On the side of a dusty Jakarta road, nestled in the corner of a gas station, might be the future of coffee.
Driving home, you might preorder a cup as you plan to refill the car, even before pulling up to the gas station. Open the Kopi Kenangan app, click on “preorder,” and choose one — perhaps a mellow coffee with just a hint of acidity, creamy with milk. By the time you arrive at the station, the iced coffee, made by a human, will be sitting on the countertop, sweating in a plastic cup in the Jakarta humidity.
Indonesian coffee chain Kopi Kenangan — “coffee memories” in Bahasa Indonesia — did not set out to be a tech-powered coffee chain. It began to rely on technology to grow, banking that there were Indonesians who wanted accessibly priced coffee that was also high-quality. Starting out in 2017 as a 10-square-meter (107 square feet) shop on the ground floor of an office tower, the company capitalized on a steady stream of foot traffic, keeping rental costs low with their tiny store size as they invested in sophisticated brewing machines and quality beans.
“We understood that, going into this space, we cannot follow the incumbents and that we have to do something different,” said Kopi Kenangan co-founder and Chief Operating Officer James Prananto. He runs the company with high school friend Edward Tirtanata — the CEO, who also owns the Lewis & Carroll artisanal tea brand — and Cynthia Chaerunnisa, a former manager of marketing at Shopee and Uber.
Southeast Asia is seeing the rise of companies like Kopi Kenangan: tech-powered coffee companies, colloquially known as “coffeetech,” which span digital and physical experiences. Across the region are about a dozen of these companies, which operate through apps that feature delivery, preorder service, discounts, and loyalty memberships and use internal technologies, such as cloud-powered heat maps, to help them build new physical locations.
The coffeetech wave mirrors the growth of local e-commerce, and a global return to the advantages of brick-and-mortar stores, even by giants such as Amazon. Kopi Kenangan and others are attempting to merge the customer-pleasing speed of online transactions with the immediacy of physical pickups.
Yet there are elements of the coffeetech wave that remain stubbornly low-tech — the way that the coffee is still overwhelmingly made by humans, for instance, and that a portion of their customers are still incidental foot traffic.
“That’s the new economy,” said Christine Natasya, an analyst from Jakarta-based Mirae Asset Sekuritas Indonesia. “Bridging the offline and online experience using technology.”
Sandeep Sharma, senior consumer analyst at investment research firm Third Bridge, said the shift showed a “clear understanding of an omnichannel” — that is, of both online and offline retail — and “digital-first strategy.”
Coffeetech startups have been able to pitch themselves as companies with new, tech-savvy retail formats. Kenangan became Southeast Asia’s first food and beverage unicorn in December 2021, and investors include Alpha Wave (formerly Falcon EdgeCapital), Sequoia Capital India, and funds backed by Jay-Z and Serena Williams, among other big names. Over four years, it has grown to operate 600 stores across 45 cities, employing over 3,000 people, with offices in Singapore and Malaysia.
Since 2018, global investors have poured at least four hundred million dollars into Southeast Asian coffee startups, according to Rest of World analysis based on Crunchbase data and media reports. Most of that belongs to Kopi Kenangan, which, by bringing coffee into the e-commerce ecosystem, is targeting what it sees as a previously underserved group of coffee-drinkers. Singapore’s Flash Coffee, which offers a full barista experience with the convenience of in-app ordering, raised $15 million in a series A round led by White Star Capital in April 2021 and joined by DX Ventures, Global Founders Capital, and Conny & Co.
Indonesia’s Jago Coffee, co-founded by a Gojek alumnus, received about $250,000 in a pre-seed funding round from Beenext and coffee entrepreneur Hidenori Izaki. Others, like robotic automated café Ratio, and Morning, maker of specialty coffee capsules and high-tech home brewing machines, have, combined, drawn millions in funding.
Jago Coffee, co-founded in 2020 by Yoshua Tanu and his cousin Christopher Oentojo, sidesteps the issue of spending money on real estate altogether. Instead, coffee drinkers can order, say, an iced milk coffee signature brew through their app. The user selects their current location and the beverage of choice, and a barista arrives by a mobile electric cart. Though the mobile baristas operate across a limited range, the company claims its deliveries are twice as quick as other delivery platforms — the most comparable being Gojek and Grab. “Our average time is about 13 minutes, in terms of orders. And that’s, like, from ordering to a cup in your hand. The fastest was like five minutes and a half,” Tanu told Rest of World.
Rizki “Iki” Lestari, 23, is a Jagoan (what Jago calls its barista “partners”). She commutes daily from a satellite city outside Jakarta to Jago’s depot in Kuningan to pick up her electric cart. When Rest of World met Lestari, she was selling coffee to the workers at the depot complex where the carts are stored. On other days, she rides the cart around her mandated 8 kilometer radius, sets up at random, and sells coffee to passersby. Iki said she can earn up to 4 million Indonesian rupiah ($278) per month from working seven hours a day, which is good enough for her, she said.
Still, despite funding from sharp, trend-seeking tech investors, parts of the coffee industry look the same as ever. While going digital has optimized the transaction and pickup process, the influx of cash isn’t yet transforming consumers’ grab-and-go instincts.
Asked where most of her coffee orders come from — the app or offline hailing — Lestari the Jagoan barista said it’s the latter.
“People spot me on the road; they ask, ‘What are you selling?’ and then they buy the coffee,” Iki said.
In Jakarta, Maxx Coffee is furnished with plush couches and air conditioning, and the owl logo for the popular high-end café chain can be found in almost every shopping mall. Founded by the giant conglomerate Lippo Group in 2015, the business set up modern co-working spaces, meeting rooms, and manual brew bars. Adding a consumer app has resulted in double-digit growth in delivery orders since the pandemic began, with approximately 5% to 10% growth in active users, said Mehdi Zaidi, the CEO. Their operations have also been brought up to date, with digital payments and data analytics.
“In terms of technology, we have everything that the new age competitors are offering,” said Zaidi, from his seat in a Maxx Coffee outlet in Kemang, Jakarta. But he is adamant that coffee will always be, for the majority, tied to an in-person experience.
Ayu Meutia, a 29-year-old professional working in Jakarta, is a casual coffee drinker. Pre-pandemic, when she was working full time in an office tower, she liked to go to a Kenangan store in the tower during breaks, despite knowing the preorder feature on the app. “My colleagues used the preorder and grab-and-go feature daily, but I liked to take my own sweet time, stretch my legs during a break, and place my order at the counter,” Meutia said. (Now, working from home, Meutia orders her caffeine from various places through the Gojek app.)
Maxx Coffee’s CEO maintained that a mix of online and offline offerings for consumers is permanent. “The question that people need to ask is, would they prefer to deal with the robot or with the human? And that’s a question which is a preference. My preference will always be for humans,” Zaidi said. “But I’m sure there will be some geeks who will be interested in getting something out from a robot.”