$270 Million Coffee Empire in Indonesia: The Journey Unveiled - Kopi Kenangan

In this interview, Edward Tritanata reveals how a Starbucks latte index exposed a massive affordability gap in Indonesia, how he deliberately opened his first stores next to Starbucks rather than avoiding them, how he guaranteed his employees' full salaries during the pandemic while taking a one-rupiah salary himself, and how a day one mentality drove Kopi Kenangan from one store to a 900-store, $270 million empire in just three years.

My name is Edward Tritanata, and I am the CEO and co-founder of Kopi Kenangan. Kopi Kenangan currently commands around 900 stores in two countries. Even though we are only six years old, we have raised around $270 million in total, with investors including Jay-Z, Serena Williams, Sequoia Capital, and several other reputable investors. We are currently selling approximately 5.5 million cups per month, and in the next two to three years, we hope to sell even more, not just in Indonesia but also in Malaysia and beyond.

I learned that there is something called the Starbucks tall latte index: the price of a Starbucks latte compared to your daily income. In the US, it is around 2%, whereas in Indonesia it is closer to 30%. There is no way everyone in Indonesia is drinking a cup of latte if it consumes close to 30% of your daily wage.

Most cafes back then always aimed to be large, with comfortable sofas and fast Wi-Fi. But many people like me do not need that comfortable sofa. I just want a good cup of coffee at an affordable price. Of course, that means a higher cost of sales, but I realized that if I make the space really small, it simplifies everything. My hypothesis was that if I shift the rental cost to the coffee itself, I can sell much higher-quality coffee at a much more affordable price.

That remains our business model: to be grab-and-go, to be small. We do not need seating, but we can attract a large crowd. We also tried to capture online customers, because back in 2017, online delivery had just started. I realized that whether your store is 200 square meters or 20 square meters, it does not really matter.

In a business with a big market, you always have a lot of competitors. I realized we needed to differentiate ourselves and look different from our competitors. A lot of people give their cafes Western names, but I thought: why not use an Indonesian name to stand out? That is why I named it Kopi Kenangan, which means "memory coffee." That branding actually makes people remember us.

I believed that with the recipe we had developed and the pricing point we had decided on, we had a chance. The first store opened in 2017. In 2018, we tried to expand because, with coffee, your catchment area is typically within a two-to-five-kilometer radius of your store. Indonesia is very large, so if you want to reach people in other cities, other districts, and other subdistricts, you need to open stores there.

When we expanded, our logic was simple: we wanted to test for scalability, meaning would the revenue still be good if I opened nearby, or would we cannibalize each other? That is why I intentionally opened the next store within half a kilometer from the first. I also deliberately chose a location that already had competing coffee chains near our stores. 

 We opened near them, and we were driving even in the midst of established competitors. Using that logic, we kept finding where all these coffee chains were and opened near them. We did well near them, so why not open more near them? That is when we were really able to attract funding, because we could identify opportunities to grab market share from existing larger coffee chains. If you are trying to get an investor to invest in your business, it really comes down to this: how do you envision your company in the next five years?

A famous investor from Sequoia Capital once told me that a good company wastes money when money is the only constraint on growth. Everyone, including ourselves and our investors, believed that was the case for Kopi Kenangan. When we received our large investment, that is how we were able to grow quickly. In the first year, we had one store; in the second year, we had 56 stores; and in the third year, we had 226 stores. You can grow really fast when you have that product-market fit.

I think the biggest challenge our organization has ever faced was in April 2020, when our borders were shut down. Our revenue literally dropped by close to 50%. All of our stores were usually in malls or offices, and suddenly nobody was going there. No revenue meant I could not pay my employees' salaries.

I overcame that challenge with empathy. I told all my employees that I would pay their salaries and not miss their bonuses, even if it meant I myself would not receive any salary. I took a one-rupiah salary along with my co-founders to show our employees that they had security. If they do not feel like they can feed their families, they will not be able to work well. They will just be worrying about their families every day.

Having spent a lot of time with employees at the store, I realized they work hard for the company. It is a basic human principle to show sympathy, to repay kindness with kindness. That is exactly what I wanted to give our employees: helping them get on with their lives and work hard for us. I am glad I did that, and it also made sense from a business perspective, because we needed to build employer branding to make sure people know we are a company run by empathy, not by a culture of pure cost-cutting.

Together, we were able to overcome the pandemic, and it was not just through empathy. We also leveraged online sales heavily, because that is when we really built our app. Our app grew from zero to around three million users. During the pandemic, we doubled down on technology, both third-party platforms and our own.

I think the most important elements for any food and beverage business are taste, price, and location. This is proven from multiple focus group discussions we have conducted with Nielsen and Kantar. A lot of demand drops off after it reaches a certain price point, so you need to make sure the price is right.

When I first started Kopi Kenangan, I asked literally everyone I could find to compile data on how much they would pay for this coffee. Using that data, we were able to price a cup of coffee affordably for many people. In terms of taste, we realized that Malaysian and Indonesian customers have different preferences, which is why we reduced the sugar in our drinks in Malaysia by 30%.

Last but not least is location. If your location is too far away, nobody is going to go to your location. Maybe they come once, but are they going to come back? No. People are busy and they do not want to travel far for something they consider a daily necessity.

During my entrepreneurial journey, I realized that the most important thing to succeed in life is to have a goal and then pursue micro-improvements, one step at a time. No great entrepreneur ever makes it by doing one big thing. It is always a combination of small things: trying to improve the recipe every day, trying to source better ingredients at lower cost, or showing empathy to your customers. It is all the small improvements that we try to do every day.

That is why at Kopi Kenangan, we live by a mantra called day one mentality. Every day is day one for us. Never be complacent, never be satisfied with yourself, always try to make micro-improvements every day. As an entrepreneur, I am not satisfied with where I am today. I believe the journey is only the beginning, and in the next five to ten years, I believe we will become a global brand, not just in Southeast Asia, but beyond.