COFFEE IN INDIA

Euromonitor International
July 2013

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LIST OF CONTENTS AND TABLES

Headlines ..................................................................................................................................... 1
Trends .......................................................................................................................................... 1
Competitive Landscape ................................................................................................................ 2
Prospects ..................................................................................................................................... 3
Category Data .............................................................................................................................. 4
Table 1 Retail Sales of Coffee by Category: Volume 2007-2012 .............................. 4
Table 2 Retail Sales of Coffee by Category: Value 2007-2012 ................................. 5
Table 3 Retail Sales of Coffee by Category: % Volume Growth 2007-2012 ............. 5
Table 4 Retail Sales of Coffee by Category: % Value Growth 2007-2012 ................ 5
Table 5 Fresh Ground Coffee: Standard Vs Pods % Value Analysis 2007-
2012 ............................................................................................................. 6
Table 6 Instant Coffee by Type: % Value Breakdown 2007-2012 ............................. 6
Table 7 Coffee Company Shares by Retail Value 2008-2012 ................................... 6
Table 8 Coffee Brand Shares by Retail Value 2009-2012 ......................................... 7
Table 9 Forecast Retail Sales of Coffee by Category: Volume 2012-2017 ............... 7
Table 10 Forecast Retail Sales of Coffee by Category: Value 2012-2017 .................. 7
Table 11 Forecast Retail Sales of Coffee by Category: % Volume Growth 2012-
2017 ............................................................................................................. 8
Table 12 Forecast Retail Sales of Coffee by Category: % Value Growth 2012-
2017 ............................................................................................................. 8
Table 13 Fresh Ground Coffee: Forecast Standard Vs Pods % Value Analysis
2012-2017 .................................................................................................... 8


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COFFEE IN INDIA


HEADLINES
Coffee registers strong retail value growth of 16% in 2012 to reach Rs24 billion
Launch of premium coffee offerings aids strong value growth in 2012
Average unit prices increase by 9% in 2012
Nestl retains its leading position with a retail value share of 36% in 2012
Over forecast period, coffee is expected to witness a 9% constant value CAGR to reach Rs38
billion in 2017


TRENDS
A number of premium offerings were launched by the top players, such as Nestl, Unilever
and Tata Coffee in 2012. This led to a premiumisation trend for coffee as consumers
demonstrated a willingness to spend.
Coffee performed better in 2012 than in the previous year, as off-trade coffee volumes
registered growth of 7%. Increasing disposable incomes, the growth of modern retail outlets,
increased availability, new product development and an increase in the number of cafs
resulted in this improved performance. South India remained the largest market for coffee in
India. North India, traditionally a tea drinking region, registered a retail volume growth of 14%
in 2012 and continued to be the fastest-growing region in India. The growth of coffee chains in
North India led to an increase in awareness of coffee in this region.
Instant decaffeinated coffee, although a fairly new concept in India, registered the fastest
retail volume growth, posting 14% in 2012. The increasing health and wellness trend led to
consumers becoming concerned about the caffeine content in their coffee, leading to growth
of decaffeinated coffee. Nestls Nescaf Gold Blend Decaffeinated coffee was the only major
brand with any significant presence in India in 2012. The company carried out a number of in-
store promotions to increase brand awareness and sales.
Retail unit prices of coffee increased by 9% in 2012 as a result of a drop in production,
inflationary pressures and increased input costs. Production of coffee in 2012 was impacted
by changing weather conditions and insufficient rainfall in the coffee plantation areas of India.
Instant coffee continued to perform strongly in 2012, registering a retail volume growth of
13%. The growth of instant coffee was driven by Nestl brands Nescaf Sunrise and Nescaf
Classic. Nestl increased its spend on promotions and carried out a number of in-store brand
awareness programmes which helped its two brands to post strong volume gains in 2012.
Volume growth of coffee in the on-trade channel was slightly faster than the growth registered
by retail sales in 2012. On-trade sales of coffee registered a strong volume growth of 8% in
2012, a slight improvement on the previous year. On-trade sales of coffee received a boost as
cafs, such as Java City, Caf Coffee Day and Barista Coffee, continued to expand their
outlets and presence across the major cities of India. The launch of exotic coffee flavours by
top players, such as Bru and Nescaf, helped retail sales of coffee to post a volume growth of
7%.
In terms of channels, 74% of coffee sales in retail volume terms in 2012 occurred through
independent small grocers, led by kirana stores. Independent small grocers remained the
primary channel for retail coffee sales in India. There was also an increase in contribution of
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coffee sales through supermarkets and hypermarkets, as modern retail contributed 21% of
retail volume coffee sales in 2012.
Vending continued to have a negligent contribution to the overall sales of coffee in India in
2012. Vending machines were popular mainly in coffee shops and offices, as fresh coffee is
available almost everywhere and hence the channel is underdeveloped in India.
Coffee is one of the most popular non-alcoholic beverages among youth as cafs become a
popular venue. This trend has been driven primarily by the growth of coffee-focused cafs. In
2012, over 42,000 caf outlets were present in India, an increase of 3% compared to the
previous year. The year saw the entry of Starbucks global coffee chain in India. The company
opened its first outlet in the thriving metropolis of Mumbai. The other prominent coffee chains
included Costa Coffee, which launched its 100th outlet in the year, Bangalore-headquartered
Caf Coffee Day, Australias largest coffee chain Di Bella and Lavazzas Caf Barista. Coffee-
centric cafs are expected to continue to expand over the forecast period as the trend of
drinking coffee increases in the country.
Standard instant coffee continued to be the major contributor to coffee value sales as
speciality coffee has yet to take-off in India. The popularity of exotic coffee drinks, such as
cappuccino, mocha and latte, is on the rise. However, the in-1 instant coffee category
accounted for less than 1% of off-trade instant coffee retail value sales in 2012.
The use of coffee pods remains minimal in India. Vending machines, primarily used in coffee
shops and offices, typically use fresh coffee beans instead of coffee pods.


COMPETITIVE LANDSCAPE
Nestl and Unilever continued to lead coffee in 2012 with a combined retail value share of
67%. Nescaf accounted for 36% of retail value sales in 2012 and was followed closely by
Bru which accounted for 31%. Increased spend on promotions by the two companies, along
with in-store activities, helped drive sales in 2012. The companies also implemented a
number of launches in the premium category which helped to attract new consumers to their
brands.
Nestl achieved the largest gain in retail value sales in 2012. The growth of its Nescaf brand
was driven by the various promotional activities carried out by the company to promote and
increase brand awareness. Nescaf carried out the Ask Deepika Contest on Facebook, in
which the participants had to come up with a question they would ask Deepika Padukone, a
Bollywood starlet, if they met her in a shopping centre or at an IPL match. The winners would
receive prizes, such as iPad, Blackberry, or Samsung equipment and the winner also had a
chance to meet Deepika in person. Also, the company carried out a number of Television
Commercials (TVCs) featuring Deepika Padukone, Karan Johar (Bollywood film director) and
Purab Kohli (popular video jockey on Channel V). Nescaf coffees latest TVC featured
Shankar, Ehsaan and Loy, the famous Bollywood music composers, along with Deepika and
Purab. These promotional campaigns helped the company register the brand name among
consumers and increase brand awareness, thus driving sales.
The Indian coffee category was characterised by multinational companies, Nestl and
Unilever, which together accounted for a combined retail value share of 67% in 2012.
Domestic companies accounted for the remaining percentage of sales with the prominent
players being Narasu's Coffee Co, Amalgamated Bean Coffee Trading Co Ltd and Tata
Coffee Ltd.
Some of the prominent new products launched in 2012 included Bru Exotica Brazil, Bru
Exotica Columbia, Bru Exotica Kilimanjaro and Bru Gold by Unilever. Nestl launched
Nescaf Sunrise Premium in the same period thereby creating a premium offering for its
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Sunrise brand. Aaksh Beverages launched Aveon Caf Premium Royale during the review
period and Davidoff Caf also implemented premium launches in 2012.
The premiumisation of coffee in India was also accompanied by innovations in the packaging
of products. Manufacturers implemented premium packaging in order to distinguish their
products from those of their competitors and to attract consumers. Some prime examples
were Bru Gold, launched in a fashionable triangular jar with a snap-fit cap, which the company
claimed helps to retain the aroma and taste of coffee, and Bru Exotica products were also
packaged in attractive glass jars with a premium classy look. Davidoff products were also
available in attractive glass jars that give a very premium appearance to their products.
Narasu's coffee, Nescaf Sunrise and Bru are some of the economy brands available in India.
Both Unilever and Nestl have products at different price points, catering to premium,
standard, as well as economy consumption. Bru Gold, Bru Exotica, Illy, Davidoff and Lavazza
are some of the premium coffees available.


PROSPECTS
Over forecast period, retail sales of coffee are expected to witness a constant CAGR of 9% in
constant value terms, to reach Rs38 billion in 2017. The growth of modern retail outlets and
coffee chains is expected to drive coffee growth over the forecast period. Exotic flavours and
premium variants of existing offerings will continue to be launched by the top players, leading
to premiumisation of the coffee category over the forecast period.
In the North, East and Northeast and West regions, consumption of instant coffee is more
predominant than filter coffee. However, in South India, consumption of filter coffee is higher
than instant coffee. There is more potential for growth of coffee in the non-south regions,
where occasional consumers are high in number. This essentially means that consumers
have begun to experience this beverage, which is being exploited by manufacturers to
increase their consumer base. A number of exotic and premium products were launched in
order to attract consumers into coffee, especially in the instant coffee category, by
emphasising the products convenience and flavour. This trend should continue over the
forecast period as premiumisation of the coffee category continues, with the major players
launching premium products.
Coffee is projected to grow at a retail volume CAGR of 8% over the forecast period. The
growth of coffee over the forecast period is expected to be mainly due to the increase in the
number of cafs serving coffee, which are increasing the awareness of coffee among non-
traditional consumers. Consumption of instant coffee is expected to increase over the forecast
period due to the growing need for convenience.
Rising demand for coffee from non-traditional coffee regions, such as Northern and Western
India is anticipated to drive growth of coffee over forecast period. Although tea has always
been the most popular hot drink in India, the trend is slowly changing as more players enter
the coffee category. The expansion of coffee-centric cafs in these regions is leading to
increased awareness of coffee and driving sales.
The increasing health and wellness trend in India has resulted in a surge in demand for
healthy fruit/vegetable juice, RTD drinks, as well as for soya milk, which is available in
numerous flavours. There is also a growing demand for green and speciality tea, which are
also considered as having health benefits. These trends could prove to be a potential threat to
the growth of coffee over the forecast period, as coffee is priced at a premium compared to
these products.
Instant decaffeinated coffee, although still a small category in terms of sales, is expected to
be the fastest-growing category within coffee in retail volume and constant value terms over
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the forecast period, as consumers are increasingly moving towards health and wellness
products. Instant decaffeinated coffee is expected to grow at a constant retail value CAGR of
15% over the forecast period. Instant standard coffee is projected to be the next fastest-
growing category over the forecast and is expected to post a strong retail constant value
CAGR of 13% over the forecast period. The growth of these coffee categories is expected to
be driven by non-traditional coffee drinking regions in India, especially Northern and Western
India, where the trend of coffee consumption is fast catching up.
Retail unit prices of coffee, which witnessed a significant increase of 9% in 2012, are
expected to continue to increase over the forecast period. Production issues as a result of
uneven weather conditions, high inflationary pressures and rising input costs are expected to
drive the price of coffee upwards over the forecast period. Smaller sachets, as an alternative
to price discounting, will influence sales of coffee over the forecast period as coffee is a
premium drink and manufacturers will not choose to take the discounting route.
Unilevers Bru Gold and Tata Coffees Aveon Caf Premium Royale were the two prominent
premium coffees launched in 2012. Both these products are expected to do well over the
forecast period. They target high-end consumers who are willing to spend. The launch of both
these products was supported by strong promotional campaigns. This trend is expected to
continue over the forecast period as more premium flavours and variants of existing brands
are expected to be launched over the forecast period.
Companies are expected to expand their current portfolio over the forecast period by
launching a series of products that are either line extensions of their current brands or new
premium brands. Along with new launches, companies are also expected to put larger
emphasis on brand building activities, by introducing premium packages, as well as
increasing the distribution of their brand.
The popularity of exotic coffee drinks, such as cappuccino, mocha and latte, is on the rise,
especially in metros, such as Mumbai, Bangalore and Kolkata. Demand for instant speciality
coffee and 3-in-1 formats is expected to increase over the forecast period. Consumers from
the non-traditional coffee drinking regions have displayed the desire for both convenience and
indulgence and demand for flavoured speciality coffee such as cappuccinos, mochas and
lattes, has been on the rise. This trend should continue over the forecast period as
manufacturers aim to attract new consumers to their brands by launching instant speciality
coffee.
The use of coffee machines in India is still very small and is limited mainly to specialist coffee
shops and institutional environments. Nespresso, a major global fresh ground coffee pod
player, is not yet present in India. As a result, coffee pods do not have significant growth
potential.


CATEGORY DATA

Table 1 Retail Sales of Coffee by Category: Volume 2007-2012

Tonnes
2007 2008 2009 2010 2011 2012

Fresh Coffee 27,466.8 28,434.6 29,315.3 30,374.6 31,565.3 32,874.5
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 27,466.8 28,434.6 29,315.3 30,374.6 31,565.3 32,874.5
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 27,466.8 28,434.6 29,315.3 30,374.6 31,565.3 32,874.5
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Ground Coffee
Instant Coffee 7,704.3 8,526.7 9,473.6 10,591.2 11,881.8 13,396.4
- Instant Standard Coffee 7,704.3 8,526.7 9,473.6 10,591.1 11,881.7 13,396.3
- Instant Decaffeinated - - - 0.1 0.1 0.1
Coffee
Coffee 35,171.1 36,961.3 38,788.9 40,965.7 43,447.1 46,271.0
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 2007-2012

Rs million
2007 2008 2009 2010 2011 2012

Fresh Coffee 5,718.5 6,177.4 6,688.3 8,074.1 8,873.1 9,859.2
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 5,718.5 6,177.4 6,688.3 8,074.1 8,873.1 9,859.2
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 5,718.5 6,177.4 6,688.3 8,074.1 8,873.1 9,859.2
Ground Coffee
Instant Coffee 5,846.6 6,928.7 7,978.7 10,008.0 11,928.9 14,352.0
- Instant Standard Coffee 5,846.6 6,928.7 7,978.7 10,007.7 11,928.5 14,351.5
- Instant Decaffeinated - - - 0.3 0.3 0.4
Coffee
Coffee 11,565.1 13,106.2 14,667.0 18,082.2 20,802.0 24,211.1
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 2007-2012

% volume growth
2011/12 2007-12 CAGR 2007/12 Total

Fresh Coffee 4.1 3.7 19.7
- Fresh Coffee Beans - - -
- Fresh Ground Coffee 4.1 3.7 19.7
-- Fresh Ground Coffee Pods - - -
-- Standard Fresh Ground Coffee 4.1 3.7 19.7
Instant Coffee 12.7 11.7 73.9
- Instant Standard Coffee 12.7 11.7 73.9
- Instant Decaffeinated Coffee 13.9 - -
Coffee 6.5 5.6 31.6
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 2007-2012

% current value growth
2011/12 2007-12 CAGR 2007/12 Total

Fresh Coffee 11.1 11.5 72.4
- Fresh Coffee Beans - - -
- Fresh Ground Coffee 11.1 11.5 72.4
-- Fresh Ground Coffee Pods - - -
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-- Standard Fresh Ground Coffee 11.1 11.5 72.4
Instant Coffee 20.3 19.7 145.5
- Instant Standard Coffee 20.3 19.7 145.5
- Instant Decaffeinated Coffee 23.4 - -
Coffee 16.4 15.9 109.3
Source: Euromonitor International from official statistics, trade associations, trade press, company research,
store checks, trade interviews, trade sources


Table 5 Fresh Ground Coffee: Standard Vs Pods % Value Analysis 2007-2012

% retail value rsp
2007 2008 2009 2010 2011 2012

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


Table 6 Instant Coffee by Type: % Value Breakdown 2007-2012

% retail value rsp
2007 2008 2009 2010 2011 2012

2-in-1 Instant Coffee - - - - - -
3-in-1 Instant Coffee - 0.1 0.1 0.2 0.2 0.2
4-in-1 Instant Coffee - - - - - -
Instant Speciality 0.5 1.5 2.0 2.5 2.1 2.0
Italian Coffee
Standard Instant Coffee 99.5 98.4 97.9 97.3 97.8 97.8
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 Coffee Company Shares by Retail Value 2008-2012

% retail value rsp
Company 2008 2009 2010 2011 2012

Nestl India Ltd 32.0 32.8 33.1 34.5 35.9
Hindustan Unilever Ltd 30.7 30.7 30.7 31.3 31.0
Narasu's Coffee Co 4.7 4.9 5.0 5.2 5.4
Amalgamated Bean Coffee 1.9 2.0 2.1 2.0 1.9
Trading Co Ltd
Tata Coffee Ltd 3.8 2.5 1.3 1.3 1.3
Cothas Coffee Co 0.5 0.6 0.7 0.7 0.8
Hindustan Lever Ltd - - - - -
Others 26.4 26.6 27.2 25.0 23.9
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


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Table 8 Coffee Brand Shares by Retail Value 2009-2012

% retail value rsp
Brand Company 2009 2010 2011 2012

Nescaf Nestl India Ltd 32.8 33.1 34.5 35.9
Bru Hindustan Unilever Ltd 30.7 30.7 31.3 31.0
Narasu's Narasu's Coffee Co 4.9 5.0 5.2 5.4
Coffee Day Amalgamated Bean Coffee 2.0 2.1 2.0 1.9
Trading Co Ltd
Mr Bean Tata Coffee Ltd 2.5 1.3 1.3 1.3
Cothas Coffee Cothas Coffee Co 0.6 0.7 0.7 0.8
Bru Hindustan Lever Ltd - - - -
Coorg Tata Coffee Ltd - - - -
Others 26.6 27.2 25.0 23.9
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 2012-2017

Tonnes
2012 2013 2014 2015 2016 2017

Fresh Coffee 32,874.5 34,312.9 35,922.0 37,781.4 39,819.9 42,091.2
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 32,874.5 34,312.9 35,922.0 37,781.4 39,819.9 42,091.2
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 32,874.5 34,312.9 35,922.0 37,781.4 39,819.9 42,091.2
Ground Coffee
Instant Coffee 13,396.4 15,182.1 17,292.3 19,818.2 22,846.4 26,487.4
- Instant Standard Coffee 13,396.3 15,182.0 17,292.1 19,818.0 22,846.2 26,487.1
- Instant Decaffeinated 0.1 0.1 0.1 0.2 0.2 0.2
Coffee
Coffee 46,271.0 49,495.0 53,214.3 57,599.6 62,666.3 68,578.6
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 10 Forecast Retail Sales of Coffee by Category: Value 2012-2017

Rs million
2012 2013 2014 2015 2016 2017

Fresh Coffee 9,859.2 10,104.7 10,408.7 10,793.7 11,238.9 11,739.0
- Fresh Coffee Beans - - - - - -
- Fresh Ground Coffee 9,859.2 10,104.7 10,408.7 10,793.7 11,238.9 11,739.0
-- Fresh Ground Coffee - - - - - -
Pods
-- Standard Fresh 9,859.2 10,104.7 10,408.7 10,793.7 11,238.9 11,739.0
Ground Coffee
Instant Coffee 14,352.0 15,964.0 17,870.4 20,155.1 22,894.4 26,162.9
- Instant Standard Coffee 14,351.5 15,963.5 17,869.9 20,154.5 22,893.6 26,162.1
- Instant Decaffeinated 0.4 0.5 0.5 0.6 0.7 0.8
Coffee
Coffee 24,211.1 26,068.7 28,279.1 30,948.8 34,133.3 37,901.9
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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 2012-2017

% volume growth
2016/17 2012-17 CAGR 2012/17 Total

Fresh Coffee 5.7 5.1 28.0
- Fresh Coffee Beans - - -
- Fresh Ground Coffee 5.7 5.1 28.0
-- Fresh Ground Coffee Pods - - -
-- Standard Fresh Ground Coffee 5.7 5.1 28.0
Instant Coffee 15.9 14.6 97.7
- Instant Standard Coffee 15.9 14.6 97.7
- Instant Decaffeinated Coffee 16.8 15.8 108.2
Coffee 9.4 8.2 48.2
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 12 Forecast Retail Sales of Coffee by Category: % Value Growth 2012-2017

% constant value growth
2012-17 CAGR 2012/17 TOTAL

Fresh Coffee 3.6 19.1
- Fresh Coffee Beans - -
- Fresh Ground Coffee 3.6 19.1
-- Fresh Ground Coffee Pods - -
-- Standard Fresh Ground Coffee 3.6 19.1
Instant Coffee 12.8 82.3
- Instant Standard Coffee 12.8 82.3
- Instant Decaffeinated Coffee 14.7 98.7
Coffee 9.4 56.5
Source: Euromonitor International from trade associations, trade press, company research, trade interviews,
trade sources


Table 13 Fresh Ground Coffee: Forecast Standard Vs Pods % Value Analysis 2012-
2017

% retail value rsp
2012 2013 2014 2015 2016 2017

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