The seeds of India’s connection with the world’s most popular beverage, coffee, were sown some 400 decades ago in Karnataka’s Chandragiri Hills. However, today, besides Karnataka, coffee is cultivated across several traditional southern regions of the country like Kerala and Tamil Nadu, as well as the newly developed, non-conventional areas like Andhra Pradesh and Orissa in the Eastern Ghats.
India is the only country that produces all of its coffee under shade, with Karnataka accounting for the largest share of coffee exports and plantations. The total production (post-blossom) estimate for FY’23 by Coffee Board stands at 393,400 metric tons, which is 15% higher than the final estimate of FY’22, -342,000 metric tons.
Who is brewing what in the global coffee landscape?
Brazil, the top producer, and seller of coffee, exported US$ 5.83 billion worth of coffee in 2021, mainly to the US, Germany, and Belgium. Switzerland (US$ 3.5 billion), Colombia (US$ 3.18 billion), Germany (US$ 2.94 billion) and Vietnam (US$ 2.37 billion) are the other leading exporters of coffee in the world.
The US is the leading importer of coffee, with a 19% share in the world’s coffee imports, and majorly imports from Colombia and Switzerland, besides Brazil. Next in line is Germany – the second-largest importer of coffee. In 2021, it imported almost $ 4.11 billion worth of coffee beans, mainly from coffee-producing countries like Brazil, Vietnam, and Honduras. Germany roasts & even decaffeinates most of these green beans in its coffee roasteries at Bremen, after which they are shipped to the US, Poland, France, and several other European nations. This makes it a leading coffee exporter.
Emerging trends & opportunities
Demand for certified coffee:
Germany’s coffee market places great emphasis on sustainability, with its sale of coffee with sustainability/organic certifications expected to show continuous growth. Analysts suggest there is a rising section of consumers becoming increasingly conscious of the coffee they purchase and whether it meets the ‘certified’ and ‘sustainability’ standards of the food and beverage market.
Indian coffee exporters can leverage this growing sentiment and consumer pattern to develop unique, organic, and sustainable blends. For this, coffee traders must ensure they have more extensive control over the supply chain so their coffee isn’t stored for an extended period and they can maintain its premium quality. One way to make this possible is to invest and become a curing house for coffee.
Changing consumer preferences:
Instant coffee usually commands a 25-30% share in India’s export basket. Interestingly, reports suggest that some consumers, especially youngsters, are expected to switch from instant coffee to more premium options, rising from their desire to venture out to cafes and socialize. Indian exporters of instant coffee might want to be on top of this emerging trend as it may impact their product sales.
Vietnam’s declining coffee exports:
Vietnam is the second-largest coffee-producing country globally and primarily exports to Europe. However, Vietnam’s exports are falling faster than expected, despite declining shipping rates. Moreover, analysts said the price of coffee had risen significantly this year due to the increased energy costs needed for roasting coffee beans. Since Europeans prefer the more robust and bitter flavors of the Indian Robusta blend and with India already capturing a bit of the European market, it can take advantage of the situation as Vietnam falls back in fulfilling the growing demand.
As Dr. D.R. Babu Reddy, Deputy Director (Market Research), Coffee Board of India, opines: Indian coffee may not be the first choice for everyone, but it has carved a niche for itself because it is blended for many of the top brands. Indian Robustas are used being by the traditional market players. Our focus is now towards branding of Indian coffee.
According to a survey conducted by the Institute for Scientific Information on Coffee (ISIC), 68% of the respondents said they often consumed coffee while working. This trend is leading to a massive demand for coffee in European countries like Germany, Spain, the UK, and others. Additionally, advancements in technology like tabletop machines and traceability tools are creating the pathway for bean-to-cup solutions, especially for office goers. This also opens a new market for Indian specialty coffee traders to make cafe-like coffee readily available.
Prem Divakar Venkatesh, Partner, Nadar Spices, an exporter of green coffee affirms this sentiment and believes that the European market is lucrative for specialty coffee beans, where consumers are more selective about taste and variety. However, he says the Coffee Board has to identify such vital takers for specialty coffee beans globally and connect them with exporters to increase exports of such grades. The exporter added that although there is little demand from Saudi Arabia, given the price premium of about 1.5X to X over the regular prices of coffee, there are fewer takers in price-sensitive markets like the Gulf.
India’s coffee export market
According to the Food and Agriculture Organization (FAO) statistics, India is the eighth largest exporter of coffee by volume. Arabica and Robusta are the two significant varieties of coffee beans exported by India. While Robusta exports constituted almost half of India’s total coffee value exports in FY’22 with a share of 49%, Arabica coffee beans comprised only 20% of the export basket. Robusta sells at almost one-third the price of Arabica, has 25% higher caffeine content, and is found in instant coffee, espresso and as a filler in blended coffees.
As per the Directorate General of Foreign Trade (DGFT), India exported nearly US$ 1.02 billion worth of coffee in FY’22. This is the first time India’s coffee exports crossed over a billion dollars after experiencing a declining CAGR of 3% between FY12-21. Moreover, there was a 42% rise in coffee shipments during 2021-22, owing to increased volumes and higher realizations. This can be attributed to higher global prices and pent-up post-covid demand. India’s coffee finds its way to over 50 countries worldwide. However, in FY21, its exports were concentrated across key destinations like Italy (US$ 132 Mn), Belgium (US$ 85 Mn), and Germany (US$ 77 Mn), constituting around 50% of total India’s coffee exports.
Government initiatives/strategies to boost coffee exports
The Coffee Board recently collaborated with an e-commerce platform to launch several premium coffee varieties. Initiatives like these are crucial to increase domestic consumption of coffee and are also an excellent start to creating a gradual positive momentum for exports. No doubt there is a growing need for value addition in India’s coffee across multiple stages- from coffee processing to roasting.
Besides this, the government has launched several schemes and initiatives to extend support to stakeholders to encourage the production and maintenance of coffee plantations, transit/freight assistance for coffee exports, etc., to develop ‘Brand India’ in high-value international markets. With aid from the government and the Coffee Board, India has the potential to establish a niche market globally for its unique coffee blends.
The article was first published on tpci.in