For decades, India’s coffee growers have been buffeted by big coffee-producing nations such as Brazil and premium beans from Vietnamese estates. Result? Their efforts to export their produce were always a struggle.
But an economy growing at record levels has pointed them in another direction: a booming market at home. Higher incomes mean more people are consuming coffee as a “lifestyle drink”. Growing local demand is just what the local coffee industry needs—a buffer against a notoriously volatile global coffee market.
It will be with newfound confidence then that coffee growers walk into the India International Coffee Festival starting in Bangalore on Friday. Around 500 participants, more than a fifth from 15 countries, will discuss the growth in India at the conference, organized by the Bangalore-based Coffee Board, a government body that promotes coffee production and drinking, with representation from growers, roasters and exporters.
The fast-growing coffee consumption in the country has seen the bean selling more than 80,000 tonnes in 2006, about half more than the stagnant 55,000 tonnes annually sold in India until 2002, a year that local consumption started turning around. Of the 2.9 million tonnes coffee India grows, 70% is exported.
The jump in local consumption is driven largely by the growth of coffee chains such as Barista, owned by Chennai-based Sterling Infotech, and Café Coffee Day, run by India’s second largest coffee exporter, Amalgamated Bean Coffee Trading Company. “Coffee is popular in urban areas due to increasing disposable income, changing lifestyle and demand for a variety of coffees,” said G.V. Krishna Rau, chairman of the Coffee Board.
The board wants to ratchet up domestic coffee consumption to 1.6 lakh tonnes over the next 10 years and has roped in P&A Marketing’s Carlos Brando, an expert who promotes Brazilian coffee in the world market, to help get there.
“The Indian coffee retail industry is positioning coffee both as beverage and food. Coffee can be added in chocolates, cakes and food and there is more variety,” said Naresh Malhotra, chief executive of Café Coffee Day, which runs 400 coffee shops across India.
“We will see annual growth of over 25%," said Malhotra, who plans to add 100 more franchise outlets in a year as it gears up for competition from Starbucks Corp., the world’s largest coffee chain, which has tied up with retail major Pantaloon to enter India.
India, the seventh-largest coffee producer in the world, has less than 5% share in the global coffee production of 6.5 million tonnes, leaving it vulnerable to prices set by Brazil, which controls a third of the world’s coffee market.
"The growth of a good domestic market will insulate our growers from the volatility of prices in the international market," said Anil Kumar Bhandari, a member of the Coffee Board. More than 80% of India’s coffee is grown in Karnataka.
At the coffee show in Bangalore, Illycaffe, the Italian coffee roaster, will announce a coffee university in India, to build a pool of talent to process and market the beverage in the country, Bhandari added.
Coffee-equipment makers such as Probat and Mahlkonigs from Germany and CMA from Italy will use the event to market their technology in roasting and coffee-making machines for home and commercial users.
International Coffee Organization, the world trade body for coffee, executive director Nestor Osorio will present a survey on trends and prospects in the international coffee market during the three-day deliberations.