COFFEE IN INDIA

Euromonitor International
August 2014

COF F E E I N I NDI A P A S S P ORT I
E u r o mo n i t o r I n t e r n a t i o n a l
LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1
Trends .......................................................................................................................................... 1
Competitive Landscape ................................................................................................................ 2
Prospects ..................................................................................................................................... 2
Category Data .............................................................................................................................. 3
Table 1 Retail Sales of Coffee by Category: Volume 2008-2013 .............................. 3
Table 2 Retail Sales of Coffee by Category: Value 2008-2013 ................................. 3
Table 3 Retail Sales of Coffee by Category: % Volume Growth 2008-2013 ............. 4
Table 4 Retail Sales of Coffee by Category: % Value Growth 2008-2013 ................ 4
Table 5 Retail Sales of Fresh Ground Coffee by Standard vs Pods: % Value
2008-2013 .................................................................................................... 4
Table 6 Retail Sales of Instant Coffee by Type: % Value Breakdown 2008-
2013 ............................................................................................................. 5
Table 7 NBO Company Shares of Coffee: % Retail Value 2009-2013 ...................... 5
Table 8 LBN Brand Shares of Coffee: % Retail Value 2010-2013 ............................ 5
Table 9 Forecast Retail Sales of Coffee by Category: Volume 2013-2018 ............... 5
Table 10 Forecast Retail Sales of Coffee by Category: Value 2013-2018 .................. 6
Table 11 Forecast Retail Sales of Coffee by Category: % Volume Growth 2013-
2018 ............................................................................................................. 6
Table 12 Forecast Retail Sales of Coffee by Category: % Value Growth 2013-
2018 ............................................................................................................. 7
Table 13 Forecast Retail Sales of Fresh Ground Coffee by Standard vs Pods:
% Value 2013-2018 ...................................................................................... 7


COF F E E I N I NDI A P A S S P ORT 1
E u r o mo n i t o r I n t e r n a t i o n a l
COFFEE IN INDIA


HEADLINES
Coffee retail value sales grow by 17% to reach Rs28 billion in 2013
Increasing number of chained coffee shops stimulates coffee consumption at home
Average unit price for coffee grows by 10% in 2013
Nestl continues to lead with a value share of 38%
Coffee is likely to grow by a 7% constant value CAGR over the forecast period


TRENDS
With growing influence from leading coffee chains, including Costa Coffee and Barista,
consumers have started to consume coffee at home, as an alternative to tea. This trend is
gaining popularity mainly in North, West and East and Northeast India, where consumers
have traditionally preferred tea as their daily drink. In addition, the increase in number of
chained coffee shops, such as Caf Coffee Day and Barista across India has helped to drive
on-trade coffee consumption.
Coffee retail value sales grew by 17%, in line with growth over the review period. The growth
was driven mainly by an increasing preference for instant coffee, which is considered
convenient to prepare. In addition, manufacturers such as Nestl and Unilever continued to
promote instant coffee with strong commercials and campaigns. As a result, retail value sales
of instant coffee grew by 21% in 2013. Furthermore, the expansion of chained coffee outlets
in tier two and tier three cities has also encouraged consumers to drink coffee more
frequently.
Average unit price for coffee continued to grow by 10% in 2013, mainly due to increasing
inflation and rising costs of fuel and transportation. These increasing costs forced
manufacturers to increase their retail prices. The growing consumption of instant coffee,
which is more expensive than fresh, also pushed up average unit prices even further.
Retail distribution of coffee did not record significant changes in 2013. Coffee continues to be
sold mainly through independent small grocers and other grocery retailers. Modern grocery
retailers, such as supermarkets and hypermarkets, gave strong visibility to coffee and
provided a wide choice of brands for consumers.
On-trade coffee sales recorded faster growth than in the previous year, mainly due to the
increase in numbers of cafs and coffee shops across India. Coffee continues to be the most
popular non-alcoholic beverage amongst Indias youth, and cafs are a popular place to
socialise.
Instant standard coffee continued to be the major contributor towards value sales of coffee, as
speciality coffee has yet to take off in India. Instant coffee drinks, such as cappuccino, mocha
and latte are gaining in popularity, especially in on-trade outlets. In 2013, Unilever introduced
Bru Exotica Guatemala, which is expensive compared to the other coffee brands. The product
was widely available in modern grocery retailers, including hypermarkets and supermarkets.
Coffee pod sales remained negligible in retail, as well as consumer foodservice outlets.
Vending machines in Indian coffee shops and offices typically use fresh coffee beans, rather
than coffee pods.


COF F E E I N I NDI A P A S S P ORT 2
E u r o mo n i t o r I n t e r n a t i o n a l
COMPETITIVE LANDSCAPE
Nestl continues to lead coffee with a value share of 38% in 2013, mainly due to its long-
established presence in instant coffee. Nestls brands including Nescaf Classic and
Nescaf Sunrise enjoy huge popularity amongst consumers. The company also enjoys
countrywide distribution and a widespread presence in all retail formats, including
hypermarkets. Nestl also sells small single sachets of instant coffee priced at Rs2, which is
considered affordable. Sachets are quite popular amongst consumers in rural areas and tier
three cities, as well as with consumers who only consume coffee occasionally.
Nestl also recorded the fastest increase in value share, mainly due to the growing popularity
of its Nescaf brand. The company continued to promote its brands through in-store
promotions and TV commercials, featuring leading Bollywood actress Deepika Padukone,
rolling out a promotional campaign in the summer season to ensure consumers use coffee to
make iced coffee. Therefore, Nescaf was promoted as a hot coffee brand in winters, but an
iced coffee brand in summer.
Coffee remains dominated by international brands, with domestic companies taking only a
very small share in 2013. Together, Nestl and Unilever hold a value share of 68%, mainly
due to the popularity of their instant coffee. In contrast, domestic companies, such as
Narasu's Coffee Co and Tata Coffee made up the remaining share.
In October 2012, Unilever launched Bru Exotica Guatemala after taking the views of its
consumers on the flavours or variety of beans they wanted to see in shops. The company
encouraged its consumers to vote on Facebook to support a favourite coffee to add to the Bru
Exotica range. Of all three chosen varieties - Sumatran, Ethiopian and Guatemalan ,
Guatemalan coffee had the highest number of votes. Based on consumer input, the company
introduced Bru Exotica Guatemala, priced at a premium compared to other brands. The
product is likely to appeal to urban consumers willing to try out new flavours, in addition to the
significant number of people who voted this as their favourite variety.
Most brands, including Bru and Nescaf, continued to be priced at a medium level in 2013.
However, Unilever has begun to premiumise coffee, by introducing higher-priced exotic
variants, such as Bru Exotica Guatemala. Manufacturers have also invested in packaging for
premium brands, so consumers can distinguish these from the standard brands available. For
instance, Bru Gold is sold in a triangular glass bottle and Bru Exotica Guatemala is presented
in a tall glass bottle with a fancy closure.
Private label continues to have a negligible presence in coffee.


PROSPECTS
With changing lifestyles and growing urbanisation, coffee specialist retailers and caf chains,
such as Barista and Starbucks, are likely to expand their presence in tier two and tier three
cities as well as Tier one. The growing caf culture in India will drive on-trade coffee sales and
is also likely to influence coffee consumption at home in tier two and tier three cities, such as
Meerut and Kanpur, mainly in North and West India. Consumers in these areas primarily drink
tea, with coffee consumed only occasionally.
Coffee retail value sales are likely to grow by a constant value CAGR of 7% over the forecast
period, mainly due to the increasing consumption of instant coffee, which is considered more
convenient to prepare. Also, growth is expected to be driven by the increasing number of
cafs, which are likely to create greater awareness and influence new consumers, especially
young ones, to start drinking coffee.
COF F E E I N I NDI A P A S S P ORT 3
E u r o mo n i t o r I n t e r n a t i o n a l
There are no significant market threats acting against retail coffee consumption, although any
evidence of an economic slowdown is likely to affect coffee consumption growth at cafs and
specialist coffee retailers, as consumers will be less inclined to spend money on coffee.
Instant coffee is likely to grow at the fastest rate over the forecast period, thanks to its
convenience and ease of preparation. Most consumers find instant coffee easier to prepare
than fresh coffee or tea. Interestingly, manufacturers such as Tata Coffee are also likely to
focus on instant coffee, as this allows companies to gain better margins.
Average unit prices are likely to increase over the forecast period. Increasing unit prices will
be mainly due to rising fuel prices and also increasing labour costs. In addition, manufacturers
such as Nestl India are likely to introduce premium brands, which will drive up unit prices
further.
Consumers have begun to look out for coffee varieties and flavours available in foodservice
outlets. As consumers continue to try new varieties of coffee, the new launches such as Bru
Exotica Guatemala are likely to perform well over the forecast period. Bru Exotica Guatemala
enjoys widespread distribution and strong visibility in many retail channels across the country.
Furthermore, strong promotional activity on Facebook and the wide availability of the brand in
modern grocery retailers is likely to increase prominence.


CATEGORY DATA

Table 1 Retail Sales of Coffee by Category: Volume 2008-2013

Tonnes
2008 2009 2010 2011 2012 2013

Fresh Coffee 28,434.6 29,315.3 30,374.6 31,565.3 32,874.5 34,181.2
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 28,434.6 29,315.3 30,374.6 31,565.3 32,874.5 34,181.2
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 28,434.6 29,315.3 30,374.6 31,565.3 32,874.5 34,181.2
Ground Coffee
Instant Coffee 8,526.7 9,473.6 10,591.2 11,881.8 13,396.4 15,182.1
- Instant Standard Coffee 8,526.7 9,473.6 10,591.1 11,881.7 13,396.3 15,182.0
- Instant Decaffeinated - - 0.1 0.1 0.1 0.1
Coffee
Coffee 36,961.3 38,788.9 40,965.7 43,447.1 46,271.0 49,363.3
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 2 Retail Sales of Coffee by Category: Value 2008-2013

INR million
2008 2009 2010 2011 2012 2013

Fresh Coffee 6,177.4 6,688.3 8,074.1 8,873.1 9,859.2 10,939.0
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 6,177.4 6,688.3 8,074.1 8,873.1 9,859.2 10,939.0
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 6,177.4 6,688.3 8,074.1 8,873.1 9,859.2 10,939.0
Ground Coffee
COF F E E I N I NDI A P A S S P ORT 4
E u r o mo n i t o r I n t e r n a t i o n a l
Instant Coffee 6,928.7 7,978.7 10,008.0 11,928.9 14,352.0 17,348.8
- Instant Standard Coffee 6,928.7 7,978.7 10,007.7 11,928.5 14,351.5 17,348.2
- Instant Decaffeinated - - 0.3 0.3 0.4 0.5
Coffee
Coffee 13,106.2 14,667.0 18,082.2 20,802.0 24,211.1 28,287.7
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 3 Retail Sales of Coffee by Category: % Volume Growth 2008-2013

% volume growth
2012/13 2008-13 CAGR 2008/13 Total

Fresh Coffee 4.0 3.7 20.2
- Fresh Coffee Beans - - -
- Fresh Ground Coffee 4.0 3.7 20.2
-- Fresh Ground Coffee Pods - - -
-- Standard Fresh Ground Coffee 4.0 3.7 20.2
Instant Coffee 13.3 12.2 78.1
- Instant Standard Coffee 13.3 12.2 78.1
- Instant Decaffeinated Coffee 14.6 - -
Coffee 6.7 6.0 33.6
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 4 Retail Sales of Coffee by Category: % Value Growth 2008-2013

% current value growth
2012/13 2008-13 CAGR 2008/13 Total

Fresh Coffee 11.0 12.1 77.1
- Fresh Coffee Beans - - -
- Fresh Ground Coffee 11.0 12.1 77.1
-- Fresh Ground Coffee Pods - - -
-- Standard Fresh Ground Coffee 11.0 12.1 77.1
Instant Coffee 20.9 20.1 150.4
- Instant Standard Coffee 20.9 20.1 150.4
- Instant Decaffeinated Coffee 21.8 - -
Coffee 16.8 16.6 115.8
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 5 Retail Sales of Fresh Ground Coffee by Standard vs Pods: % Value 2008-
2013

% retail value rsp
2008 2009 2010 2011 2012 2013

Pods - - - - - -
Standard 100.0 100.0 100.0 100.0 100.0 100.0
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources

COF F E E I N I NDI A P A S S P ORT 5
E u r o mo n i t o r I n t e r n a t i o n a l

Table 6 Retail Sales of Instant Coffee by Type: % Value Breakdown 2008-2013

% retail value rsp
2008 2009 2010 2011 2012 2013

2-in-1 Instant Coffee - - - - - -
3-in-1 Instant Coffee 0.1 0.1 0.2 0.2 0.2 0.2
4-in-1 Instant Coffee - - - - - -
Instant Speciality 1.5 2.0 2.5 2.1 2.0 1.8
Italian Coffee
Standard Instant Coffee 98.4 97.9 97.3 97.8 97.8 98.0
Others - - - - - -
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 7 NBO Company Shares of Coffee: % Retail Value 2009-2013

% retail value rsp
Company 2009 2010 2011 2012 2013

Nestl India Ltd 32.8 33.1 34.5 35.9 37.6
Hindustan Unilever Ltd 30.7 30.7 31.3 31.0 30.7
Narasu's Coffee Co 4.9 5.0 5.2 5.4 5.1
Amalgamated Bean Coffee 2.0 2.1 2.1 1.9 1.7
Trading Co Ltd
Tata Coffee Ltd 2.5 1.3 1.3 1.3 1.1
Cothas Coffee Co 0.6 0.7 0.7 0.8 0.8
Hindustan Lever Ltd - - - - -
Others 26.6 27.2 25.0 23.9 22.9
Total 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 8 LBN Brand Shares of Coffee: % Retail Value 2010-2013

% retail value rsp
Brand Company 2010 2011 2012 2013

Nescaf Nestl India Ltd 33.1 34.5 35.9 37.6
Bru Hindustan Unilever Ltd 30.7 31.3 31.0 30.7
Narasu's Narasu's Coffee Co 5.0 5.2 5.4 5.1
Coffee Day Amalgamated Bean Coffee 2.1 2.1 1.9 1.7
Trading Co Ltd
Mr Bean Tata Coffee Ltd 1.3 1.3 1.3 1.1
Cothas Coffee Cothas Coffee Co 0.7 0.7 0.8 0.8
Bru Hindustan Lever Ltd - - - -
Coorg Tata Coffee Ltd - - - -
Others 27.2 25.0 23.9 22.9
Total 100.0 100.0 100.0 100.0
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 9 Forecast Retail Sales of Coffee by Category: Volume 2013-2018
COF F E E I N I NDI A P A S S P ORT 6
E u r o mo n i t o r I n t e r n a t i o n a l

Tonnes
2013 2014 2015 2016 2017 2018

Fresh Coffee 34,181.2 35,439.2 36,638.3 37,810.0 38,827.3 39,865.3
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 34,181.2 35,439.2 36,638.3 37,810.0 38,827.3 39,865.3
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 34,181.2 35,439.2 36,638.3 37,810.0 38,827.3 39,865.3
Ground Coffee
Instant Coffee 15,182.1 17,125.0 19,263.7 21,616.2 24,171.3 26,896.7
- Instant Standard Coffee 15,182.0 17,124.9 19,263.5 21,616.0 24,171.0 26,896.4
- Instant Decaffeinated 0.1 0.1 0.2 0.2 0.2 0.3
Coffee
Coffee 49,363.3 52,564.2 55,902.0 59,426.2 62,998.6 66,762.0
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 10 Forecast Retail Sales of Coffee by Category: Value 2013-2018

INR million
2013 2014 2015 2016 2017 2018

Fresh Coffee 10,939.0 11,159.0 11,374.8 11,585.8 11,755.6 11,902.9
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 10,939.0 11,159.0 11,374.8 11,585.8 11,755.6 11,902.9
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 10,939.0 11,159.0 11,374.8 11,585.8 11,755.6 11,902.9
Ground Coffee
Instant Coffee 17,348.8 19,231.7 21,290.4 23,544.8 25,960.9 28,442.4
- Instant Standard Coffee 17,348.2 19,231.1 21,289.8 23,544.0 25,960.0 28,441.4
- Instant Decaffeinated 0.5 0.6 0.7 0.8 0.9 1.1
Coffee
Coffee 28,287.7 30,390.7 32,665.2 35,130.5 37,716.5 40,345.4
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 11 Forecast Retail Sales of Coffee by Category: % Volume Growth 2013-2018

% volume growth
2017/18 2013-18 CAGR 2013/18 Total

Fresh Coffee 2.7 3.1 16.6
- Fresh Coffee Beans - - -
- Fresh Ground Coffee 2.7 3.1 16.6
-- Fresh Ground Coffee Pods - - -
-- Standard Fresh Ground Coffee 2.7 3.1 16.6
Instant Coffee 11.3 12.1 77.2
- Instant Standard Coffee 11.3 12.1 77.2
- Instant Decaffeinated Coffee 17.6 16.4 113.6
Coffee 6.0 6.2 35.2
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources

COF F E E I N I NDI A P A S S P ORT 7
E u r o mo n i t o r I n t e r n a t i o n a l

Table 12 Forecast Retail Sales of Coffee by Category: % Value Growth 2013-2018

% constant value growth
2013-18 CAGR 2013/18 TOTAL

Fresh Coffee 1.7 8.8
- Fresh Coffee Beans - -
- Fresh Ground Coffee 1.7 8.8
-- Fresh Ground Coffee Pods - -
-- Standard Fresh Ground Coffee 1.7 8.8
Instant Coffee 10.4 63.9
- Instant Standard Coffee 10.4 63.9
- Instant Decaffeinated Coffee 15.8 108.5
Coffee 7.4 42.6
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 13 Forecast Retail Sales of Fresh Ground Coffee by Standard vs Pods: % Value
2013-2018

% retail value rsp
2013 2014 2015 2016 2017 2018

Pods - - - - - -
Standard 100.0 100.0 100.0 100.0 100.0 100.0
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources