India‟s 2012-13 coffee production is forecast slightly lower at 5.1 million 60 kg bags following exceptionally good 2011/12 weather conditions.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
GAIN Report Number: IN2072
Dhruv Sood & Priya Jashnani
India‟s 2012-13 coffee production is forecast slightly lower at 5.1 million 60 kg bags following
exceptionally good 2011/12 weather conditions. Helped by higher world prices, a weaker rupee and
programs designed to facilitate exports, India‟s coffee exports are expected to exceed 5.0 million 60 kg
bags for the third-consecutive year in 2012/13. India‟s café culture continues to expand, but has not yet
translated to a significant increase in consumption.
Marketing year (MY) 2012/13 (October/September) coffee production is expected to drop slightly to 5.1
million 60 kg bags following exceptionally good weather conditions during 2011/12. Both Arabica and
Robusta production are forecast slightly lower under the assumption that weather conditions will be
“normal” or average. With the Robusta crop being less labor intensive and offering higher disease
resistance and lower upkeep, growers are gradually shifting towards Robusta production. Robusta
production accounted for nearly 70 percent of the total coffee production in MY 2011/12.
For MY 2011/12, coffee production is estimated at 5.3 million 60 kg bags. The crop benefited from
well-distributed rains during much of the growing season in addition to pre-season rains that helped
establish early growth and support soil moisture levels. In the main producing state of Karnataka, good
weather and high prices encouraged producers to improve their plant husbandry practices. Weather
conditions in the states of Kerala and Tamil Nadu were similarly favorable.
Coffee pests such as the white stem borer and berry borer continue to affect coffee yields, especially
Arabica production. Farmers are expanding the use of organic or natural pest control methods in an
effort to control insects and minimize the use of chemical control methods. High coffee prices are
expected to enable farmers to apply even better agronomic practices during MY 2012/13.
Planted area in the traditional coffee growing regions of Karnataka, Tamil Nadu and Kerala remains
largely unchanged at 400,000 ha. The non-traditional low yielding areas of Andhra Pradesh and Orissa
have seen a marginal increase in area. With coffee estates in close proximity to the forest reserves, there
is limited scope for further area expansion. Growers are gradually shifting towards replanting to replace
their ageing plantations at an annual rate of 2-3 percent per year which leaves a difference of
approximately 40,000 ha between harvested and planted area.
Coffee cultivation has been promoted in the tribal regions of Andhra Pradesh, Orissa, and the
northeastern states with the objective of providing economic opportunity to low income residents of
rural areas and afforestation. However, it could quite some time before these efforts result in a
significant increase in area.
Source: Coffee Board of India – Post Blossom Estimate
Recent increases in the cost of farm inputs, along with the elimination of subsidies for fertilizer and
diesel, have increased production costs for growers. Labor costs, which account for more than 50
percent of the cost of cultivation, continue to escalate. With increasing off-farm employment
opportunities, coffee planters have started experiencing shortages of skilled labor. Because of uneven
terrain and small and fragmented growing areas, the adoption of mechanization has been slow and
limited to a few coffee plantations.
Source: Coffee Board of India – Post Blossom Estimate
A significant share of low quality domestic Robusta coffee and some imported low-priced coffee
(imports take place under a re-export that allows duty-free imports against re-exports) goes into the
production of instant/soluble coffee. This segment is almost entirely branded and packaged, and is
dominated by multinationals such as Nestle, Hindustan Unilever and the Indian conglomerate Tata. In
recent years, a few other Indian companies have made a foray into this segment with some success.
Specialty coffees like certified organic coffee are gaining in popularity but production is limited. Lower
yields, certification costs and the absence of a significant premium over non-organic coffee combine to
limit prospects for higher organic production.
Indian Coffee Marketing System
Common marketing practices include selling to exporters through an agent, storing at a curing plant
before selling, selling at auctions and exporting directly. Small holders typically sell their parchment
coffee (or dry cherry) to exporters through exporting agents. The agent takes the coffee beans to the
curing factory, where they are checked for quality against the standards of the destination country.
Storing the coffee at a curing plant allows the coffee grower to retain ownership of the coffee before
selling it in order to take advantage of price movements. Larger producers typically sell at auctions
organized by the Indian Coffee Traders‟ Association or export directly.
The bulk of India‟s coffee production is exported and the domestic industry focuses much of its
marketing effort on export promotion. While there is significant coffee consumption in India, for the
purposes of this report, coffee consumption is effectively a residual of production less exports with
some adjustment for estimated stock levels. Consequently, while coffee consumption appears to be
growing, it can be difficult to establish a repeatable trend given the industry emphasis on exports,
especially when coffee prices and export demand are high.
While the popularity of coffee appears to be on the rise in India, home consumption, an important driver
of demand, continues to be relatively limited outside of southern India where coffee has traditionally
been more widely consumed. Indian filter coffee served in „darshinis‟ (vegetarian restaurants)
concentrated in Southern India and instant coffee consumption in northern India have been the major
drivers of growth of coffee consumption. Coffee shops and cafés are spreading rapidly across India, but
industry sources suggest that total annual café coffee consumption is not more 25,000 60 kg bags (1,500
metric tons). Coffee shops do not consume enough coffee to drive significant increases in consumption.
Over the longer term, cafes will likely play a significant role in changing consumption patterns and
consumer attitudes towards coffee, but the immediate effect on consumption is thought to be limited.
Until stronger domestic demand develops, India‟s coffee industry continues to be focused on exports
and the data indicate that 2010/11 and 2011/12 were banner years for exporters, which suggest that the
availability of coffee for domestic consumption was quite limited. In addition, higher coffee prices
likely encouraged consumers to substitute away from coffee. Consumption levels have been reduced
significantly in response to larger exports and higher prices. Chicory continues to be used widely in
coffee for the domestic market. Coffee products are typically 20-40 percent chicory and many Indian
consumers prefer the taste of chicory in their coffee. While there are no reliable data on coffee stock
levels, the volume of exports during 2011/2012 suggests that stocks were likely higher than previously
Table 1. Retail Prices of Coffee Beans in Major Coffee Consuming Centers, Rs. Per kilo 1\
Bangalore Chennai Hyderabad
Year Arabica Robusta Arabica Robusta Arabica Robusta
Average 2007 137 87 170 91 150 89
Average 2008 150 114 157 118 164 127
Average 2009 210 105 215 109 229 119
Average 2010 217 97 225 103 232 110
Average 2011 297 131 300 134 314 141
Average 2012* 288 130 310 141 324 142
1\ Exchange Rate equals Rs. 54 per dollar as of May 15, 2012
*Average of data through March 2012
(Rs/kg of clean coffee beans of Arabic Plantation A & Robusta Cherry AB)
Source: Coffee Board of India
Growing Coffee Café Culture in India
Hundreds of western influenced coffee bars have emerged across India‟s major and “second tier” cities
over the past decade. Coffee now competes against the once dominant tea in these cafes, especially
among younger consumers. A growing willingness to consume food and drink outside the home and
increasing disposable income are helping to fuel the growth. A summary of some of the major chains
Barista Lavazza: The Barista Lavazza is a chain of espresso coffee bars that operates around 200 outlets
across India. Established in 2000 under the name Barista, the Indian chain was taken over by Italian
coffee products manufacturer Lavazza in 2008. Barista offers menu items like espresso, lattes,
cappuccino and various pastries, in addition to basic coffee.
Café Coffee Day: Café Coffee Day offers nearly everything coffee-related, from take-home products
and equipment to fully operational stores. Since the grand opening of the first store in Bangalore in
1996, Café Coffee Day has grown to become India's largest coffee retailer, with exports into Europe and
the Middle East. Café Coffee Day currently has over 1,200 outlets in 140 cities.
Costa Coffee: The British retailer has been in India since 2005 and is master franchised in India by
Devyani International RJ Corp, and reportedly has significant expansion plans. Of the current 95
locations, 12 are in Bengaluru and the remaining in the north, east and western parts of India.
Café Pascucci: Italian coffee brand Café Pascucci has entered India with the launch of its outlet in
Bangalore. Madhura Beverages India Pvt. Ltd., the exclusive master franchisee for this brand in India,
plans to set up 60 outlets across the country.
Gloria Jean‟s: Gloria Jean's Coffees, an Australian owned global specialty coffee company in
collaboration with a Dubai-based retail group, Landmark Group, opened its first café in India in 2008.
The chain is currently operating 15 outlets across New Delhi, Mumbai, Bangalore, Hyderabad, Chennai
The Coffee Bean & Tea Leaf: Blue Foods, master franchisee, has launched 16 Coffee Bean & Tea Leaf
stores in India as part of the tie-up with the US-based coffee chain. They operate 2 stores in Bangalore;
5 in Delhi; 8 in Mumbai and 1 in Kolkata.
Javagreen: Javagreen is an Indian chain of in-store cafes started by the Reliance Group in 2003. With
over 100 cafes, Javagreen is now operational across 10 cities with 90 locations in India.
Mocha: Café Mocha opened its doors in Mumbai in December 2001. With 19 operational outlets across
the country and its own central kitchen, Mocha has developed a reputation in providing a unique menu
along with a Mediterranean look catering to the younger generation.
Brewberrys Café: Opened in 2008 in Vadodara, Gujarat and presently has about 27 stores across India.
Coffee N U: With the first Coffee N U outlet in operation since 2008 in Bangalore, they now have a
presence in 35 locations all over India.
Dunkin Donuts: In a franchise agreement with Jubilant Food Works Ltd., the first Dunkin Donuts
opened in May 2012 in New Delhi. They reportedly plan to develop 500 restaurants across India over
the next 15 years.
BRU World Café: Hindustan Unilever has extended its only coffee brand BRU to a café chain, the BRU
World Café. The chain currently has six outlets across Mumbai.
Cuppa Joe: Cuppa Joe is an independent café launched by Umbrella Hospitality Pvt. Ltd. in April 2012
in Mumbai. The company is looking at the possibility of expanding to other areas of Mumbai and India
Indian coffee is primarily an export oriented commodity with about 60 percent of production being
exported. Current marketing year (2011/12) exports are estimated at 5.8 million 60 kg bags, down 1
percent from last year‟s record level. Indian Robusta has a good reputation among international buyers.
Europe continues to be the major destination for Indian coffee.
Assuming international prices remain high, MY 2012/13 exports are forecast 5.5 million 60 kg bags, as
strong international prices are expected to prompt foreign buyers to again seek Indian coffee as they
pursue more varied supply options. Higher production, a weak Indian rupee and the government‟s
export incentives (duty drawback programs) should support MY 2012/13 coffee exports
India‟s coffee imports are primarily from Vietnam and Indonesia for use by export-oriented units for
value addition and re-exports. This coffee enters India free of duty under special programs designed to
shift value addition to India subject to re-export. Tariffs on imports of coffee and coffee derived
products for domestic consumption are quite high, ranging from 30 to 100 percent.
Indian MY (October/September) coffee exports are provided in the table below and reflect the most
current trade data.
Table 2. India’s Coffee Exports Marketing Year 2009/2010 and 2010/11
MY 2009/10 MY 2010/11*
Sr. No. Destination Quantity (MT) Quantity (MT)
1 Italy 68,991 74,852
2 Germany 23,459 45,166
3 Russia 30,589 38,154
4 Belgium 11,439 23,201
5 Spain 7,914 15,590
6 Jordan 7,108 7,790
7 Slovenia 4,601 7,780
8 U.S.A. 6,177 6,436
9 Finland 4,442 7,489
10 Others 91,513 125,839
TOTAL 256,381 352,297
Source: Coffee Board of India
*Provisional includes re-exports.
MY 2011/12 carryover stocks are forecast at 835,000 60 kg bags given the expected strong pace of
exports during MY 2011/12. Given tight carry-in stocks, the ending stocks are expected to further
decline and remain tight for MY 2012/13 at around 135,000 60 kg bags. Lower carryover stocks are the
result of very high export demand.
Funding for most programs designed to facilitate production and exports are tied to India‟s five-year
planning documents. The eleventh five-year plan has concluded and the details of the twelfth five-year
plan are being finalized. The programs mentioned below are currently operating and are expected to
continue under the twelfth five-year plan.
Production subsidy: The Government of India and the government-run Coffee Board provide various
subsidies, mostly to small and marginal coffee producers to increase production and improve quality.
The Coffee Board provides subsidies for coffee replanting, water conservation and quality upgradation.
Rainfall Insurance Scheme- Coffee (RISC): The Agricultural Insurance Company of India Ltd., a
government parastatal, is now providing a unique rainfall insurance product specially designed for the
coffee growers of Karnataka, Kerala and Tamil Nadu. RISC‟s aim is to provide effective risk
management aid to those coffee growers likely to be affected by adverse rainfall.
Processing Subsidy: The Coffee Board is providing a subsidy to enhance the quality of coffee products
and achieve value addition through the introduction of improved technologies in coffee roasting,
grinding and packaging.
Export Incentive Scheme: The Ministry of Commerce has approved the implementation of the “Scheme
for the Export Promotion of Coffee” by the Coffee Board. The objective of this subsidy program is to
enhance the export of Indian branded and high value coffees to international markets such as the United
States, Canada, and Japan. The subsidy is equivalent to Rs. 1-2 per kg (2-4 cents per kg).
The Ministry of Commerce has included coffee in the list of products eligible for the duty drawback
scheme and the Vishesh Krishi and Gram Udyog Yojana (VKGUY) Special Agriculture and Village
Industry Scheme. The objective of these programs is to provide duty free access to foreign coffee
subject to processing and re-export of the coffee.
Support for coffee replantation in Karnataka, Tamil Nadu and Kerala: The Government of India‟s
Ministry of Commerce has approved the implementation of the Scheme for providing support for coffee
replantation. All individual coffee growers irrespective of the size of the holdings are eligible for
assistance under this scheme. Arabica coffee plants aged over 30 years and Robusta coffee plants aged
over 40 years are eligible. The subsidy is equivalent to Rs.100,000 ($1,843) per hectare for Arabica and
Rs.70,000 per hectare ($1,290) for Robusta.
Support for Mechanization of Farm Operations: The Government of India‟s Ministry of Commerce has
approved the implementation of the scheme for providing subsidized support to farmers in procurement
of machines to offset the effect of shortage of labor and improve labor efficiency and productivity. The
scale of subsidy to be provided will be determined based on the total extent of area owned by the
individual growers. The scale of subsidy ranges from 25-50 percent of the purchase cost with a ceiling
up to Rs. 500,000 ($9,217) based on size of the producer‟s planted area.
Table 3. Import Duty on Coffee and Related Products
H. S. Product description Basic
0901.11 Coffee neither roasted nor decaffeinated 100%
0901.12 Coffee not roasted decaffeinated 100%
0901.21 Coffee roasted not decaffeinated 100%
0901.22 Coffee roasted and decaffeinated 100%
2101.11.10 Instant coffee flavored 30%
2101.11.20 Instant coffee not flavored 30%
2101.11.30 Coffee Aroma 30%
2101.11.90 Others 30%
Preparations with a basis of extracts, essences or concentrates with a basis
Production, Supply and Demand Data Statistics:
Table 4. Commodity, Coffee, Green, PSD
Coffee, Green India 2010/2011 2011/2012 2012/2013
Market Year Begin: Oct Market Year Begin: Oct Market Year Begin: Oct
2010 2011 2012
USDA Official New Post USDA Official New Post USDA Official New Post
Area Planted 0 400 0 402 411
Area Harvested 0 360 0 369 370
Bearing Trees 0 565 0 566 568
Non-Bearing Trees 0 64 0 65 64
Total Tree Population 0 629 0 631 632
Beginning Stocks 785 2640 100 1,584 835
Arabica Production 1,575 1,569 1,650 1,729 1,667
Robusta Production 3,465 3,464 3,550 3,605 3,417
Other Production 0 0 0 0 0
Total Production 5,040 5,033 5,200 5,333 5,084
Bean Imports 720 783 750 775 767
Roast & Ground 0 0 0 0 0
Soluble Imports 0 0 0 0 0
Total Imports 720 783 750 775 767
Total Supply 6,545 8,456 6,050 7,693 6,686
Bean Exports 3,700 4,263 2,900 4,321 4,083
Rst-Grnd Exp. 0 4 0 4 4
Soluble Exports 1,600 1,604 1,800 1,500 1,423
Total Exports 5,300 5,872 4,700 5,825 5,510
Rst,Ground Dom. 895 800 900 826 834
Soluble Dom. Cons. 250 200 250 207 208
Domestic Use 1,145 1,000 1,150 1,033 1,042
Ending Stocks 100 1,584 200 835 134
Total Distribution 6,545 8,456 6,050 7,693 6,686
1000 HA, MILLION TREES, 1000 60 KG BAGS
Note: The Coffee Board of India does not maintain data on total tree population but has recently started
work towards developing estimates. It is not yet clear when these estimates will be finalized.