LONDON and MUMBAI - Surging coffee demand in India is
drawing global chains like Lavazza, Nestle and Starbucks to descend on the
country, while analysts forecast a decrease in bean exports from the country,
the Wall Street Journal reports.
While the tea-drinking country still represents just 1.4% of
global coffee demand, growth is projected at nearly 9% to $486.6 million this
year, according to market-research firm Euromonitor International, which comes
on the heels of almost 80% growth over the past five years.
"The size of the Indian economy and the rate of growth
of the cafe sector, combined with rising spending power and shift in consumer
preferences present a tremendous opportunity for us," said Avani Saglani
Davda, chief executive of Tata Starbucks Ltd., a venture between the
Seattle-based coffee chain and India's Tata Global Beverages Ltd.
Starbucks, partnering with Tata, opened its first Indian
store in October and now has seven outlets in Mumbai and New Delhi.
Lavazza sells its coffee to retailers and opened its first
Indian shop recently in Bangalore. Attilio Capuano, the company's Asia and
Pacific director, said opening stores in India's main cities is part of a
strategy to grow its stake in the country.
"Young people are turning to places like Starbucks
because they want a trendy place to socialize and can take their iPhones and
connect to the free Wi-Fi," said Roberio Oliveira Silva, head of the
London-based International Coffee Organization. "Coffee culture has taken
India by storm and it will continue to do so because of higher incomes and
greater urbanization."
Meanwhile, instant coffee consumption in India is also on
the rise, and Nestle established demonstration farms in South India last year
to help farmers improve productivity to help meet demand for the company??s
Nescafe products.
With its huge population, India can influence global supply
and demand for coffee beans with just a small fluctuation in coffee
consumption. And its status as the world??s fourth-largest exporter of robusta
beans could be changed by domestic demand.
"As more production is consumed domestically, it leaves
less for exports, supporting international prices," said Keith Flury, a
soft-commodity analyst at Rabobank in London.
India is expected to produce roughly 315,500 metric tons of
coffee during the 2012-13-crop year. Meanwhile, exports of Indian coffee
dropped roughly 9% last year to 310,021 tons.
Anil Bhandari, president of the India Coffee Trust trade group, said India could stop
exporting most coffee in the next five to 10 years because of rising domestic
use. "Coffee consumption in India started around the coffee-producing areas??but
now things are changing as more and more Indian coffees are consumed
domestically."