International Business

Group Project

Coffee HSCode:

Submitted To:

Submitted By:

Prof. S.S. Tripathi

27NMP38

Abhishek Desai
Rahul Tiwari

27NMP64
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Contents
Indian Coffee.............................................................................................................. 3
Growing Conditions.................................................................................................... 3
Important Varieties..................................................................................................... 4
Coffee Industry........................................................................................................... 5
Segmentation on value chain basis......................................................................6
Segmentation on consumption basis...................................................................6
Coffee Varieties.................................................................................................... 7
Coffee Industry in India........................................................................................ 7
Coffee Exports............................................................................................................ 9
SWOT Analysis............................................................................................................ 9
PESTEL Analysis........................................................................................................ 10

Indian Coffee
The saga of Indian coffee began on a humble note, with planting of Seven seeds of
Mocha during 1600 AD by the legendary holy saint Baba Budan, in the courtyard of
his hermitage on Baba Budan Giris in Karnataka. For quite a considerable period,
the plants remained as a garden curiosity and spread slowly as back yard plantings.
It was during 18th century that the commercial plantations of coffee were started,
thanks to the success of British entrepreneurs in conquering the hostile forest
terrain in south India. Since then, Indian coffee industry has made rapid strides and
earned a distinct identity in the coffee map of the world.
In India, coffee is traditionally grown in the Western Ghats spread over Karnataka,
Kerala and Tamil Nadu. Coffee cultivation is also being expanding rapidly in the
nontraditional areas of AP and Odisha as well as in the North East states. Coffee is
predominantly an export oriented commodity and 65% to 70% of coffee produced in
the country is exported while the rest is consumed within the country. Indian coffee
industry earns a foreign exchange to the tune of about Rs.4000 Crores. Indian
coffee has created a niche for itself in the international market and the Indian
Coffees are earning high premium, particularly Indian Robusta which is highly
preferred for its good blending quality. Arabica Coffee from India is also well
received in the international market. Coffee is an export product with low import
intensity and high employment content. This is evident from the fact that more than
six lakh persons are directly employed and an equal numbers of individuals get
indirect employment from this sector.
The two main varieties of coffee viz., Arabica and Robusta are grown in India.
Arabica is mild coffee, but the beans being more aromatic, it has higher market
value compared to Robusta beans. On the other hand Robusta has more strength
and is, therefore, used in making various blends. Arabica is grown in higher
altitudes than Robusta. The cool and equable temperature, ranging between 15
degree Celsius to 25 degree Celsius, is suitable for Arabica while for Robusta, hot
and humid climate with temperature ranging from 20 degree Celsius to 30 degree
Celsius is suitable. Arabica requires more care & nurture and is more suitable for
large holdings whereas Robusta is suitable irrespective of size of the farm. The
harvest of Arabica takes place between November to January, while for Robusta it is
December to February. Arabica is susceptible to pests & diseases such as White
Stem Borer, leaf rust etc., and requires more shade than Robusta.

Growing Conditions
India cultivates all of its coffee under a well-defined two-tier mixed shade canopy,
comprising evergreen leguminous trees. Nearly 50 different types of shade trees are
found in coffee plantations. Shade trees prevent soil erosion on a sloping terrain;
they enrich the soil by recycling nutrients from deeper layers, protect the coffee
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plant from seasonal fluctuations in temperature, and play host to diverse flora and
fauna.
Coffee plantations in India are essential spice worlds too: a wide variety of spices
and fruit crops like pepper, cardamom, vanilla, orange and banana grow alongside
coffee plants.
Indias coffee growing regions have diverse climatic conditions, which are well
suited for cultivation of different varieties of coffee. Some regions with high
elevations are ideally suited for growing Arabicas of mild quality while those with
warm humid conditions are best suited for Robustas.
Factors

Soils

Arabica

Robusta

Deep, fertile, rich in organic matter, well drained and

slightly acidic (Ph6.0-6.5)

Same as Arabica

Gentle slopes to fairly level

Slopes

Gentle to moderate slopes

Elevation

1000-1500m

500-1000m

Aspect

North, East and North- East aspects

Same as Arabica

Temperature

150 C 25 0 C ; cool, equable

200 C 300 C; hot, humid

70-80%

80-90%

1600-2500 mm

1000-2000 mm

March- April (25-40mm)

February March (25-40 mm)

Relative
humidity
Annual rainfall
Blossom
showers

Backing showers

fields

April-May (50-75 mm) well distributed

March-April (50-75 mm) well

distributed

Source Indian Coffee Board

Important Varieties
Kents: Kents is the earliest variety of Arabica, selected by an English planter of the
same name during the 1920s. This variety remained popular with the planting
community till the 1940s, because it was less susceptible to rust. Today, it is grown
in a few areas but it is still known for its exceptional cup quality.
S.795: This is by far the most popular Arabica selection released during the 1940s
with high yields, bold beans, superior quality and relative tolerance to leaf rust. This
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selection was developed using Kents Arabica, known for its high quality. Even
today, the S.795 is a favorite with the planters and is a widely cultivated Arabica
variety. S.795 has a balanced cup with subtle flavour notes of Mocca.
Cauvery: Popularly known as Catimor, Cauvery is a descendant of a cross between
Caturra and Hybrido-de-Timor. Caturra is a natural mutant of the famous Bourbon
variety. Thus, Cauvery inherited the high yielding and superior quality attributes of
Caturra and the resistance of Hybrido-de-Timor.
Sln.9: Selection 9 is a derivative of a cross between an Ethiopian Arabica collection,
Tafarikela, and Hybrido-de-Timor. Sln.9 has inherited all the superior cup quality
traits of Tafarikela. This variety has won the Fine Cup Award for best Arabica at the
Flavour of India - Cupping Competition 2002 organized by Coffee Board of India.

Traditional areas representing the southern states of

Karnataka, Kerala and Tamil Nadu.

Non-traditional areas comprising Andhra Pradesh and

Orissa in the Eastern Ghats of the country.

Traditional areas representing the southern states of

Karnataka, Kerala and Tamil Nadu.

The plantations in the south are the cradle of Indian coffee. They include the Bababudangiris in
Karnataka, known as the birthplace of coffee in India. The Eastern Ghats and the North Eastern
states are newly developed areas of coffee.

Source: Coffee Board - Government of India

Coffee Industry
The coffee industry is segmented on the basis of:
Value chain
Consumption

Segmentation on value chain basis

On the basis of player presence in the value chain, the industry can be segmented
into the following
Planters: Planters are coffee growers who primarily sell their produce at farm gates
or auctions.
Planters-cum-traders / integrated players: These are coffee growers who have
diversified into the packaged coffee segment to insulate themselves from
fluctuations in bean prices. They are present throughout the value chain, from
estate operations such as curing and blending to marketing and selling in the
domestic retail or export markets. Tata Coffee Ltd (TCL), is one of the key players in
this category.
Non-integrated players: These are players without captive coffee plantations, who
purchase cured beans from curers, agents, co-operatives and auctions, and then
grind, blend, pack and market the same. For example, Hindustan Unilever Ltd (HUL)
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and Nestle India Ltd. Although HUL has some plantation facilities, it primarily
sources from auctions.
Segmentation on consumption basis
The industry can be segmented into filter coffee and instant coffee based on
consumption. Of the total domestic consumption, about 45 per cent is consumed as
filter coffee and the remaining as instant coffee. Both, filter coffee and instant
coffee can be classified further into pure coffee and coffee blended with chicory.
Chicory is mixed with coffee to enhance its taste and flavour. The quantity of chicory
mixed with coffee determines the taste, flavour and price of the end-product. Since
the price of chicory is significantly lower than that of coffee beans, blended coffee
costs less than pure coffee. However, the Prevention of Food Adulteration Act, 1954,
allows an addition of only up to 49 per cent chicory. Instant coffee is also sold in
different flavours and cold coffee forms such as vanilla, mocha and lemon.

Coffee Varieties

Arabica: It is a mild coffee but the beans are more aromatic and have a higher
market value. It accounts for 75 80% of the worlds production. It is grown in
higher altitude. It requires a cool and equable temperature ranging from 15C to 25C
as Arabica requires care and nurture and is therefore more suitable for large
holdings. It is susceptible to pests and diseases such as White Stem borer, leaf rust
etc. and therefore requires more shade. The harvest of Arabica takes place from
November to January.

Robusta: It has more strength and produces an inferior tasting beverage with higher
caffeine content, therefore used in making various blends. It requires hot and humid
climate with temperature ranging from 20C to 30C. The harvest of Robusta takes
place from December to February.
Coffee Industry in India
India is worlds seventh largest producer of coffee with a vast majority of coffee
grown in these three southern states of India i.e. Karnataka (72%), Kerala (20.8%)
and Tamil Nadu (7.7%). These southern regions lie in the Western Ghats range
which is a biodiversity hotspot coffee cultivation is also being expanding rapidly in
the non traditional areas of Andhra Pradesh and Orissa as well as in the North East
states. Nearly 60 70% of the coffee produced in these regions are said to be
exported while the rest is consumed within the country.
The post monsoon forecast for the year 2014-15 has been placed at 331,000 MT,
which is a reduction of 13,750 MT (-3.99%) over the post blossom estimate of 201415.
Of the total estimate of 331,000 MT, the Arabica production is estimated at
99,600 MT while that of Robusta at 231,400 MT. Arabica production estimate has
shown a decline of 5,900 MT (-5.59%) while Robusta declined by 7,850 MT (-3.28%)
over the post blossom estimate of 2014-15.
When compared to final estimate of 2013-14 (which was placed at 304,500 MT),
the current post-monsoon estimate (2014-15) showed an overall increase of 26,500
MT (8.70%).In terms of Arabica, the production estimate has shown a marginal
decline of 2,600 MT (-2.54%), while Robusta production shown an increase of
29,100 MT (14.58%).
The increase in production estimate over the 2013-14 final estimate is mainly
seen in Karnataka to the tune of 25,240 MT followed by Kerala (1,550 MT)and
NTA&NER (360MT) while the Tamil Nadu has shown a marginal decline of 650 MT.
By the states, the post monsoon crop estimate for Karnataka is placed at 236,340
MT with a break up of 76,005 MT of Arabica and 160,335 MT of Robusta. This is a
decline of 11,960 MT (-4.82%) over the post-blossom estimate comprising of -5.82%
decline in Arabica (4,695 MT) and -4.33% in Robusta (7,265 MT).
In Karnataka, the Kodagu district experienced a maximum decline of 9,495 MT
both in Arabica (1,295 MT or -6.43%) and Robusta (8,200 MT or -7.26%) over the
post blossom forecast followed by Chikmagalur (1,535 MT or -6.97%) and Hassan
(930 MT or -2.74%) districts.

 In Kerala, the berry development was normal and not much adverse effect on
crop was reported. Therefore the post monsoon forecast is placed at 68,225 MT with
a marginal decline of 650 MT (-0.94%) from the previous post blossom estimate of
68,875 MT.
In Tamil Nadu post monsoon forecast is placed at 18,125 MT against 17,875 MT of
post blossom estimate which is a marginal decrease in production of 250 MT.
In Non-Traditional areas of Andhra Pradesh and Orissa the post monsoon forecast
is placed at8,100 MT against post blossom estimate of 9,480 MT with a decline of
1380 MT (-14.56%) mainly on account of Hud-Hud cyclone. In North-Eastern Region,
the post monsoon forecast is placed at 220 MT.

Coffee Exports
India exported a total of 1,23,133 MT of coffee between Jan 2014 to Aug 2014. Italy
was the largest market followed by Germany and Russian Federation. India exported
22.13% of the total to Italy, 10.48% to Germany and 7.39% to Russian Federation.
CCL Products (India) Limited was the largest producer of coffee with around 12.22%
of the total export followed by Amalgamated Bean Coffee Trading Co. Ltd with
around 8.5% of the total export.

Source Coffee Board

SWOT Analysis
Strengths:

India is Asias third largest producer and exporter and worlds seventh largest
70% per cent of the coffee produced in India is exported
Around 600,000 people are daily employed in various coffee plantations

Weaknesses:

Weather: The industry is hugely weather dependent and the volume of

production depends on it.
Lack of farmers financing: Farmers in India lack the capability to invest in
growing high quality coffee

Opportunities:

Specialty Coffee Coffee today is better valued as gourmet coffee which

fetches higher profits.
Promoting coffee consumption As the consumption rate is low, the coffee
board of India is creating awareness to promote its consumption

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Exports of Coffee Over the period of time as the coffee consumption

increases across the globe, theres huge opportunity to export high quality of
Indian coffee beans

Threats:

Competition from other countries: India faces a stiff competition from other
exporting countries.
Lack of training Even though India is the largest producer of coffee, it still
lacks the training and knowledge about various technologies needed in
growing coffee.
Inadequate research and availability of info to farmers: In coffee industry the
focus hasnt shifted to research which is essential in growth of coffee

PESTEL Analysis
Political:

Indias political situation is considered to be stable. It has reduced its political

interference in the enterprises management which has led to an increase in
efficiency and productivity of businesses
Government of India imposes various industry specific regulations such as the
Coffee Act, 1942 with the aim of promoting the sale and consumption of
coffee in India and abroad

Economic:

Economic factors such as interest rates, taxation changes, economic growth,

inflation, exchange rates etc. affect the coffee industry in terms of its
production, import export, consumption.
Interest rate influences the cost of capital which plays an important role in
the expansion and growth of the industry.
Exchange rates have a great impact on the coffee industry. It affects the cost
of import and export of coffee. Since India is the 6th largest exporter of
coffee, the coffee exports increase over the years however due to exchange
rate, its can affect its value in terms of cost.
Increase in inflation causes the demand of coffee to decrease and thereby
decrease the coffee consumption.
It is essential for the farmers to be aware of the economic situation in the
times of the economic and financial crisis.

Social:

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India is having a huge population out of which a majority of the population

consists of the youth. The lifestyle of India has changes over the years. These
changing patterns have a great impact on the coffee industry.
These days majority of the population prefer coffee which has resulted in an
increase in coffee consumption.

Technological:

Technology plays an important role in the development of coffee industry.

With the emergence of innovative technology the coffee production and
improvement has increased tremendously.
Developments in agriculture have made it possible to grown various varieties
of coffee beans in India. Also it has helped the farmers to harvest the coffee
beans faster.

Environmental:

Various environmental rules and regulations have been implemented in India

in order to safeguard the environment. The coffee industry of India has to
abide by these rules and regulation which processing coffee.
Environmental disasters such a heavy rainfall or draught have a great impact
on coffee production.
Also global warming and other environmental issues affect the coffee
production which in turn affects the economy as a whole.

Legal:

The health authorities of India have introduced various policies about caffeine
production and consumption.
India has also implemented various international trade regulations in order to
strength the imports and exports of coffee.

Comparative Country Analysis

The two countries chosen for comparison are USA and Germany. Both the countries
have huge coffee imports and relatively high coffee per capita consumption.
Germany
Germany is the second important coffee market in the world, just overshadowed by
the United States. Coffee is the most famous beverage in Germany even more
popular than beer. On the supply side dominate few roasters. Market structure
influences the market outcome and explains the processors ability to exercise
market power.
Coffee, coffee, coffee

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Not surprisingly, neither wine nor beer is the drink of choice in the morning. Tea and
coffee are preferred. Those, too, have been the subject of heated debate and until
not too long ago only rich people could afford the drinks. "I need to have coffee,
coffee; if you want to give me a treat - pour me a cup of coffee," Johann Sebastian
Bach wrote in 1732.
An expression of national identity
Tea and coffee houses are still popular places to hang out. And the hot drink you go
for has almost become a question of national identity: While in Britain it is
undoubtedly tea, in Germany coffee has the upper hand. On average, Germans
drink 150 liters of coffee per year - more than beer, wine or mineral.
So the next time you sit down in a bar, your decision what to order might - whether
you know it or not - not just be based on personal preference, but also on the
cultural and historical context of each of those tempting beverages listed on the
menu.
PROSPECTS

Demand for coffee products that are fast and quick to prepare is predicted to
remain high over the forecast period. Tight work schedules and a relatively low
unemployment rate mean that most Germans have a regular income but little
spare time. This acts as a strong incentive to buy convenient products,
particularly because the desire of working Germans to engage in many activities
in their spare time is high, and time-saving products are needed. Products which
allow for quick consumption and easy preparation are thus expected to be the
best performers over the forecast period. Convenient products like coffee pods
and x-in-1 instant coffee typically carry high unit prices, which is why coffee is
anticipated a positive value CAGR at constant 2013 prices over 2013-2018. In
volume terms, however, a moderate CAGR decline is predicted.

Comparison of Target Countries

Country

Austria
France
Germany
Italy
United
Kingdom
United

Populatio
n
(Millions)

8.4
63
82
60
62
318

Net imports (million bags)

Green
Roast Solub
beans
ed
le
0.55
0.25
0.11
4.28
1.62
0.03
12.69
2.24
1.39
7.71
2.06
0.15
2.21
20.68

0.55
0.64
13

0.34
1.15

Total
bags

Per capita
consumpti
on
(kg/year)

0.91
5.93
16.32
9.92

6.4
5.7
6.8
5.8

3.1
22.47

3
4.1

States

Country Analysis
8
7
6
5
Per Capita Consumption Kg/Year

4
3
2
1
0
0

50

100

150

200

250

Population (In Milions)

USA

14

300

350