Transcript

00:00 What do you think about when you are having your morning coffee? Is it the taste? The vibe of the cafe, perhaps? Or maybe the price? Well, the answer is that, it depends. And recognizing that very notion is what makes Indonesian coffee chain Kopi Kenangan different from many of its competitors. Starbucks and other global coffee chains really prioritize consistency, where a cup of latte in Jakarta, Singapore and New York tastes the same. For Kopi Kenangan, we prioritize going hyperlocal. I realized that people have different tastes and preferences. If I go to Vietnam, I don’t like the coffee, it's too strong for me. If a Vietnamese drinks Indonesian coffee, they’ll be like, oh, it’s too mild for me, right? There’s no right or wrong. It’s just based on preference. And this is where we really shape our strategy for our global expansion. Which is why this cup of Kopi Kenangan here in Singapore may taste a little different in Indonesia. What started as a local coffee stall in 2017 has now gone global, with over 850 locations across Southeast Asia, It’s backed by the likes of Serena Williams, Jay-Z and Eduardo Saverin’s B Capital. There are three numbers to watch out for in Kopi Kenangan’s story. $15,000 – the amount Edward says they initially invested into opening the company’s first location. 8 million – Kopi Kenangan’s first outside investment by venture capital firm Alpha JWC Ventures. And $106 million – the amount Kopi Kenangan says they brought in in 2023. This is Founder Effect. Globally, the company sells about five million cups of coffee each month.On average, that’s about two cups per second. So, how did they do it? We’re here at the company’s Singapore headquarters today to find out more. This is Edward Tirtanata. He was born an entrepreneur. I didn’t really study much when I was a kid.

01:57 But whenever there is an opportunity to make money or do business, I always get excited and always get passionate about some of these little side gigs that I did. When I was a kid, whether it be trading Pokemon cards, I think back then. It was very popular. And I did a lot of buying and selling. Buy low, sell high, right? It’s a concept that I learned by doing. It is not about the money, it is about the pleasure of doing it. It is something that really excites me until today. Edward attended Northeastern University in Boston, where he studied finance and accounting. But things didn’t go according to plan. Growing up in Jakarta, especially coming from an entrepreneurial family, I always get exposed to a lot of things that my father was trying to do. He tried so many different things in his life. And I get inspired by it. During my freshman year in college, I had one fateful call from my mother, telling me that your dad is going through some financial difficulty. I think you need to come home quickly and help. And that is why I decided to really expedite all my courses. I was able to squeeze everything in three years.

02:59 And when I’m back in Jakarta, I went straight to entrepreneurship. Despite witnessing the setbacks faced by his father, Edward forged ahead with his own business ideas. Before I started Kopi Kenangan, I started this tea chain called Lewis and Carroll. Ironically, I thought, oh, there are a lot of cafes, but most of them only sell coffee. Why don’t I start a cafe that is selling tea? But I realized that doing my fifth, sixth and seventh store, the store is nowhere near profitable. And that’s when I realized that the market is already tapped out.One day in 2017, Edward and his long-time friend James Prananto were having a conversation in his tea shop, when they came to discover a problem. We realized that a lot of Indonesians cannot purchase a $3-4 cup of tea or coffee. If every cup of coffee costs you $4, and you consume it for 30 days, that is exactly one-third of minimum wage. Just as flavor profiles can vary across regions, so can the appetite for spending. This can be best explained through something called the Starbucks Tall Latte Index, which compares and maps out the price of a Starbucks Tall Latte in each country across the world. This makes it easy to spot where a Starbucks latte is the most and least expensive in the world. So, while a Starbucks latte would cost approximately two per cent of the median daily income of the population in the United States, that same latte would cost approximately one-third of the median income in Indonesia. And that is when we realized that instead of having a platform business model, like Starbucks, we want to create a grab-and-go coffee company. Instead of focusing on the sofa or fast Wi-Fi, we’re gonna focus on a good, high-quality cup of coffee.

04:42 That’s how we started Kopi Kenangan together. Shortly after that chance conversation out of a little tea shop in Jakarta, Kopi Kenangan was born. We believe that the key recipe of success in branding is to be different. And I realized that nobody is using an Indonesian name. I asked James, what is the most memorable memory that you have? Oh, my ex-girlfriend. And that is why our first menu is called Kopi Kenangan Mantan, which directly translates into, memory of my ex-girlfriend coffee. And that went really viral. A lot of people were saying, oh, this coffee tastes exactly like my ex-girlfriend. It was sweet in the beginning and bitter at the end.

05:20 That really creates that organic virality. We did not invest a single dollar for influencers, they all just post themselves. Together, they invested $15,000 into opening their first location in Jakarta, Indonesia. The experience of opening our first store was very hectic. We only raised like $15,000 from friends, family and our own money. And we went over budget, unfortunately. Thankfully, the contractor was kind enough to let us pay a little bit later. Little did we know, that from the first month's profit alone, we were able to pay back all of our outstanding. And we were able to make our money back in three months. After successfully opening his first store, Edward and James quickly re-invested their profits into expanding the business. They went on to experiment with how they opened new locations.For my real estate strategy, I would like to test for scalability. Therefore, I intentionally chose my second outlet to be in close proximity to my first outlet. It was only 500 meters away. And to our surprise, there was no cannibalization. We found out that we can open 14 stores on one road and there is no cannibalization at all. And the second thing that we tested is, can we actually compete head-on with a global brand? So that is why I believe that out of like the first 15 stores, at least half is next to Starbucks. And we actually took a lot of their market share. Because obviously, the taste is more localized, and it’s half the price. So a lot of people back then, actually buy our coffee and sit at the global coffee chain. In 2019, Kopi Kenangan received its first outside investment of $8 million from venture capital firm Alpha JWC Ventures.

07:01 Two years in, Edward had grown the business to 20 locations. By 2019, the business had grown to more than 200 locations. And by 2022, as economies slowly picked up following the Covid pandemic, Edward and his co-founder had nearly quadrupled their store count across Southeast Asia. Back then, I got a lot of pressure to actually just lay off all the employees and then maybe close the store temporarily. But I believe that the key for us getting out of Covid, is not to close our stores, but to open more, which was really counterintuitive. During the pandemic, Edward and his team invested heavily into building out their technology to help scale the business. And rather than being conservative, Edward chose to take advantage of the lower prices and open more locations. We used data to open stores near the customers. We even made the investment to go inside the mall, because we know that this is the best time for us to do land grabbing. So we made that investment. And that’s why we were able to go to where we are today.

08:03 Kopi Kenangan achieved unicorn status in 2021. By April 2024, the business had raised over $230 million in capital from investors across the globe. Despite the business’s success, it didn’t come without its own set of challenges. Entrepreneurship, for me is a constant struggle. I think it never gets easier, it only gets harder. The only things that improve are yourself and your team. You got better at handling struggle. If you think about it, right, I have never led a company with a triple-digit revenue before. It all started with a very simple, hectic beginning, where our biggest issue back then was.How can we find coffee? We ran out of it. We needed to use my Toyota Innova to go around the city to buy creamer or go to Bandung to buy coffee beans. So I try to learn every day how to become a better leader, how to become a better CEO, how can I lead a company of this size, right, and an even bigger size in the future? This is something that you need to do as an entrepreneur. It only gets more complicated as a business grows bigger. And I’m sure that it applies not just to Kopi Kenangan, but to businesses globally as well. I think the best advice that I can give to fellow entrepreneurs is to be different. The next Starbucks is not going to look like a Starbucks. The next McDonald’s isn't going to look like a McDonald’s. The next Google is not going to look like Google today. So you need to be radically different in order for you to compete against the incumbent. And now, I’m very excited for what the future holds for us. I believe that it’s just the beginning of our journey. We are still very, very far from meeting our dream to become a global coffee chain.

09:40 And hopefully we will be able to meet that dream within the next four to five years. Edward hopes to expand Kopi Kenangan to 3,000 locations by 2028 and dreams of listing the business in the U.S. one day. In order to achieve that 3,000 number, we need to put a very strong emphasis on our international expansion. Our Indonesian business is highly profitable. But our international business is not yet profitable, right, admittedly. But we believe that to meet our vision of 3,000 stores. By 2028, we need to make that investment today.