Spilling
the beans
India
should smell the coffee and grant this brew its due. Excerpts from a
Rabo Finance report explain why
Traditionally
a tea-drinking country, the average coffee consumption in India does
not do justice to its global stature. Let’s scratch the surface of this
state of affairs.
Coffee
consumption in India has been largely concentrated in three southern
states – Tamil Nadu, Karnataka and Andhra Pradesh. The total domestic
market of about 52,000 tonnes translates into a per capita consumption
of 4-5 g (1 cup) per annum in the North and 240 g (50 cups) in the South.
A traditional and decided preference for filter coffee in the South
is one of the main reason for the beverage’s popularity in the region.
The
global coffee market is valued at Rs
110 crore ($234 million), of which the soluble (instant) segment accounts
for 40 per cent, while the roast & ground (R&G) segment, better
known as the filter segment, accounts for the remaining 60 per cent.
In terms of volume, however, the R&G segment accounts for 84 per
cent of the total market. Each segment can be further categorised into
the pure and chicory mix segments. The emergence of the chicory mix
segment can be attributed to price desirability of mix over pure coffee.
Instant
coffee
The
instant coffee segment is almost entirely branded and packaged. The
absence of smaller players is a result of the high investments required
in producing instant coffee. The pure instant segment is dominated by
Nestlé, with its Nescafé brand. While Hindustan Lever Ltd (HLL) and
Nestlé are the major players in the instant chicory mix segment.
Roast
& ground coffee
This
segment is dominated by numerous small, local brands. The branded category
consists of the following:
- In
the packaged coffee segment, the major players are HLL (Green Label)
and Tata Coffee (Coorg)
- Players
in the fresh R&G coffee segment are Amalgamated Bean Coffee Trading
Company (ABCTC) with its chain of over 255 exclusive outlets (Coffee
Points), Narasu (60 outlets) and Leo (35 outlets)
Supply
chain
On
the supply side, there is an emergence of a new breed of coffee players
focused on promotion of coffee through fresh R&G coffee (as against
packaged R&G coffee).
Players
such as ABCTC are promoting their chain of outlets – Coffee Points –
as an exclusive R&G coffee chain with an attractive ambience and
a range of over 20 blends. Such efforts are promoting the consumption
of coffee – both among the traditional coffee-drinkers as well as the
non-coffee consumers. As for the demand, a growing paucity of time is
translating into consumers increasingly seeking convenient product forms
and delivery channels (vending machine). Furthermore, the consumer is
seeking speciality consumption experiences, which combine quality with
a pleasing ambience, leading to an increasing demand for speciality
food and beverage outlets.
Distribution
trends
Consumption
growth in emerging coffee markets like Japan and China is being led
by the increased availability of coffee through the new distribution
channels – coffee bars and vending machines – as well as the development
of new products and packaging forms aimed at quality, convenience and
experience enhancement.
The
crucial relevance of liquid coffee retailing is evident from the growth
experienced in this segment. In the US, for example, speciality coffee
outlets increased from 500 units in 1991 to more than 12,000 in the
year 2000. These numbers include 3,500 cafes, 2,700 coffee bars &
kiosks, and 2,100 espresso carts. Starbucks, a leading chain, has been
experiencing a compounded annual growth rate of over 30 per cent in
the past 2 years.
In
Poland, one of the strong emerging coffee markets, players such as Nestlé,
Tchibo and Stoney Point Java are extending their presence to coffee
outlets. Nestlé has a chain of cafes in Japan, and Douwe Egberts has
a chain of coffee shops (Jacqmotte) in the Netherlands.
Indian
opportunities
The
non-traditional coffee distribution channels are expected to reach a
size of Rs 1,900 crore ($380 million) by 2005. The non-traditional retailing
channels, which include coffee bar chains, vending machines and speciality
coffee powder shops, offer exciting opportunities in India. These segments
currently account for sales of approximately Rs 600 crore ($120 million)
and constitute over half of the Indian coffee industry. Coffee and tea
vending account for over 85 per cent of the sales in these segments.
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