Market Reports

Coffee Board of India Chairman Jawaid Akhtar on India’s coffee-fuelled growth

Coffee Board of India Chairman Jawaid Akhtar tells Global Coffee Review of the India‚Äôs preparations for growth and the board‚Äôs role in supporting this coffee growing nation.’,’none’,’ It used to be a rare thing to find an Indian sipping on a cup of coffee. In 1993, when India’s population hovered around the 900 million mark, total coffee consumption was 833,000 60-kilogram bags, making average consumption less than 0.06 kilograms a person, and largely limited to the South. As such, it’s of little surprise that this tea-drinking nation was off the radar for coffee businesses seeking areas of growth. Fast-forward almost a decade later, and see how times have changed. As the population has grown to 1.2 billion, coffee consumption has more than doubled to 1.8 million bags for the 2011/12 crop year, according to International Coffee Organisation figures. This growth has attracted the attention of major corporations the world over. Starbucks are the latest addition to the scene, following a historical deal with Tata Global Beverages announced earlier this year that will see the American coffee-chain giants set up shop under a shared name. In a separate sourcing agreement, Tata Coffee will supply the Indian-grown beans that will take on the Starbucks Tata label. With an import tax on coffee at over 100 per cent, growth in consumption will mean a lot to the country’s producers as the majority of these new Indian coffee drinkers will most likely be sipping on domestically grown beans. Throughout the country’s growth, the Coffee Board of India has remained a central pillar in supporting farmers. The board is a government organisation. It was first formed in 1942 under an act of parliament, and since the liberalisation of the nation’s coffee industry in 1996, the weight of the board’s activities has shifted heavily towards research and development, supporting the country’s farmers.  Current Chairman of the Coffee Board of India, Jawaid Akhtar, says this new focus on India as a potential consuming nation is certainly warranted. He says they are preparing for further increased consumption with the advent of new coffee chains and a growing middle class. “Coffee culture today is really starting to take off, even in Northern India,” he says, adding however, that Starbucks may not be the sole pioneer in this area. Indian-owned Café Coffee Day (CCD) has already set the groundwork, opening 1270 cafés in 185 cities in the last decade and a half. Akhtar says CCD now plans to double that number in the next three to four years.
He says that Starbucks’ entry into the market will likely do little to take away from CCD’s business, but rather will help fuel coffee consumption. “Starbucks has its own signifying flavour, I think it will operate in another market segment,” he says. “When it sets up cafés , I’m sure it will increase coffee consumer base in India.” Cafés aside, Akhtar notes that the core coffee activity India is set to engage in over the next few years will continue to be as a producing country. Producers currently enjoy a protected market in the form of a more than 100 per cent import tax on coffee. With that tax weakening in the years to come, they will have to continue to up their game against competition. In 2009, India signed on to a free trade agreement (FTA) with the Association of Southeast Asian Nations (ASEAN), which will see the import tax on coffee drop by 5 per cent a year to 50 per cent in 2019-20. Where the market isn’t protected by a tax, India already faces competition. In its instant coffee market, where there is no tax on coffee that is imported and then re-exported, Akhtar says the country usually sees between 70,000 and 80,0000 metric tonnes of coffee brought in from Vietnam and Indonesia. With the nation’s coffee industry for so long sold as a controlled commodity, Akhtar admits that the country’s coffee quality suffered when there was little incentive to differentiate.
“When all the coffee was surrendered to the coffee board for export… it just wasn’t possible to bring our coffee to that next level,” he says. “Now growers are under the increased realisation that they want to invest more in quality and they want to follow sound environmental practices.” The growers’ recent efforts have come a long way, with some Indian Robustas receiving a 35 per cent premium over market price, and occasionally even selling higher than Arabicas. Akhtar says farmers are realising not just the power of quality, but of marketing as well. With the ability to go direct to market, farmers are selling their coffee under the name of their estate, much like wine, and seeing the benefits.    Indian farmers are, however, not without their share of challenges. With one of the fastest rates of urbanisation in the world, Akhtar says that farms are suffering from a net shortage of skilled labour. Over the next five years, Akhtar says the Coffee Board of India is looking to counteract this shortage by encouraging farm work as a profitable employment. They have invested in skill-building programs to encourage training in agricultural practices. Akhtar says that mechanical harvesting equipment is another option to help deal with labour shortages. Although the specialty market often shows a preference for hand-picked coffee, countries including Australia, Brazil and the United States (Hawaii) have adopted mechanical harvesting equipment, where labour costs are simply too high to pay pickers.
“Some mechanisation of farms will be inevitable,” Akhtar says. “And we will support the growers in this process of mechanisation.” In supporting its farmers, one of the board’s roles is to purchase and test out machinery like mechanical harvesters. With India’s hilly terrain, Akhtar says mechanical harvesting will be a challenge with current technological constraints. However, they have had some success with hand-held harvesters. In addition to fighting demographics, Akhtar says that climate change continues to be one of the greatest challenges Indian coffee growers face. The country’s climate swings between unpredictable monsoons to drought, which can increase the onslaught of white stem borer. In attacking the host plant, white stem borer can lead to significant capital losses on plantations.
“In India, it’s against the diversity of climate that we grow coffee,” says Akhtar. In 2010, the government introduced a Coffee Debt Relief Package, to help farmers whose production had suffered from drought early on in the new millennium. In 2007, the coffee board released a new coffee variety, the Chandragiri, developed by the Central Coffee Research Institute (CCRI). The new variety offers high productivity and very large beans that produce over 80 per cent A-grade. To distribute the new variety, the board grows seedlings in its farms and provides them to growers at reduced prices. When plants grow old, the board provides funding under a replantation scheme. “When we do things like release a new variety, they are available to everyone,” Akhtar says. “It’s the intentions of the department to provide education and inform farmers of the best methods of production.” With domestic consumption growing in such a highly populated country, the board is working to maintain coffee as an important part if its export basket. “We’re here to help with every stage of the process,” says Akhtar. “We’re looking to help continue to increase production so we can meet the needs of the domestic market and continue to export.” 

Leave a Reply

Send this to a friend