International Coffee Day: India’s Growing Coffee Trend and Market

International Coffee Day: India’s Growing Coffee Trend and Market
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Coffee beans have been scattered all over the world for more than 600 years, and their preparation for consuming is a great example of metamorphosis. Humanity has been preparing coffee for many presentations: drinks, candies, medicine, and some ancient civilizations even used it as currency!

History

According to historical records, Coffee is originally from Ethiopia, and its discovery in Africa comes with an interesting story. Around the 700s AD, a herd of goats started acting strangely, almost as if they were dancing. Their owner, Kaldi, discovered that they were eating a sort of red bean and concluded that was the cause of their behaviour. Kaldi decided to share his findings with a monk who required something that could help him to stay awake all night as he prayed; but another story claims that the monk refused and threw the beans into the fire and the pleasing aroma that came from it was just wonderful.

Suddenly, coffee made its way through the north into Yemen in the 15 Century where the beans arrived by the name “Mocha.” Shortly after, they became well known in Egypt, Persia, and Turkey as ‘wine of Araby’ and coffee houses started to open by the name of ‘Schools of the Wise’.

Next, Arabia became the gatekeeper for coffee, and these beans began a large-scale coffee farming in Southern India. In 1560 coffee made its way through Europe and quickly became popular, until Pope Clement VIII decided that the drink must be satanic. Under inspection, he gave into the glory of the beverage by baptism and declared it a Christian drink. As the 1600s rolled on and coffee houses sprung up all over Europe, the beans followed the wave of colonization and found themselves in America.

Finally, after a long time among humanity in 2014, The International Coffee Organization declared October 1, as International Coffee Day, an occasion to celebrate coffee as a beverage and raise awareness for the plight of the coffee growers.

According to Harvard's Health Publishing study, coffee drinkers tend to live longer, plus they have a reduced risk of cardiovascular disease.

Coffee is the second largest traded commodity right after crude oil, and the most consumed beverage, after water.

Coffee beans are called "beans" just because of the resemblance, but they’re actually berries.

For medicine and psychology, caffeine is a central-nervous-system stimulant, and that is because it has a similar molecular structure to the "adenosine", which allows it to bind to "adenosine receptors" on the brain.

India has largely been a tea-drinking nation since time immemorial. However, coffee has become an increasingly popular drink since the turn of the twentieth century. It is now no longer a typical drink, but a refreshing and voguish beverage. 

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While the urban consumption dominates with about 73 percent of total volumes, the remaining 27 percent it is speculated to account for rural consumption, especially in South India. Among the South Indian States, Tamil Nadu accounts for 60 percent of consumption, while Karnataka, Andhra Pradesh, and Kerala account for 25%, 10%, and 5% respectively. In the North, East, and West zones, consumption of instant coffee is more predominant than filter coffee. Occasional drinkers in these regions contribute to 52% of total consumption. However, in the south zone, the consumption of filter coffee is higher than that of instant coffee.

As per Euromonitor International statistics, on an annual per capita basis, Indians drank 15.6 cups of coffee in 2014 and 16.6 cups so far. The number of cafes in the country that are primarily frequented by millennials has certainly been growing.

While coffee has traditionally been dominant in India’s south, where it is known as filter coffee, the drink gained nation-wide popularity in the early 2000s amid a cafe culture boom that some say mirrored the growth of India’s tech sectors. The filter coffee was made popular by the Indian Coffee House set up the Indian Coffee Board in the 1930s.

Trends have, however, changed drastically over the past decade, as coffee drinking has rapidly:

Picked up in the North, East & Western parts of the country, the domestic per capita coffee consumption is negligible especially in regions other than South India when compared to black tea consumption.

India has seen a growth in the consumption of coffee sold at coffee and tea chain stores including homegrown Café Coffee Day, Barista, Starbucks, and Costa Coffee. The value of this market has grown to an estimated 25 billion Indian Rupees in 2018.

Coffee retailers and cafes nowadays not only roast and sell rich creamy coffee, but, they also aim at giving customers the experience of picking their beans and brewing them through various techniques. Over the years, Indian coffee culture has progressed from Aero press coffee tournaments to experience centers and coffee-centered events. A fine example of this is best illustrated by the fact that, for the past three years, India has begun to conduct its own National Barista Championships & the Fine Cup Award; which are two of the most prestigious brewing competitions held in the country.

Apart from government initiatives, the HORECA sector also has a major role to play in revolutionizing the importance of a quality brewing experience. One such notable contribution is by the luxury resort, The Tamara Coorg, and its one-of-a-kind Coffee Festival; a three-day experience that allows its guests to learn about the different varieties of coffee, how it is grown and how it can be made into a perfect brew.

Internal vs External Consumption

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Coffee consumption in India would double during the next five to six years, with this growth being led by out-of-home consumption. Moving forward, the rise of coffee-related businesses may see this drink’s consumption surge even further cap coffee’s growth. Consumption at home, too, could see exponential growth.

Navin Gurnaney, the CEO, Tata Starbucks Pvt. Ltd., says “Coffee consumption patterns will constantly evolve. However, the rise of consumption in the country tells us that brands need to go beyond product innovation and build an emotional connection where the consumption habit becomes a ritual, and eventually synonymous with the brand.”

“India, primarily a tea-drinking nation, is slowly and unwaveringly liking coffee, making cafés a meeting place for tradition and modernity, leading to a new kind of coffee consumers. But maximum drinkers still stick to their usual cappuccino, latte, and expresso,” says Rahul Kumar, founder of Red Mango, Chhatarpur. While Red Mango serves a variety of premium coffee blends from espresso to an americano, cappuccino, latte, mocha, white chocolate, and a range of frappes. The most picked up at the cafe still remain the first three.

A restaurant, Cicchetti by Mr. Beans, Gurugam, occupies a special space as chef Neha Singh and the team observes customer behaviour play out in real-time. “On the basis of my experience in F&B and hospitality, customers don’t often experiment with their choice of coffee. In fact, serious caffeine drinkers stick to their usual orders and are not easily swayed,” says Singh.

“There has been an undeniable increase in the global exposure of patrons as discretionary spending have gone up substantially. These increases coupled with social media expansion have led to patrons open to experimentation. But any serious coffee drinker still mostly experiments with brands and the type of roasts they can drink, but not coffee styling as much.”

Disagreeing with the above observation is Puneet Gulati, CEO of Barista, who feels Indians are getting more and more drawn towards coffee innovation, leading to the excitement in domains like Cold Brew, Pour Over, and French Press. “Regular customers are getting evolved whereas new customers are joining the bandwagon. Coffee is the new fad,” says Gulati.

Jai Ganesh Ramnath, MD Lavazza India, observes that customers today are open to experimenting, which is why the trend of ‘aromatic coffee’ is on the rise. “There is coffee in food, in ice creams, in frozen desserts and affogato (Italian coffee-based dessert).

With the introduction of innovative products and the methodology of serving it, customers have kept pace and experiment. As long as there will be innovation, we will always find people who are willing to try.”

Coffee trends

The rise of coffee consumption in the country tells us that brands need to go beyond product innovation and build an emotional connection where the consumption habit becomes a ritual, and eventually synonymous with the brand.

Even gourmet coffee is seeing a rise. This includes artisan, hand blends, and high-quality coffee, says Rahul Kumar. “People are ready to try more regional and international blends prepared in the aero press, French press, and more.

Coffee bars have begun to usher in the experiential proposition to coffee drinking, with an ambiance that’s inviting, invigorating as well as relaxing,” he shares.

Noting how this 15-year-old market (of artisanal coffee) is doing splendid, Akanksha Chaudhary, marketing head, Foxtrot, a Coffee & Cocktail Bar, has been observing people indulge in the actual flavour of the coffee and doing away with add ons. “The youth is a large market and a lot more open to newer flavours and brewing methods. No wonder cold brews have become significantly popular too.”

Adding to it, Ajai Thandi, co-founder, Sleepy Owl, says that now, especially with the entry of cold brews in the market, coffee consumption is not just restricted to a hot cup of coffee.

He says, “More players are recognising the massive potential of the untapped coffee industry in India, and with more consumers from the middle-class spectrum, the discretionary spending will go up and the consumers will spend more on curated consumer experiences.”

Numerous elements are considered before a packet of coffee is brewed or a new drink to the menu is introduced. “We make an effort to engage with our customers by conducting extensive market surveys.

We try to match the expectations of our guests with respect to beverage flavors and the introduction of different types of milk (dairy, vegan, etc.) that go well with the coffees we have to offer,” Kazem Samandari, founder of L’Opéra. They are currently working on a delectable beverage list especially for the winter season.

When introducing a new drink, chef Singh says she factors in a lot of variables. “So colder beverages in hotter months and vice versa, a little more punched up or spiced drinks in monsoons and drinks with warmer ingredients in winters.

Then chocolate-based drinks work best with younger patrons as well as families, especially with smaller kids.”

The demand for instant coffee in India is currently driven by several factors. As a result of increasing urbanization levels and changing lifestyles, instant coffee provides consumers the convenience of preparing hot coffee anywhere in a very short time. Moreover, it can be easily prepared by anyone. As the consumer just needs a cup, boiled water, and a stirrer to make it. Other factors that are driving the demand for instant coffee in India include increasing incomes, rising demand from the institutional sector, changing food habits, health benefits, increasing café culture in India, etc.

The bulk of Indian Coffee production is exported and the domestic industry focuses much of its marketing effort on export promotion. The popularity of coffee is increasing with the spread of foreign and homegrown coffee shops. However, exports continue to siphon large amounts of coffee away from the domestic market and consumption estimates are largely unchanged in recent years.

The growth of the coffee market can be attributed to the increasing demand from the young population, rising disposable income, rapid urbanization, corporate culture, and global lifestyle. Moreover, the rising number of double-income households, more global exposure, increasing innovation, and media penetration are further fuelling growth in Indian coffee cafe market.

Additionally, factors like changing lifestyle preferences influenced by western countries, a number of variants in beverages available in the market, and enhanced accessibility through the increasing number of outlets in Tier II and Tier III cities have all added up to the expedition of many national and international players in the sector, which would aid the growth of India coffee café market during the forecast period.

India coffee cafe market is expected to register growth at a CAGR of over 12% during 2019-2024.