Like many industries, India’s coffee industry too is going through a tough time. There is a strong lull in the coffee business.
Weak demand in the European market due to slowdown, attacks by pests and erratic monsoon have impacted production and exports of coffee in calendar year 2012.
Here is a lowdown on the coffee industry and the government initiatives taken to sustain growth of the industry.
Industry
The beverages industry is one of the highest employers in India. It provides employment to over a million workers in various segments such as plantation and other ancillary activities. It is estimated that coffee producing countries consume 30% of the world’s coffee.
Among the coffee producing countries Brazil has the highest consumption of coffee with 1.1 million tonnes in 2010. The remaining 70% of the coffee produced is traded internationally.
The United States is the biggest importer of coffee with an average import of 1.27 million tonne a year in the period 2006-10, followed by Germany (5,46,000 tonne) and Japan (431,000 tonne) and the United Kingdom (184,000 tonne).
The global consumption of coffee continues to grow in the steady range of 1.5% to 2% despite the fact that green coffee prices have gone up and the increase in prices has been passed on to the consumers.
According to an estimate, the global production of coffee is estimated at 135 million bags. Thanks to such optimistic estimates, the consumption of coffee is expected to grow especially in countries such as Brazil, Russia and China.
Experts believe that consumption is rising not only in traditional coffee-drinking countries such as UK, Russia, India and Japan, but also in emerging new markets in Eastern Europe and China.
It is estimated that the instant coffee sector has a bright future due to increasing preference for instant coffee among consumers. It is believed that consumers prefer instant coffee because of the sheer uncomplicated way in which the coffee is prepared.
According to one estimate, the demand for coffee in India is expected to grow at 10.5% per annum in the 2008-13 period. This growth would be driven substantially through rising per capita income, urbane lifestyle and high appreciation among youths for the convenience of instant coffee.
In India, there are different coffee-growing regions, which produce coffee under diverse climatic conditions. And these discrete climatic conditions suit different varieties of coffees.
Mountainous regions (high-elevated) are typically suited for growing Arabicas of mild quality while those with warm humid conditions are best suited for Robustas.
Nearly 3,90,000 Harvested Area (ha) is under coffee cultivation in India. Of this, 70% are small farms of less than 10 (ha). A vast majority of coffee is grown in the three southern states of Karnataka (71%), Kerala (22%) and Tamil Nadu (5%).
According to experts, 80% of India’s Arabica coffee is grown in Karnataka at elevations of 1,000 m to 1,500 m. It can go up to 2,000 m. Robusta coffee is grown at lower elevations.
In Karnataka, a few regions where coffee is produced include Chikmagalur, Coorg, and Mysore.
On the domestic front, coffee consumption is expected to grow very fast over the next five years. This will be predominantly seen in the instant coffee segment. Private label coffees could see a rise through increasing modern trade.
Rural markets and semi urban markets are expected to drive consumption. Freeze dried coffee is expected to form a new segment in the domestic market.
Health and wellness platform being appropriated by other beverages could limit the growth in coffee consumption. New technologies in vending could also increase competition in the domestic market.
As far as tea is concerned, climate change initiatives have opened opportunities to look at alternative fuels, such as agri briquettes instead of firewood, which is fast becoming a scarce commodity. This has led to a 60% reduction in the usage of firewood in 2010-11.
According to an industry estimates, the global consumption of instant coffee has shown an annual average growth of about 6% in the last decade from 70,000 MT to 1,02,000 MT till the year 2009.
Hence, going ahead, while these concerns seem to be temporary and addressable, the future of the coffee industry looks promising, given the urbanization and transition from tea-drinking to coffee-drinking among the urban youth. Though the number of tea-drinkers seems high, those of coffee-drinkers is likely to soon catch up.
Source: Nirmal Bang’s Beyond Market
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source: http://www.moneycontrol.com / Home> News / by Nirmal Bang’s Beyond Market / March 23rd, 2013
