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Gaining grounds: How Kopi Kenangan brews beans into big business

This is the first in a three-part series that looks at the origins of one of Southeast Asia’s largest coffee chains.

As the joke goes, writers turn coffee into words, mathematicians turn coffee into theorems, and programmers turn coffee into code. No matter what you do and where you are in the world, caffeine’s many variations seem to be indispensable to modern life.

Five years ago, es kopi susu, or iced milk coffee, became all the rage in Jakarta. Made from coffee beans grown locally in Indonesia, frothed milk, and palm sugar, the beverage is light and creamy, and goes down easy on hot and humid days.

Originally blended by an independent coffee shop called Kopi Tuku, the recipe has been adapted by other baristas around the capital, and then all over the country, each offering their own take on the drink.

Then, one chain created an empire around es kopi susu. Kopi Kenangan entered the fray in 2017, and has been pressing forward rapidly since then.

Kopi Kenangan co-founder and CEO Edward Tirtanata. Courtesy of Kopi Kenangan.

Kopi Kenangan was established in August that year by Edward Tirtanata and James Prananto. Before that, Tirtanata was already a recognizable name in Indonesia’s F&B industry; his first venture, a premium tea house called Lewis & Carroll that was established in 2015 in the capital, was for a while the talk of the town for its artisanal tea selection. A range of coffee-based beverages also sold quickly and easily in the tea house, inspiring Tirtanata to branch out and establish a chain that specializes in coffee.

Like many diners and restaurants that ended up as massive chains, Kopi Kenangan started with one humble shop in an office building in Jakarta. Tirtanata and Prananto hired a staff of five, starting with just IDR 250 million (USD 16,900) in capital from angel investors. Three of those first five consumer-facing employees are still with the company; two manage their own stores, while another is a regional manager today.

On its first day of business, Kopi Kenangan sold 700 cups of coffee. Within three months, it was in the black—a point that caught the attention of Alpha JWC. In October 2018, the investment firm poured USD 8 million of seed capital into the coffee chain.

That gave Kopi Kenangan fuel to overtake its competition. As more and more Indonesians were becoming familiar with phone-based food delivery services made popular by Gojek and Grab, Kopi Kenangan launched its own app last year. Customers can pay through their phones, pick up their drinks at their designated locations, and keep track of their points in a loyalty program.

Read this: GoFood partners with Digitaraya and Kopi Kenangan CEO to launch food startup accelerator

At the moment, Kopi Kenangan’s percolation seems unstoppable. The company raised eyebrows in May this year when it raised USD 109 million in an investment round led by Sequoia Capital India. It was a massive sum for a local coffee startup, especially during the COVID-19 pandemic, when many businesses in the food and beverage industry in Indonesia and around the world were barely clinging to life.

According to Tirtanata, who is now CEO, Kopi Kenangan’s robust growth and profitable business inspired investors’ confidence in them. “We recorded positive growth in 2019. In terms of store expansion, we grew more than ten times compared to the previous year. Our same-store sales rose 82% and we reached positive EBITDA in December 2019. With so many cash-burning companies flooding the US and other places, I think more investors are hungry for profitable companies today,” he told KrASIA in a recent interview.

The amount that was raised in May actually far exceeded what Tirtanata was after, but the company realized that the investors who wanted to be involved could bring new skills and opportunities to the table. For instance, Eduardo Severin, known for being one of the co-founders of Facebook, is now on Kopi Kenangan’s board of directors. He will advise them on how to improve their tech.

In less than three years after serving its first cup of coffee, Kopi Kenangan now has 324 locations across Indonesia, 3,000 employees, and has acquired a total of USD 137 million in funding to date.

More palatable than instant coffee, but not as expensive as beverages from international chains—around IDR 20,000 (USD 1.35) for an order, versus USD 5 for a latte from Starbucks—Kopi Kenangan’s drinks are popular enough that the company’s vision to become one of the largest homegrown coffee chains in Southeast Asia, if not the largest, doesn’t seem far-fetched.

In the second part of this series, we will look at Kopi Kenangan’s recipe for profitability and virality.