Third Wave Coffee has achieved remarkable growth, leveraging venture capital to scale rapidly over recent fiscal years. The coffee chain’s revenue from operations skyrocketed to ₹241 crore in FY24, a massive jump from ₹32 crore in FY22, demonstrating a compound growth trend.
In year-on-year terms, Third Wave Coffee saw a 67% surge in operational revenue, growing from ₹144.4 crore in FY23 to ₹241.3 crore in FY24. According to its standalone financial statements, the company specializes in producing, processing, and selling coffee and related products both domestically and internationally. Its product portfolio includes coffee beans, cold brews, and coffee bags, accounting for its entire revenue stream.
With a robust expansion strategy, Third Wave Coffee currently operates 114 cafes across India, aiming to reach 160 outlets by FY25. The chain plans to accelerate its growth further, adding 80-100 outlets annually from 2025. To sustain this expansion, the company claims it roasts between 10,000 to 15,000 kilograms of coffee beans weekly.
Operational Performance and Rising Costs
Apart from its core business, Third Wave Coffee earned ₹6.61 crore in non-operating income, bringing its total revenue to ₹247.9 crore in FY24. However, its expenses rose significantly, with employee benefits forming 27% of total costs and reaching ₹97.26 crore, up 68.8% from the previous year. The cost of materials doubled to ₹87.61 crore, while rent expenses grew to ₹81.25 crore. Notably, marketing and promotional expenses remained modest at ₹11.65 crore.
Overall, the company’s total expenditure rose 78% to ₹358 crore, leading to losses doubling to ₹110 crore in FY24. This was largely due to increased spending on salaries and rent. Operating cash outflows also climbed by 33%, amounting to ₹81.57 crore for the year.
Financial Metrics and Market Standing
Third Wave Coffee’s EBITDA margin and ROCE stood at -35.52% and -35.28%, respectively, reflecting challenges in profitability. On a unit level, the company spent ₹1.48 to earn ₹1 of operational revenue in FY24. Despite this, its current assets surged more than fivefold to ₹223.2 crore, with cash reserves increasing to ₹120.4 crore from ₹8.06 crore in FY23.
The Bengaluru-based chain has raised approximately $65 million to date from investors such as WestBridge Capital, Creaegis, and Redbrook. A $35 million funding round in September 2023 valued the company at $155 million post-money.
Challenges and Future Outlook
While the coffee chain faces stiff competition from brands like Blue Tokai, Sleepy Owl, and Rage Coffee, its ability to maintain low advertising costs without compromising growth highlights a strategic edge. However, challenges such as high rental costs and building customer loyalty persist.
The path to profitability remains a distant goal, but Third Wave Coffee’s significant runway and expansion plans position it well for future growth and potential funding rounds. For loyal patrons, the chain’s sustainability is reassuring, ensuring they can enjoy their favorite brews as it scales new heights.
4o