Coffee industry in India

The coffee industry in India is the sixth largest producer of coffee in the world, accounting for over four percent of world coffee production, with the bulk of all production taking place in its Southern states. India is most noted for its Monsooned Malabar variety. It is believed that coffee has been cultivated in India longer than anywhere outside of the Arabian Peninsula. The caf culture was brought into this country by Caf Coffee Day, the Chikmanglur based brand which opened the first caf in 1996. Since then it has established 1250 outlets with 150 outlets operating out of Bangalore itself. Add Baristas 200 and Costa Coffees 70 along with new entrants like Aromas, and you are looking at 2000 crore market with 1500 cafs. Now thats quite a big market, isnt it? And obviously despite all the regulations in FDI, Starbucks couldnt sign off this country for long. In the US, Starbucks is like their Caf Coffee Day present at every nook and corner. But in India, they have already indicated that they would initially start their operations by sourcing coffee beans from Tata Coffees plantations and set up shop in Tata run Taj Hotels. A good idea obviously because of the high end premium positioning they have in the minds of the Indian consumers. There are over 171,000 coffee farms in India, cultivating nearly 900,000 acres of coffee trees. Most coffee production in India is on small farms, with over 90 percent of all farms consisting of 10 acres or fewer. However, such farms account for just over half of all land used for coffee production and a minority of all coffee produced .Most coffee in India is grown in three states: Karnataka, Kerala, and Tamilnadu. These states accounted for over 92 percent of India's coffee production in the 2005-2006 growing season. India exported over 440,000 pounds of coffee in the 2008-2009 season, slightly less than in 2007 and nearly 5 percent less than 2005. Over a quarter of the India's coffee exports go to Italy. Russia is a distant second place, importing nearly 15 percent of India's exports.

Starbucks and Tata Coffee, a part of the Tata conglomerate, officially announced their partnership to source premium coffee beans in a non-binding memorandum of understanding earlier this year. Additionally, the agreement will explore the potential for future development of the Starbucks brand in retail spaces owned by Tata in India, with the first outlet likely to open this summer. Related reports have also suggested that the partnership may form into a joint venture within which Starbucks will hold 51 percent equity share within a year. The traditionally teadrinking society of India has been steadily increasing its coffee intake as the young and middle-class aspire to have more Western tastes. Group networking is embracing the practice of meetings over coffee as professional and recreational clubs alike gather routinely at coffee shops in Indias major cities to discuss business and pleasure. The Indian market is now home to multiple coffee brands including Caf Coffee Day, Barista Lavazza, Java Green, Costa Coffee, and Gloria Jeans Coffee, but the market is still young. Though India is the sixth largest coffee producer in the world with an annual output of 300,000 tons (4 percent share of global production), it consumes only 100,000 tons a year a relatively tiny volume for a population of 1.2 billion. As market estimates predict at least 100 million new coffees. Drinkers are to emerge in India in the near future; the potential for more international and domestic entry into the industry is high. The government did allow 100% foreign investment in single-brand retail. Until now, single-brand foreign retailers such as Nike Inc. could hold only 51% of an Indian joint venture. Starbucks is classified as a hospitality business rather than a retailer and was allowed to have 100% ownership in India prior to the new policy for single-brand retail. Analysts said Starbucks arrival will be viewed positively by other foreign brands that may have become skeptical about India's prospects. Starbucks had been looking for a partner in India since about 2007 .A few years ago; India's Gross Domestic Product was seeing almost double-digit growth. The government expects GDP for the year ending March 31 to come in at around 7% and few economists think it'll do much better in the coming year.

Conclusion
Barista and Caf Coffee Day have established themselves a great deal in this sector as they were the first movers. This has happened so much so that the customers have become used to staying at a caf more for its ambience rather than the product as CCD says A lot can happen over coffee. But then the high end coffee chains like Costa which is one of Starbucks strongest competitors in the UK is planning to increase its number of stores to about 120 by end of 2011. Having an average day sales of Rs. 24,000, it seems to be positioned for strong future growth. Even though Aromas from Australia has also entered this segment, CCD and Barista are tough competition for them. In such a situation, the question remains on how Starbucks would go about differentiating itself in such a scenario. The fact that India as a country is so vast and everyone has equal opportunities should make sure that they would necessarily carve a niche for themselves. Their quality, style and sense of service would definitely improve the caf culture in the country.