When Edward Tirtanata set out building his Indonesian coffee shop empire in 2017, he quickly struck on a simple rule of thumb to guide where to open a new location.
There was no sophisticated data crunching or real estate strategy involved. “Just open near a Starbucks,” he tells MONIIFY. “It’s as simple as that.”
Tirtanata was confident that his offering – a chocolatey, less bitter coffee blend at a price point ordinary people could afford – could lure customers away from the multinational giant. It turns out he was onto something.
From an initial $15,000 investment, Indonesia’s Kopi Kenangan has grown into a company worth more than $1 billion, with over 900 stores serving 70 million cups of coffee every year. The company, whose name is Bahasa for “Coffee Memory,” has won over big name investors including VC giant Sequoia Capital and celebrities like Serena Williams and Jay-Z. That’s helped fuel its rapid expansion to markets like Malaysia and Singapore, with new countries like India in its sights.
“There’s no meaningful Indonesian brand that’s going global,” he says. “I want to be the first one.”
Speaking to Money Moves’ Muhammed Mekki, Tirtanata revealed how, after identifying a gap in the market, he rapidly grew his business through a winning formula: Hyper-localized offerings, small retail footprints, and a tech-enabled, grab-and-go approach.
“It’s not about what I like, or what coffee experts think is correct,” says Tirtanata. “It’s really all about ‘What does your customer like?’”
Here are three takeaways from the conversation:
- Know your market. Tirtanata is a big believer in hyper-localization, intensely focus-grouping his menus in each new market, rather than the one-size-fits-all approach of many global players.
- Small is beautiful. A smaller footprint allows Kopi Kenangan to get its counters into more locations, including hundreds of gas stations, and keeps overheads down, leaving more to spend on the beans.
- Go fast. The company’s rapid growth reflects its tech startup ethos: get to market quickly, then iterate as you go. “In entrepreneurship, I always say ‘Just Do It,’ like Nike,” says Tirtanata. “You don’t need to overcomplicate – you just need to iterate and talk to your customer and just do it.”
Muhammed Mekki: From an initial $15,000 investment over seven years ago, you’ve built a company valued at over $1 billion. What was the gap in the market you saw?
Edward Tirtanata: The idea never changed from day one… where we saw a big… gap in the market, between instant coffee and freshly brewed coffee, like Starbucks.
One cup of [freshly brewed] coffee back then, in 2017, was around 40,000 rupiah ($2.44) to 50,000 rupiah.
There is no way that people can do that every day. That’s why I created Kopi Kenangan. We realized that the best price point is below 20,000 rupiah.
Read more: How Mehdi Oudghiri took on the big boys of eyewear and won
- Mekki: What was the point where you realized this might actually work?
When we first opened: Day 1. I told my partner I think we’ll be lucky to sell 100 cups. But on the first day alone, we were able to sell close to 700 cups.
We were actually beside a Coffee Bean, Starbucks and a convenience store that was selling coffee, plus a lot of street side vendors outside. People were saying “Wow, this tastes better than Starbucks, but it’s half the price.”
It’s not necessarily better, but it’s more relevant, more suited for the market that I am in. The fact that we could open near a Starbucks? We knew that expansion would be very easy.
Read more: From App Store rejection to winning at Web3 – Yat Siu’s big comeback
- Mekki: 700 cups in your first day, though – you must have gotten the word out somehow?
Number one is the branding. Back then, most cafes, they called their cafes something along the lines of coffee, or with a Western name. But I realized that if you want to penetrate Indonesia, you need to be localized. You need to look different.
I do believe that, you know, the next Starbucks is not going to look like a Starbucks. The next Google is not going to look like a Google. You need to be differentiated from everything – from the business model, from the product, all the way to the branding as well.
We really didn’t have money for marketing, so we needed to differentiate ourselves with the branding. Kopi Kenangan translates into “Coffee Memory,” because I thought it sounds nice in Bahasa.
Then I thought to myself, “OK, what memory is actually most memorable for you?” That’s why our number one bestseller until today is called Kopi Kenangan Mantan, which translates into “My Ex-Girlfriend’s Memory.”
It was an instant success because people were laughing at the cashier… like, ‘What is this?’ People are posting on Instagram: ‘This coffee tastes like my ex-girlfriend, sweet in the beginning and bitter at the end.’ It was very viral. That virality keeps us going until today.
Read more: Drones, copycats and tumor-shrinking chips – How Noor Sweid finds the next big thing
- Mekki: Customer feedback is clearly vital to what you do. How early did you start funneling that input into the business?
Actually, the first day of business in 2017, I talked to a lot of customers, and I changed the recipe on the go. They said, “Oh, this is way too bitter for me.”
I adjusted the calibration of the espresso, because I realized that I like my coffee to be very strong, actually. But then not a lot of customers like it to be bitter – it could be bold but not as strong as I liked it.
Starbucks… pride themselves on being consistent across different markets. So the taste of a tall latte in Singapore, Malaysia, Indonesia all tastes the same.
But for us, we really believe in going hyper-local, meaning that we adjust to the market.
Read more: Throw the accountant in the pool – How Moses Lo brought Silicon Valley to Southeast Asia
- Mekki: How else did you differentiate?
The format is very different. We are more like a grab-and-go format, meaning that our first store is only 12 square meters. It’s very small – most coffee shops, their bar is 20 square meters.
Because it’s small, I can enter locations that cafes cannot enter. For example, we’re the number one gas station player in Indonesia by far. We have close to 200 stores just in gas stations because our concept is small. It fits.
We know that if we want to sell high-quality coffee at an affordable price, we need to work with a higher COGS [cost of goods sold] than most. But I know by going small, my costs in terms of rent and labor will be a lot smaller than most.
Another thing that is different is how we leverage technology… to make people go into our store – so people order digitally.
- Mekki: On the tech front, you’ve been developing your own digital assistant called Jarvin. What motivated that?
One of the things that we realized in building 900 stores is that finding 900 good managers is just as challenging as building the stores. Or even more challenging, you need to find one good manager a day.
So, we want to make sure that Kopi Kenangan doesn’t need to be run by a manager.
In fact, out of those 900 stores, only half have a manager, half don’t.
What does a manager do? They need to make sure they follow the [standard operating procedures] and then they order correctly to make sure that they can sell coffee.
Basically, Jarvin helps them ensure that they follow the checklist properly. Then the system can help them do suggestive ordering to the warehouse. ‘I think for the next 3-4 days, you need 100 kilograms of coffee.’
Only if the store has a high enough volume, then we start providing them with a better manager, because obviously the complication is different if the store is doing very well.
Read more: Meet the part-time DJ, full-time tycoon who wants to make you richer
- Mekki: Where do you see this evolving?
It’s not AI yet. We are going towards that because the technology for generative AI is getting better and better.
With Gen AI, you could actually recommend the manager to do more. “I think based on the sales, you need to open your stores slightly earlier,” for example, or “You need to upsell the bread better, because you are falling behind compared to other stores nearby.”
Those kinds of analytics… we cannot do it ourselves.
- Mekki: Did you always have ambitions to go pan-Asian, or beyond?
Back then I didn’t really have the pan-Asian vision. I just thought that I want to become the number one coffee chain in Indonesia. That’s it.
But after a year or two, I realized that Indonesia is actually the fourth largest exporter of coffee. But we export coffee as a commodity. We don’t export coffee as a brand.
That’s when I realized as well, if you want to, you know, make Indonesia progress, if you want to make people know more about Indonesia more than just Bali… one of the mediums is through food.
- Mekki: Finally, let’s imagine you’re established in your first job and you’ve pulled together your first $10,000 of investable money. How do you spend it?
My first rule of thumb in investing is that I don’t want to look at it too much, and I don’t want to worry too much about it. So daily trading of stocks is definitely a no-go. Crypto is definitely a no-go.
I would just do 70/30 – 70% bonds and 30% S&P [500]. On bonds, when the interest is high, the yield is pretty attractive. Then when the interest rate gets cut, then the bond value will go up.
If it’s the other way around, where it’s a low interest environment, and the S&P is not as high as it is today, then I would probably switch it around.
You can’t have every single thing in your life be risky, right?
Edited by Lin Noueihed and Azar Zaidi. If you have any tips, ideas or feedback, please get in touch: talk-to-us@moniify.com
