Retail chains push up coffee consumption

Coffee consumption in India is witnessing an upward trend with better branding of coffee among the youth by various domestic and international coffee chains in recent years. According to estimates of the Coffee Board of India, domestic consumption is expected to be above 100,000 tonnes in the 2010-11 season, up by close to six per cent from 94,400 tonnes in 2008-09. In 2009-10, the consumption touched around 100,000 tonnes.

“Domestic coffee consumption has witnessed a steady growth of five to six per cent in last five years, with major growth coming from unconventional areas like north, west and eastern parts of the country,” Babu Reddy, agricultural economist of the Coffee Board of India, said.

Barring conventional areas like south India, where coffee consumption is traditionally higher, growth was also seen in other parts of the country, he added.

He also said that branding of coffee by retail chains and the commodity’s popularity among youth would be the major growth drivers of domestic consumption in the near future. India produces close to 300,000 tonnes coffee per annum from which two-third of the produce is exported to other nations.

However, experts feel that this dependence can be reduced as coffee is receiving encouraging response from youth as a popular drink with opening of coffee retail outlets in the country. Homegrown Cafe Coffee Day (CCD), Italian Barista Lavazza and Costa are some of the coffee retail chains with close to 1,250 outlets across India. Industry estimates say there is a scope for another 5,000 outlets in the country, which will provide a significant boost to domestic consumption.

Meanwhile, coffee retail chains like Cafe Coffee Day are planning to expand their footprint in Tier-II and Tier-III cities.

“The coffee chain, with 970 stores as of now, will invest Rs 150 crore to increase its retail presence in Tier-II and Tier-III cities,” a top company official said.

The chain also planned to increase the number of outlets to 1150 stores by the end of this fiscal, he added.

Similarly, Barista Lavazza, the second-largest coffee chain of India, is planning to expand its outlet number to 500 from 200 in the next four years.

The company has also tied up with oil marketing companies like HPCL, BPCL and IOC to open outlets on highways.

Another international coffee brands like Costa Coffee and Coffee Bean with presence in India are also planning to expand their operations.

Referring to this expansion of coffee chain in India, Ramesh Srinivas, partner, KPMG, said, “Coffee retail chains act as a trigger to consume coffee as a beverage in unconventional areas like north, west and eastern regions of the country and will help increasing the consumption level in the country.”

Coffee retail in unconventional region like northern, western part is one of the fastest growing segments of the companies, he added.

He, however, said that organised coffee retail still accounted for a very small portion of the total coffee consumption and would not be able to contribute significantly to the overall demand in the near future, he added.