Coffee in India- Market Report
Headlines
·
Coffee grows by 14% to reach
off-trade value sales of Rs11 billion in 2008
·
Smaller affordable pack sizes
drive growth in the face of price hikes
·
Instant standard coffee posts
the highest off-trade value growth of 19% in 2008
·
Unit prices of coffee record 9%
growth in line with international coffee prices
·
Nestlé India and Hindustan
Unilever continue to dominate coffee in India
·
Coffee is expected to register
a CAGR of 8% in constant value off-trade terms over the forecast period
Trends
·
Coffee consumption did not
suffer in 2008 despite a 5% average unit price rise in fresh ground coffee and
7% average rise in instant coffee. Manufacturers cushioned consumers from the
price rises by absorbing some of the increases in the cost of coffee and
pushing affordable smaller pack sizes. Thus, in spite of the high prices and
coffee being a discretional purchase in most parts of India, coffee consumption
posted a volume growth of 5% in 2008.
·
The off-trade value growth in
2008 was higher than the average over the review period, attributed to the
spike in coffee prices in 2008 and the popularity of instant coffee. Volume sales of coffee in 2008 were slightly
higher than the review period. The growth in consumption of coffee was driven
by affordable product offerings of smaller pack sizes in urban areas and
wholesales of sachets in rural areas.
·
Instant standard coffee
recorded the fastest growth as its convenience of preparation and availability
in cheap small packs is attracting new consumers in the north and west of the
country. While fresh ground coffee is dominant in South India, the markets in
other regions have seen higher growth as they have lower penetration of coffee.
The increased exposure to coffee in urban regions due to the spread of coffee
chains and branded coffee vending machines is increasing the consumption of
coffee in these regions.
·
Off-trade unit prices of both
fresh ground coffee and instant coffee increased in 2008 in line with the
international rise in coffee prices. Rising costs of fuel and other inputs also
contributed to the hike across all brands. With consumers feeling the pressure
from increased inflation, the increased sales of smaller packs also contributed
to rise in the average unit price of coffee.
·
Only 13% of India’s total
volume coffee consumption takes place through the on-trade channel. On-trade
consumption is growing faster than off-trade consumption as it is being driven
by the aggressive expansion of chained coffee shops and the setting up of
branded coffee vending machines in independent on-trade outlets. The increased
time spent on-the-move due to busy lifestyles in urban areas drove the growth
of coffee consumption in on-trade outlets.
·
Off-trade sales were dominated
by independent grocers which accounted for 73% of off-trade volume sales of
coffee. Supermarkets/hypermarkets, a channel which is mushrooming in urban
areas saw its share of coffee sales increase in the latter part of the review
period. Supermarket shelf displays provide increased exposure to the different
flavour variants and formats of coffee and supermarkets/hypermarkets accounted
for 20% of the off-trade coffee sales in 2008.
·
While vending machines are
present in the institutional channel, especially in offices, colleges and
hospitals, their presence in the off-trade channel is still negligible.
Companies such as Nestlé India and Fresh & Honest Café supply vending
machines which use either coffee premixes or fresh coffee beans to foodcourts
in malls and independent on-trade outlets. These machines are always manned by
a vendor who collects money from the customers and then operates the machine to
speedily dispense coffee that is priced affordably at Rs5-10 per cup. Unlike
these vending machines, which cater to on-the-move customers, chained coffee
shops are more expensive and cater to the trendy youths who want to spend their
leisure time socialising with their friends.
·
The number of outlets of
specialist coffee shops grew by 33% in 2008, driven by aggressive expansion by
chained coffee specialists. These outlets are seen as trendy hangouts by youth
and are instrumental in developing a taste for regular coffee consumption among
the youth. The spread of coffee chains such as Café Coffee Day has increased
the visibility of coffee in India and is generating interest in the various
flavours and formats of coffee. It is also introducing consumers to Italian
variants such as Cappuccino and mocha which is generating trials for 3-in-1
instant speciality coffee products such as Bru Cappuccino.
·
As there is not enough
willingness to pay extra for the benefit of convenience of preparation among
Indian consumers, 3-in-1 coffee premixes have a very niche presence and account
for less than 2% of the value sales of instant coffee. While standard 3-in-1
premixes have not been very successful, Italian 3-in-1 premixes such as Bru
Cappuccino have developed a small following among urban youth who have
developed a taste for such products by frequenting specialist coffee shops.
·
Sales of coffee pods in India
are negligible as retail sales of coffee machines in India remained negligible
in 2008.
Competitive Landscape
·
Hindustan Unilever and Nestlé
India are the dominant national players in coffee, with both companies together
accounting for more than two thirds of off-trade value sales. Fresh coffee is
mostly consumed in South India and is dominated by regional players, which
control small pockets of the region based on the taste preferences and brand
loyalties of the residents. Instant coffee is dominated by the two main
national players with their respective Nescafé and Bru brand portfolios. In
2008, Nestlé India commanded a share of 37% of coffee off-trade value sales
with Nescafé Classic and Sunrise, while Hindustan Unilever followed closely
with a share of 32% with Bru. While Bru Roast & Ground is the leader in
fresh coffee, Nescafé is the clear winner in instant coffee. Hindustan Unilever
derives a higher proportion of coffee sales from South India, whereas Nestlé
India is stronger in the rest of the country.
·
Growth in instant coffee drove
the off-trade value sales of coffee in 2008 as instant coffee value sales saw a
10 percentage point higher growth in 2008 than fresh ground coffee. This
benefited Nestlé India which controls 61% of off-trade instant coffee sales and
allowed it to increase its share of coffee in India. Its increase in share was
slightly higher than the increase in share Hindustan Unilever achieved. With
the premix coffee format being rather unsuccessful, Nestlé India concentrated
on ground level promotions such as sampling in order to increase the
penetration of its regular coffee brands instead of introducing new coffee
formats such as premixes and flavoured coffee.
·
Although Nescafé, the leading
coffee brand in India held a 37% share of off-trade value sales in 2008, coffee
in India is dominated by domestic brands such as Bru and Coorg and various
other regional brands. Other international brands such as Illy have
super-premium prices and have a minute presence in select urban off-trade
outlets.
·
There were no notable new
product launches in coffee in 2008. With rising prices and the failure of
premix products to take off, companies concentrated on increasing the
penetration of their existing brands.
·
Nestlé India and Hindustan
Unilever were both active in terms of TV commercials for Nescafé and Bru. Both continued to use similar
taglines and themes as 2007 with Bru continuing with “Bru se hoti he khushiyaan
shuru” (Bru is the initiation point of happiness) tagline and Nescafé using its trademark playback music.
·
Coffee is predominantly sold in
pouches with some brands available in plastic or glass jars. In the latter part
of the review period, companies dealt with sharp increases in coffee prices and
high inflation rates by promoting smaller pack sizes such as 50g and 100g,
which are more affordable than 200g or 500g packs. Hindustan Unilever’s Bru is
being promoted in affordable sachets in rural areas.
·
Premium brands, Bru Cappuccino
are differentiated from standard brands Nescafé Classic and economy brands
Nescafé Sunrise based on their higher price points. Economy brands such as
Nescafé Sunrise are also considered cheaper economy brands as they are mixes of
coffee and chicory. Key brands such as Nescafé and Bru widely use points of
sale displays to attract consumers in supermarkets/hypermarkets.
·
There are no private label
products in coffee in India
Prospects
·
As coffee penetration is very
low in India, there is high potential for expansion of the coffee consumer
base. The aggressive expansion of chained coffee specialists is expected to
create a taste for coffee among Indian consumers who are predominantly tea
drinkers. The new generation of urban Indians is expected to develop a taste
for speciality coffees such as cappuccino and mocha during the forecast period
and this will expand the currently niche coffee premix consumer base.
·
A 4% CAGR off-trade volume
sales is expected in the forecast period. This is slightly slower than the
review period CAGR of 5%. The penetration of coffee has expanded over the
review period and year-on-year growth is expected to slow in the forecast
period because of this expanded consumer base.
·
The growth of coffee in the
future could be threatened by consumers shifting to juices as a healthy alternative
for at-home consumption and to soft drinks such as juice drinks and bottled
water for on-the-go consumption. With consumers experimenting with various
alcoholic and non-alcoholic drinks coffee companies are faced with the
challenge of retaining interest in coffee once the hype around chained coffee
specialists fades.
·
Instant standard coffee is
expected to see higher volume growth rates as busy lifestyles and the
increasing proportion of working women will favour instant coffee over fresh
ground coffee that takes time and skill to prepare. Moreover, coffee volume
growth is being driven by the expansion of its consumer base in north, west and
East India where unlike South India, the consumption of fresh ground coffee is
not traditional and the taste of instant coffee is preferred.
·
On-trade coffee sales which are
growing from a much smaller base are expected to see higher growth rates than
off-trade sales. With their established status as hip hangouts for the youth,
the number of specialist coffee shops is expected to witness a high CAGR of
22%. The expansion of chained coffee specialists is expected to establish
on-trade coffee consumption as a leisure and entertainment activity for a
larger proportion of Indian youth.
·
Unit prices are expected to
rise over the forecast period as high input costs and inflationary pressures
are expected to squeeze company margins. Outside of South India, coffee
consumption is not an essential part of daily routines as is tea and coffee and
is not expected to erode tea consumption during the forecast period. As coffee
remains a discretional purchase, companies are expected to continue offering
small affordable pack sizes and freebies to generate trials and increase coffee
consumption from a seasonal to regular habit.
·
Hindustan Unilever and Nestlé
India are expected to concentrate on above-the-line communication and point of
sale sampling and displays to increase the penetration of instant coffee in
north and West India. These players are not likely to face any competition from
regional companies which are predominantly in the fresh ground coffee category.
Retail chains such as Subhiksha and Food Bazaar, which are already carrying
private label tea are expected to launch private label coffee to offer
affordable alternatives to branded coffees.
·
Coffee premixes are expected to
expand their consumer base during the forecast period as the appreciation for
convenience of preparation grows with increasingly busy lifestyles in the
cities. Increased exposure to Italian variants such as mocha and cappuccino in
on-trade outlets is also expected to drive sales of speciality 3-in-1 premix
coffees in off-trade outlets.
·
Future prospects for coffee
pods/machines are fairly dim in India as consumers are content to prepare
coffee on the stove. The high prices of coffee pods/machines will limit their
growth prospects during the forecast period.
Sector Data
2002 2003 2004 2005 2006 2007
Retail value
(Million 439,2468 456,398.8 477,352.5 500,532.5 523,057.5 535,177.5
Rupees)
Retail volume
('000s of 139.47 142.3 146.1 151.2 156.8 159.6
machines)
Source: Trade press (including Times of
India, The Hindu Business Line), company research, store checks, trade
interviews, Euromonitor International estimates
Off-trade volume
2004 2005 2006 2007 2008
Standard 99.9 99.5 99 98.5 98.5
Cappuccino 0.3 0.7 0.85 0.9
Mocha 0.1 0.1 0.2 0.2
Other Flavours 0.1 0.1 0.2 0.45 0.4
Source: Trade press(including Times of India,
The Hindu Business Line), company research, store checks, trade interviews,
Euromonitor International estimates
tonnes
2003 2004 2005 2006 2007 2008
Fresh coffee 23,703.7 24,672.9 25,587.8 26,404.5 27,466.8 28,434.6
- Fresh ground
coffee 23,703.7 24,672.9 25,587.8 26,404.5 27,466.8 28,434.6
- Fresh coffee
beans - - - - - -
Instant coffee 5,475.5 5,872.6 6,397.0 6,999.1 7,704.3 8,526.7
- Instant
standard coffee 5,475.5 5,872.6 6,397.0 6,999.1 7,704.3 8,526.7
- Instant
decaffeinated - - - - - -
coffee
Coffee 29,179.2 30,545.4 31,984.8 33,403.6 35,171.1 36,961.3
Source: Official Statistics, trade
associations, trade press, company research, store checks, trade interviews,
Euromonitor International estimates
Rs million
2003 2004 2005 2006 2007 2008
Fresh coffee 3,516.9 3,647.0 3,767.2 3,900.1 4,135.0 4,466.9
- Fresh ground
coffee 3,516.9 3,647.0 3,767.2 3,900.1 4,135.0 4,466.9
- Fresh coffee
beans - - - - - -
Instant coffee 3,973.2 4,248.5 4,640.2 5,119.8 5,846.6 6,928.7
- Instant
standard coffee 3,973.2 4,248.5 4,640.2 5,119.8 5,846.6 6,928.7
- Instant
decaffeinated - - - - - -
coffee
Coffee 7,490.1 7,895.5 8,407.4 9,019.8 9,981.6 11,395.6
Source: Official Statistics, trade
associations, trade press, company research, store checks, trade interviews,
Euromonitor International estimates
% volume growth
2007/08 2003-08 CAGR 2003/08 TOTAL
Fresh coffee 3.5 3.7 20.0
- Fresh ground
coffee 3.5 3.7 20.0
- Fresh coffee
beans - - -
Instant coffee 10.7 9.3 55.7
- Instant
standard coffee 10.7 9.3 55.7
- Instant
decaffeinated coffee - - -
Coffee 5.1 4.8 26.7
Source: Official Statistics, trade
associations, trade press, company research, store checks, trade interviews,
Euromonitor International estimates
% current value
growth
2007/08 2003-08 CAGR 2003/08 TOTAL
Fresh coffee 8.0 4.9 27.0
- Fresh ground
coffee 8.0 4.9 27.0
- Fresh coffee
beans - - -
Instant coffee 18.5 11.8 74.4
- Instant
standard coffee 18.5 11.8 74.4
- Instant
decaffeinated coffee - - -
Coffee 14.2 8.8 52.1
Source: Official Statistics, trade
associations, trade press, company research, store checks, trade interviews,
Euromonitor International estimates
% retail value
rsp
2004 2005 2006 2007 2008
Coffee Pods - - - - -
Standard 100.0 100.0 100.0 100.0 100.0
Total 100.0 100.0 100.0 100.0 100.0
Source: Trade associations, trade interviews,
Euromonitor International estimates
% retail value
rsp
Company 2004 2005 2006 2007 2008
Nestlé India Ltd 32.6 33.5 34.3 35.4 36.8
Hindustan
Unilever Ltd - - - 31.2 31.5
Tata Coffee Ltd 5.3 5.6 5.4 5.0 4.7
Amalgamated Bean
Coffee 5.5 5.4 4.9 4.6 4.3
Trading Co Ltd
Narasu's Coffee
Co 5.5 4.5 4.3 4.1 3.9
Hindustan Lever
Ltd 28.9 29.7 30.2 - -
Others 22.2 21.3 20.9 19.7 18.8
Total 100.0 100.0 100.0 100.0 100.0
Source: Trade associations, trade press,
company research, trade interviews, Euromonitor International estimates
% retail value
rsp
Brand Company 2005 2006 2007 2008
Nescafé Nestlé
India Ltd 33.5 34.3 35.4 36.8
Bru Hindustan
Unilever Ltd - - 31.2 31.5
Coorg Tata
Coffee Ltd 5.6 5.4 5.0 4.7
ABC Coffee Day Amalgamated Bean
Coffee 5.4 4.9 4.6 4.3
Trading
Co Ltd
Narasu's Narasu's
Coffee Co 4.5 4.3 4.1 3.9
Bru Hindustan
Lever Ltd 29.7 30.2 - -
Others 21.3 20.9 19.7 18.8
Total 100.0 100.0 100.0 100.0
Source: Trade associations, trade press,
company research, trade interviews, Euromonitor International estimates
tonnes
2008 2009 2010 2011 2012 2013
Fresh coffee 28,434.6 29,294.4 30,034.0 30,642.1 31,112.9 31,436.6
- Fresh ground
coffee 28,434.6 29,294.4 30,034.0 30,642.1 31,112.9 31,436.6
- Fresh coffee
beans - - - - - -
Instant coffee 8,526.7 9,394.6 10,304.5 11,251.5 12,229.9 13,232.8
- Instant
standard coffee 8,526.7 9,394.6 10,304.5 11,251.5 12,229.9 13,232.8
- Instant
decaffeinated - - - - - -
coffee
Coffee 36,961.3 38,689.1 40,338.4 41,893.6 43,342.7 44,669.4
Source: Official statistics, trade
associations, trade press, company research, trade interviews, Euromonitor
International estimates
Rs million
2008 2009 2010 2011 2012 2013
Fresh coffee 4,466.9 4,690.5 4,880.4 5,028.1 5,155.6 5,260.8
- Fresh ground
coffee 4,466.9 4,690.5 4,880.4 5,028.1 5,155.6 5,260.8
- Fresh coffee
beans - - - - - -
Instant coffee 6,928.7 7,758.7 8,613.9 9,497.3 10,424.3 11,390.4
- Instant
standard coffee 6,928.7 7,758.7 8,613.9 9,497.3 10,424.3 11,390.4
- Instant
decaffeinated - - - - - -
coffee
Coffee 11,395.6 12,449.2 13,494.3 14,525.3 15,580.0 16,651.3
Source: Official statistics, trade
associations, trade press, company research, trade interviews, Euromonitor
International estimates
% volume growth
2012/13 2008-13 CAGR 2008/13 TOTAL
Fresh coffee 1.0 2.0 10.6
- Fresh ground
coffee 1.0 2.0 10.6
- Fresh coffee
beans - - -
Instant coffee 8.2 9.2 55.2
- Instant
standard coffee 8.2 9.2 55.2
- Instant
decaffeinated coffee - - -
Coffee 3.1 3.9 20.9
Source: Official statistics, trade
associations, trade press, company research, trade interviews, Euromonitor
International estimates
% constant value
growth
2008-13
CAGR 2008/13
TOTAL
Fresh coffee 3.3 17.8
- Fresh ground
coffee 3.3 17.8
- Fresh coffee
beans - -
Instant coffee 10.5 64.4
- Instant
standard coffee 10.5 64.4
- Instant
decaffeinated coffee - -
Coffee 7.9 46.1
Source: Official statistics, trade
associations, trade press, company research, trade interviews, Euromonitor
International estimates
