Milking coffee: From Tim Hortons to Reliance, coffee is a huge market opportunity

Businesses are noticing an opportunity for everything from roasted coffee beans to fresh coffee delivered home as the beverage is finding favour in the tea-drinking nation of India. 

Of the country’s total tea production of 1,344.4 million kg (mkg) in 2021-22, a whopping 85 per cent was used for domestic consumption, according to Tea Board of India figures. In contrast, India produced 342,000 metric tonnes or 34.2 mkg of coffee in 2021-22, according to the Coffee Board of India. The Board estimates that only a third of the coffee produced in the country is consumed domestically.  

That is, India guzzled 1,143.61 million kilograms (mkg) of tea and roughly 10 mkg of coffee in FY22. But the younger, well-heeled population’s rising disposable incomes are spurring urbanisation and lifestyle changes, say the businesses placing a bet on it. 

“Over the last 3-4 years, we’ve seen people getting hooked to coffee. They may not want to spend Rs 500 every time on a cup and would like to have it at home instead. A lot of coffee beans- and coffee-powder startups have also come up backed by private equity investors. But to make good coffee from a coffee bean or powder, you need a good machine,” said cookware and kitchen appliances firm Wonderchef’s Founder & CEO Ravi Saxena at a recent Mumbai event.  

Spotting a gap in the market, the firm launched nine coffee machines ranging from Rs 1,500 to Rs 95,000, and also opened up renting of the machines for a fraction of the cost through an affiliated platform. He told Business Today that he expects the sale and renting of coffee machines to be a Rs 100-crore opportunity over the next two years for Wonderchef.  

Canadian coffee and baked goods chain Tim Hortons opened two stores in Delhi-NCR last week, with plans to open a total of 120 stores in India over the next three years at a total investment of Rs 240 crore. Its CEO Navin Gurnaney, who is former Starbucks India CEO, told another publication that the Indian coffee market is expected to reach over $4.2 billion in size by 2025, with out-of-home consumption accounting for about 20 per cent. “The Indian coffee retail chain market is expected to reach the $850 million mark by 2025, hence India is an important market for Tim Hortons,” he had said. The chain plans to expand into Punjab and other parts of the country.  

Recently, billionaire Mukesh Ambani-owned Reliance Retail’s subsidiary Reliance Brands Limited announced plans to launch the British sandwich and coffee chain ‘Pret A Manger’ in India to take on Tata Starbucks, the most dominant player in the space with 275 stores across 30 cities. Reliance Brands MD Darshan Mehta had said the Pret A Manger in India will focus on airports.  

Tata Starbucks – a 50:50 JV between Tata Consumer Products and American coffee chain Starbucks – meanwhile, launched 50 new stores in FY22, the highest ever in a year for the company. 

The D2C boom in India has also had a lot of private equity-funded coffee and coffee-related startups like Blue Tokai, Sleepy Owl, SLAY Coffee, Rage Coffee, Third Wave Coffee, Beanly and Country Bean have come to the fore. They sell everything ranging from ground coffee powder, roasted coffee beans, cold coffee, pour-over coffee, hot brew bags and Nespresso pods. Meanwhile, brands like iD have launched ready-to-use coffee decoctions as well.  

Coffee-drinking culture is not new in the country. But it has largely been limited to the southern part of the country, which is where most of the production happens. The Indian coffee-producing states are Karnataka, Kerala and Tamil Nadu, and Robusta accounts for the larger chunk of the production. The Arabica variety is produced is to a much lesser extent.  And 65%-70% of coffee produced in India is exported to Italy, Germany, Belgium, and the Russian Federation, Libya, Poland, Jordan, Malaysia, the US, Slovenia, and Australia.  

But coffee-drinking is undergoing a change, according to chef Sanjeev Kapoor.  Speaking at the recent Mumbai event for Wonderchef, a brand he co-owns, he said any trend in food comes from out-of-home to in-home, ie, from restaurants to homes like in the case of noodles. “Same is the case with coffee. Coffee over the last 5-8 years in India, where coffee was earlier choice of drink outside the home, is seeing that change. That’s where India is right now — at the cusp of change.”