Coffee arithmetic likely to see a change in India

Consumption set to rise as global players arrive to brew coffee.

With global coffee retailers setting up shop in India, domestic consumption is set to rise and growers are likely to get a buffer against international price fluctuations.

Experts feel these global retailers would also help in popularising coffee among youngsters in non-traditional areas.

Coffee Board of India Chairman Jawaid Akhtar agrees domestic consumption will witness an upward trend due to the entry of global coffee retailers into India, but said, “It’s difficult to predict the growth rate. However, it will be definitely higher.”

According to the board’s estimates, domestic coffee consumption witnessed two per cent growth during 1990-2000. It went up to six per cent during 2001-2008. A recent survey of the board indicated that this growth rate had gone up to eight per cent for 2008-09. Domestic coffee consumption stood at 102,000 tonnes in 2008-09, compared to 94,000 tonnes a year earlier.

In fact, consumption has seen an upward trend in the last two decades, with the entry of private retailers like home-grown Cafe Coffee Day, Italian Barista Lavazza and Costa Coffee. These retailers have 1,250 outlets and the number is likely to increase to 5,000 in the coming years, according to industry experts.

The world’s largest coffee retailer, Starbucks, recently entered into an agreement with Tata Coffee to open retail outlets in the country. “The entry of Starbucks shows the growth potential of coffee retailing market in the country and the domestic consumption level should reach 140,000-150,000 tonnes in the next five years from 102,000 tonnes as of now,” A Nanda Belliappa, a Karnataka-based planter said.

Coffee planters will also get some kind of buffer against fluctuations in international prices, as these retailers will source their produce from local planters, he said. India produces around 300,000 tonnes coffee a year, out of which 70 per cent is exported. “There is also a constant fear of conversion rate swings and less dependency on exports will work in favour of local planters,” he said.

K Ramakrishnan, president (marketing) of Cafe Coffee Day, said there was space for every one in the Indian coffee market, as per capita consumption was very less in the country.

“Per capita consumption of coffee in our country is around 85 grams as compared to six kilograms in the United States. Domestic consumption will be activated by the expansion of the industry,” Ramakrishnan said.

Out of more than 3,000 cities in India, coffee retailers are present only in 170 cities, which indicate the growth potential of the industry, according to him.

He said domestic growers would be definitely benefited, as they would have assured market for their produce.