Home / Companies / News /  Cafes feel the heat as coffee prices surge

A 12-year low Arabica coffee production due to pest damage, crop diseases and climatic conditions is driving up prices of a cup of cappuccino or latte served at popular cafes.

Leaf rust, white stem borer (small beetle), heavy rain, shortage of skilled labour to trace and remove infected plants have brought Arabica production down to 90,400 tonnes, the lowest since 2008-09 when production was at 79,500 mt, according to data from Bengaluru-based Coffee Board of India, an organization that promotes coffee.

Coffee shops, which were frequented by customers in pre-covid times, are not only having to deal with lower footfalls but are also wary of an imminent price rise that could further dent business recovery.

“Given Café Coffee Day’s experience in the plantation business, it knows the upcoming Arabica crop is likely to suffer innumerable issues ranging from multiple diseases, including white stem borer and fruit drop due to unseasonal rains, which may drive up the prices," said a person, seeking anonymity.

From an average price of 6,909 for 50kg of Arabica Parchment in Madikeri (Kodagu) in 2017, prices have gone up to 8,913 in January, according to data by the coffee board. As on Tuesday, Arabica Parchment prices stood at 10,500-11,000 per 50kg.

Indian coffee prices are determined by international trade. “CCD is unique in that we have our own plantations held by the group and, hence, procurement has not been as much of a challenge as it would be for any other chain / coffee retail format," said Vinay Bhopatkar, chief executive, Cafe Coffee Day, one of India’s largest coffee producers and retailers.

Smaller coffee chains have been impacted the most, and are being forced to retain prices. “Every year there are challenges of yields going down and prices going up," said Matt Chitharanjan, co-founder of Blue Tokai, a farm-to-cup coffee brand. Though the company buys directly from growers, Chitharanjan said his company has not seen as much price rise as those in trading in the commodity markets.

The brand, which procured around 150 tonnes of coffee (including 200kg of Robusta coffee), has raised its base price for 250gm from 400 to 420-450 after three years.

A Coffee Board spokesperson said that Intercontinental Exchange Arabica coffee was under pressure over concerns of the new lockdown measures imposed in some of Europe’s biggest cities, and this will further curb coffee consumption.

Globally, Indian coffee is in huge demand, which determines prices in local markets.

Sunalini Menon, president of Coffeelab Ltd and one of Asia’s most eminent coffee cuppers, said no plant material is available that can withstand the stem borer and lack of remedial measures could wipe out the Arabica variety.

As a traditionally tea-drinking nation, domestic consumption of coffee remains low despite the potential, experts said.

Suryaprakash Rao. N., director of research, Central Coffee Research Institute, said India is witnessing a systemic shift from the arduous, high-risk and low-return Arabica coffee plantations to the more rewarding pepper plants.

He said that facilitating pepper plants by chopping tree shade that gave Indian coffee its uniqueness, has heightened the stem borers activity since it is a “light-loving pest".

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