Exports continue to impact India’s domestic coffee consumption despite spurt in coffee shops

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There are signs that the popularity of coffee in India is increasing with the spread of both foreign and home-grown coffee shops and restaurant chains, but consumption estimates are largely unchanged as exports continue to siphon large amounts of coffee away from the domestic market, the U.S. Department of Agriculture (USDA) said in a report on the country’s coffee sector.

The instant/soluble coffee segment is almost entirely branded and packaged, and is dominated by two multinationals, accounting for almost 90 percent of the total soluble coffee market. 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, it said.

Consequently, while coffee consumption appears to be growing moderately, it can be difficult to establish a repeatable trend given the industry emphasis on exports, especially when coffee prices and export demand are high, the report said, adding that one reason for the large variation in some industry consumption estimates is the widespread use of chicory in the domestic market.

“Many popular instant coffees contain 20 to 40 percent chicory. Tea continues to be the hot drink of choice for many Indian consumers. Consumers in southern India, where much of India’s coffee is produced, consume more coffee than in other areas of the country. While there is a small but growing café culture, nearly all Indian coffee is consumed at home or in traditional street stalls as instant coffee. There is very little home use of ground coffee.”

The report pointed out that over the longer term India’s coffee consumption is not likely to increase significantly until the practice of home consumption becomes more common. India’s annual per capita coffee consumption is just 60 grams, slightly higher than China, but quite low when compared to consumption levels in most other countries.

Key points from the report

  • Current marketing year (MY) 2015/16 exports are estimated at 5 million 60 kg bags (303,000 metric tons), based on trade estimates and steady demand from major European buyers.
  • Export data in green bean equivalent from October 2015 to January 2016 shows a 15 percent increase in shipments compared to the same period last year. Even though prices are much lower since the beginning of the marketing year, the depreciation in rupee continues to provide support to exporters.
  • The export data for MY 2014/15 has been revised based on DGFT data. Accordingly FAS Mumbai raised the export estimate to reflect available data.
  • Indian Robusta has a good reputation among international buyers and European countries continue to be the major buyers of Indian coffee. Italy, Germany, and Russia are the top export destinations for Indian coffee.
  • India exports an estimated 90 percent of its production. Actual exports are virtually equivalent to production, but include 1.0 million bags of coffee that are imported duty free for processing and re-export under a special re-export program.
  • In India, the raw coffee prices in the largest coffee growing state of Karnataka as of April 27, 2016 for Arabica parchment and cherry have fallen by 8 and 3 percent respectively since beginning of marketing year (Oct/Sep), but Robusta parchment prices have risen by 19 percent.
  • The rise in Robusta prices is on account of lower arrivals in the market and expectation of a lower crop harvested in MY 2015/16. But large carryover stocks are expected to keep prices low.
  • Robusta prices are expected to remain firm until the onset of the next harvest as strong foreign demand pressures Indian supplies.
  • As per coffee board trade data, the major shipment ports for coffee in India are Mangalore (Karnataka) and Cochin (Kerala) followed by Chennai (Tamil Nadu). Traditionally, January is when coffee exports begin.

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