Coffee planters climb up value chain in a bid for better returns

Coffee planters climb up value chain in a bid for better returns
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First Published: Tue, Feb 19 2008. 01 12 AM IST

From bean to table: Marvin Rodrigues (in yellow shirt) at his Flava coffee shop in Bangalore.
From bean to table: Marvin Rodrigues (in yellow shirt) at his Flava coffee shop in Bangalore.
Updated: Tue, Feb 19 2008. 01 12 AM IST
Bangalore: A small but growing number of coffee planters in Karnataka are venturing into the business of coffee bars or cafes encouraged by the ­success of chains such as Cafe Coffee Day and in an attempt to get better returns from their crop than what they currently do.
While prices of Arabica beans have fallen to around 140 cents (Rs57.04) per pound (0.45kg) now from a peak of 216 cents per pound in the international market in 1994-95, the price of a cup of coffee in a coffee bar has continued to rise. At India’s largest coffee bar chain, Café Coffee Day, which has 498 outlets across India, the cheapest a cup costs is Rs40.
From bean to table: Marvin Rodrigues (in yellow shirt) at his Flava coffee shop in Bangalore.
The International Coffee Organization quotes prices in cents per pound.
Marvin Rodrigues, managing director of J Rodrigues Coffee Pvt. Ltd became the latest planter to venture into the retail business with a cafe, branded Flava, which opened in Bangalore last week. Rodrigues, who owns plantations in Hassan and Coorg, wants to open about 10 such cafes over the next 18 months.
“This is a very small movement as of now,” says Harish Bijoor, a Bangalore-based marketing consultant, who was earlier a vice-president (marketing) at Tata Coffee. “When coffee growers enter into the retailing business, it sharpens not only the planters’ side of the business spectrum but also the consumer interface which is essential to know how the coffee is going to get consumed and how it climbs up the value chain,” adds Bijoor.
The trend isn’t new. Cafe Coffee Day is owned by Amalgamated Bean Co. Ltd, one of the largest coffee producers in India. However, the planters entering the business now own and run smaller plantations. And many of them, says G.V. Krishna Rau, chairman, Coffee Board, a government body, have realized the need to “add value to their business.”
“In the near future, it will be difficult to sell coffee just as a commodity,” says T.M. Nandan Gowda, who started a cafe, Hunkal Heights, in Bangalore in 2007. Though his family has been growing coffee—branded Thogarihunkal Highland Coffee—in Chikmagalur for over a century, Gowda, 26, decided to open a café.
The coffee bar (or café) business in India has grown over the years. Apart from Café Coffee Day and Barista (this chain has changed hands several times and is currently owned by Italian roasting company Luigi Lavazza SpA), UK’s Costa Coffee is also present in the country through a franchise arrangement with Ravi Jaipuria’s Devyani International, part of the RK Jaipuria Group.
While Bijoor says more coffee planters will open cafes, Gowda says most “will wait and see” how the planters who have already entered the business do. Gowda plans to open 15 more cafes in Bangalore and Mysore over the next two years.
Another planter, Kalmane Trading Pvt. Ltd, already runs four cafes and three coffee kiosks in different malls in Bangalore under the name Kalmane Koffees. The company plans to open 25 cafes across Bangalore over the next one year. “Every day, we roast the coffee afresh and we grind and make coffee only when the customer orders it and we offer nine different blends,” says the chain’s head of operations, V. Sriharsha.
Bangalore is a natural destination for many of the small planters because of its proximity to their plantations and also because the city has a growing “retail” and “hang-out” culture. Lalitha Narayan, whose family has interests in plantations in Chikmagalur in Karnataka and Yercaud in Tamil Nadu tried her luck with an outlet branded Cafe Point in Coimbatore, but says the cafe “is not doing really well because the concept of ‘hang-outs’ has not caught on unlike in Bangalore.”
Flava, Hunkal Heights and Café Point serve pastries, sandwiches and burgers, but say it is still coffee that makes the most money for them.
The time is right to get into this business, says Rodrigues.
“Five years ago, people would not come up and ask for a Latte (a coffee drink), but they do now.”
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First Published: Tue, Feb 19 2008. 01 12 AM IST