Tea Avenue Is Building A Regional Café Chain

The boutique café business—which is building products and experiences for new-age consumers around Sri Lanka’s tea heritage—is adopting an asset-light franchising model for growth

LUSHANTHA DE SILVA hails from a clan that has deep roots to the tea industry for nearly a century. He now watches with pride as his son Sajeev answers the family’s calling to serve the industry. But Sajeev brings new thinking and a passion to move up the supply chain, launching Tea Avenue in 2014. The boutique café serves up a range of teabased beverages and a range of delicacies designed to please. Tea Avenue has outlets here and in Vietnam, and the father-son duo see opportunity to expand its footprint in the region.

How was Tea Avenue conceived?

Sajeev: The café-related market space is dominated by coffee chains both here and overseas, there are not many for tea. This was an opportunity for us to carve out a niche for an authentic tea brand. Globally, tea is riding a wave because of health-conscious consumer choices. Unlike coffee, tea can be served up in many ways by adding herbs, spices, fruits or natural flavours. The choices can be overwhelming, but our goal is to avoid that and create just enough options that reflect consumers’ lifestyle choices.

Lushantha: Ceylon Tea is a global brand, but few have really taken this to the café or restaurant space. Our market research showed that even leading restaurants don’t get it right with a perfect cup of tea. Consuming tea can be an experience by itself. It’s not just the taste or aroma, there’s an entire culture and history that can be made part of the experience. With tourism growing and lifestyles evolving, we realised there was tremendous opportunity here. Trends and consumer habits are changing especially among the younger generation who want new experiences. With Tea Avenue, we’re trying to bring the best of both worlds—the heritage of Ceylon Tea and modern lifestyles. That’s how ‘Tea Avenue’ by ‘De Silva and Sons, since 1936’ came to be.

The restaurant space is crowded, so what’s your strategy to stand apart?

Sajeev: We wanted to build a brand that would resonate with consumers and also reflect the niche we are playing to. We worked with a consultancy to discover market opportunities and one insight was around creating experiences around heritage. All our outlets have a rustic yet sophisticated ambience. Considerable resources are invested to ensure consistent high quality in product and services. We develop a new product each week. Most of them won’t make it, but the ones that do become standout products for us. It took a while for our patrons to pay a premium for a cup of tea. Tea Avenue’s menu included several coffee beverages, and these were more popular initially. Since launching, our tea beverages have slightly overtaken coffee. We persisted with our brand proposition for tea, and that faith is reaping rewards. Now, there’s opportunity to expand and grow the business. We’ve opened three outlets including one at the Shangri La Mall Colombo, and a fourth is coming up very soon. In 2018 we opened an outlet in Vietnam that’s doing very well— the Vietnamese franchisee opened a second Tea Avenue outlet within ten months—so we’re encouraged to grow our regional presence.

With tourism growing and lifestyles evolving, we realised there was tremendous opportunity here. Trends and consumer habits are changing especially among the younger generation who want new experiences.

How do you plan to grow the café business overseas, or here for that matter?

Lushantha: I believe franchising is the best model because it will make us asset-light. It’s perfect for expanding overseas or locally where owning or renting space can be challenging. Importantly, we will be able to focus more on developing our brand and products to deliver the same unique experiences wherever the outlets operate.

Sajeev: In Sri Lanka, franchising locally would be a new concept and we will be the first upscale tea café chain. Our franchisee in Vietnam recently opened its second Tea Avenue café, so that’s a good model to grow the global business but doing it here locally would be a learning curve for us. We will have the opportunity to learn faster and reset quickly if we make mistakes. We are constantly refining standards and systems— for example, we have an operational handbook and a manual for recipes & preparations—so that each franchise outlet delivers the same high-quality products and unique experiences, consistently.

This is also an opportunity for investors to gain some exposure to a growing restaurant industry here: Sri Lanka has a growing middleclass population, and increasingly younger people are becoming more discerning consumers. Tourism is growing. Colombo Port City and several luxury high-rise developments will attract a large expat population. All these point to tremendous growth opportunities for Tea Avenue.

The investment could be around Rs15-25 million depending on the property, rent and equipment required. We will do all the rest. Investors would get a large share of the profits. We have a unique brand, tried-and-tested recipes and café management expertise already positioned for investors looking to enter the café space in Sri Lanka, or even globally