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Retail chains push up coffee consumption

Debasis Mohapatra  |  Bangalore 

in India is witnessing an upward trend with better branding of coffee among the youth by various domestic and international coffee chains in recent years. According to estimates of Coffee Board of India, domestic is expected to be above 100,000 tonne in 2010-11 season, up by close to 6 per cent from 94,400 tonnes in 2008-09. In 2009-10, the consumption touched around 100,000 tonnes.

“Domestic has witnessed a steady growth of five to six per cent in last five years with major growth coming from unconventional areas like north, west and eastern parts of the country,” Babu Reddy, agricultural economist of said.

Barring conventional areas like south India where coffee consumption is traditionally higher, the growth is also seen in other parts of the country, he added.

He also said that branding of coffee by retail chains and the commodity’s popularity among youth would be the major growth driver of domestic consumption in near future. India produces close to 300,000 tonnes of coffee per annum from which two-third of the produce is exported to other nations.

However, experts feel that this dependence can be reduced as coffee is receiving encouraging response from youth as a popular drink with opening of coffee retail outlets in the country.

Homegrown Cafe Coffee Day (CCD), Italian Barista Lavazza and Costa are some of the coffee retail chains with close to 1,250 outlets across India.

Industry estimates say there is a scope for another 5,000 outlets in the country which will provide significant boost towards domestic consumption.

Meanwhile, coffee retail chain like Cafe Coffee Day are planning to expand their footprint in Tier-II and Tier-III cities as part of their expansion plan.

“The coffee chain with 970 stores as of now will invest Rs 150 crore to increase its retail presence in tier-II and tier-III cities,” a top company official said.

The chain also plans to increase the number of outlets to 1150 stores by the end of this fiscal, he added.

Similarly, Barista Lavazza, the second largest coffee chain of India, is also planning to expand its outlet number to 500 from present 200 in next four years.

The company had also tied-up with oil marketing companies like HPCL, BPCL and IOC to open high way outlets.

Another international coffee brands like Costa Coffee and Coffee Bean with presence in India are also planning to expand their operation.

Referring to this expansion of coffee chain in India, Ramesh Srinivas, partner, KPMG said, “Coffee retail chains act as a trigger to consume coffee as a beverage in unconventional areas like north, west and eastern region of the country and will help increasing the consumption level in the country.”

Coffee retail in unconventional region like northern, western part is one of the fastest growing segments of the companies, he added.

He, however, said that organised coffee retail still accounted for a very small portion of the total coffee consumption and would not be able to contribute significantly in near future, he added.

First Published: Tue, July 13 2010. 00:03 IST
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