Explore the fascinating world of coffee, from its origin to global markets, with insights into the Indian coffee industry. Lets learn about key players, value chain stages, and external factors shaping the coffee industry.

Coffee isn’t just a drink; it’s a daily tradition for millions worldwide. It’s one of the main essentials in kitchens everywhere, with one in every three people enjoying its flavour. Each day, 2 billion cups are consumed globally, and this number continues to rise. Ever wondered why coffees taste different?   

In this article, we explore the coffee industry, from bean varieties to roasting methods, and the distinct character of each café.  

History of Coffee and Types   

The coffee industry blossomed in the 16th century with its expansion into Europe and later America in the 18th century, marking a surge in demand. Originating in Yemen’s homes and coffee shops during the 15th century, coffee transitioned from a startup to a thriving global industry, shaping cultures and economies worldwide.   

The four main types of coffee beans are: Arabica, Robusta, Liberica, and Excelsa. However, Arabica and Robusta are predominantly consumed. Arabica, comprising 60% of global consumption, offers a milder and more aromatic flavour compared to Robusta, which boasts double the caffeine but less acidity with a stronger bitterness.  

Industry Overview   

The coffee industry has a significant share in the world economy as 125 million people earn their livelihoods, with most of them being farmers. The coffee market size is estimated at USD 132.13 billion in 2024 and is expected to be USD 166.39 billion by 2029, with a CAGR of 4.72% during the forecasted period of 2024-2029.   

The coffee market is fiercely competitive, with Nestlé S.A., Kraft Heinz Company, JAB Holding Company, Luigi Lavazza S.p.A., and Massimo Zanetti Beverage Group as dominant players. These leaders have expanded their market shares through product innovations and regional expansions via joint ventures.  

The major producing countries of coffee are Brazil with 6.3 million metric tons of coffee beans, Vietnam the second largest producer of 1.7 million metric tons bags of beans and third being the Colombia producing 1.5 million metric tons of coffee beans.  

Industry Segmentation 

Coffee Industry is segmented into three main segments: Product Type, Distribution and Geography.

SegmentFocusProduct TypeDistributionGeography
Coffee EnthusiastsQuality, Flavor, EthicsWhole Bean, Specialty BlendsOn-Trade (Specialty), Off-Trade (Specialty)Established
Convenience SeekersSpeed, EaseInstant, Pods/Capsules, Pre-made CoffeeOn-Trade (Convenience), Off-Trade (Supermarkets)All
Value SeekersPriceGround, Instant (Large Packs)Off-Trade (Discount)Emerging
Health-ConsciousHealth BenefitsOrganic, Fairtrade, Decaf, Functional BlendsOn-Trade (Health-Focused), Off-Trade (Health Food)All (Growing)

On-Trade Distribution: This refers to selling coffee directly to consumers for immediate consumption, for Ex: Cafes. 

Off-Trade Distribution: This refers to selling coffee to consumers for home consumption, For Ex: Stores   

Indian Coffee Industry  

India made its mark as the world’s fifth largest coffee exporter in the fiscal year 2021-22, boasting 6% of the global coffee output. With its premium quality, Indian coffee, featuring both Arabica and Robusta varieties, holds a special place in international markets. Robusta, known for its robust flavour dominates the production landscape, making up 72% of India’s coffee production and providing livelihoods for over 2 million people, especially in states like Karnataka, Kerala, and Tamil Nadu.  

In 2023, Indian coffee exports reached a value of USD 1.12 billion, marking a 10% increase from the previous year’s USD 1.02 billion. Notably, during April-July 2023, exports surged by 6% to USD 451.94 million, driven by higher prices and growing demand, particularly from countries like Russia and Turkey. Instant coffee product, which accounts for 31% of the export basket. Speciality is gaining popularity among global enthusiasts due to its meticulous cultivation, processing, and branding. India ranks as the eighth largest coffee exporter by volume, with exports peaking from March to June, comprising over 70% of its production.  

Top 3 companies of Coffee Industry in India 

Company Market Share (%) Market Cap (Rs. Cr) Revenue (Rs. Cr) Profit (Rs. Cr) 
Nestle India Ltd 30-35 2,43,546 19,126 4,038 
Tata Consumer Products Ltd 20-25 1,09,214 13,783 1,798 
CCL Products (India) Ltd 10-15 7,896 2,071 270 
Source: Screener
(Data as of April’24)

Companies are categorised according to their industry segmentation of product type and distribution channel; the above companies are from different market segments.  

Value Chain: 

 Cultivation Phase: Coffee plants undergo nurturing and meticulous care, with the cherries delicately collected in this initial phase. 

Processing Stage: Following careful cultivation, the coffee cherries undergo a series of discrete processes, culminating in the extraction of green beans. 

Roasting Process: The green beans experience a transformative process where flavours and aromas are artfully crafted. 

Grinding and Distribution Stage: Optionally, the roasted beans are finely ground and discreetly packaged, facilitating their discrete distribution. 

Retail Phase: Coffee enthusiasts discreetly procure their favourite brews from various outlets, concluding the clandestine journey of the coffee value chain. 

Key External Drivers  

Political – Government trade policies play a crucial role, as bans on coffee imports can significantly impact demand and company revenues.   

Economic– Fluctuations in currency exchange rate change can affect import costs, potentially leading to decreased consumption.   

Social– Evolving consumer preferences and demographic shifts pose challenges.  

Technological – advancements in coffee machines can boost demand by customising more flavours.    

Environmental – As the world is moving towards sustainable farming, this would increase the price of cultivation, making it more costly.  

Legal – Coffee is subject to many strict Food and Safety regulations. Heavy penalties and bans can be imposed on coffee in countries with strict foods and beverages  

Competitive Environment 

Competitive Rivalry: The coffee industry comes with significant challenges due to intense competition from both local small businesses and established giants like Starbucks, Costa Coffee, and Dunkin’ Doughnuts, renowned for their quality products.   

Supplier Power: Suppliers wield less power in this crowded market, as numerous coffee suppliers exist, with some companies even growing their own beans. This results in minimal supplier control over prices.  

 Buyer Power: Buyer enjoys ample options, dictating pricing dynamics.   

Threat of Substitution Coffee faces substitution threats from alternative high-caffeine beverages like tea, milkshakes and energy drinks.   

Threat of New Entrant: The industry sees a high threat of new entrants due to low barriers to entry, allowing for easy market access with modest initial investments.  

Growth Opportunities   

Product Innovation: In the global coffee industry, a flavour revolution is brewing. Demand for plant-based milks like oats and almonds, alongside innovative brewing methods such as cold brew and nitro coffee, is surging. Companies utilise technology to craft unique flavour profiles, offering personalised experiences that foster brand loyalty in a competitive market.  

Technology Advancement: Technology is reshaping the coffee industry, enhancing flavour and tailoring experiences. Companies leverage advanced methods to revolutionise brewing, exceeding customer expectations and positioning for long-term success, technology remains pivotal for growth and differentiation.  

Conclusion  

The coffee industry is a vibrant global force, blending tradition with constant innovation. It experiences steady growth and caters to varied consumer tastes. Despite challenges, its resilience and flexibility promise ongoing success and enjoyment for coffee enthusiasts worldwide.  

FAQs

What percentage of India’s coffee exports consists of instant coffee products?

Instant coffee products represent 31% of India’s coffee exports.

What is the estimated value of the coffee industry in 2024?

The coffee industry is estimated to be worth USD 132.13 billion in 2024.

What are the primary coffee bean varieties?

Arabica and Robusta offer distinct tastes and caffeine levels.

Why is Indian coffee getting noticed?

Indian coffee’s quality and diversity make it stand out internationally.

What percentage of India’s coffee production is Robusta?

Robusta beans make up 72% of India’s coffee production.