohit Agarwal wrote in a LinkedIn post.
The growth funding follows Kopi Kenangan’s first institutional funding round of $8 million in October 2018 from Indonesia’s Alpha JWC Ventures.
Other investors to have backed tech-enabled coffee chains in Indonesia are East Ventures, Agaeti VC, Sinar Mas Digital Ventures (SMDV), and Insignia Ventures, which joined an $8.5-million funding round earlier this year for Fore Coffee.
Investor interest in coffee startups has also been stirred up by the success of China’s Starbucks challenger, Luckin Coffee. The coffee chain’s blockbuster Nasdaq debut in May this year has had a further ripple effect on Indonesian coffee chains that are stepping on the gas with their expansion plans.