In a nation where the aroma of ‘chai’ (tea) has long been intertwined with its identity, coffee is a new contender making waves. Once considered a niche indulgence, coffee is rapidly becoming the drink of choice for the growing group of urban millennials and Gen Z trendsetters. From the bustling metros to the emerging Tier-2 and Tier-3 cities, cafes are rapidly increasing, artisanal roasters are flourishing and a newfound appreciation for the coffee bean is emerging.
A Market Set To Soar
The statistics paint a compelling picture of this caffeinated awakening. India’s coffee market is projected to soar to a staggering $1.23 billion by 2032, growing at a CAGR of 9.87 per cent between 2024 and 2032, according to Custom Market Insights report.
The big shift in India's beverage industry is being fuelled by a confluence of factors, from evolving consumer preferences and the rise of cafe culture to the entry of global players and the growing appeal of artisanal, specialty brews. As Sushant Dash, CEO of TATA Starbucks, observes, “India's coffee culture has seen significant growth in the past decade, attributed to younger consumers embracing the cafe culture and increased exposure to global coffee varieties through travel and digital mediums.”
From Instant to Artisanal
While instant coffee has long been the convenient choice for the Indian masses, a new breed of coffee connoisseurs is looking out for freshly brewed blends and savouring the nuanced flavours and aromas that artisanal roasters bring to the table, seeking authenticity and quality.
Shivam Shahi, Co-founder & COO, Blue Tokai Coffee Roasters, acknowledges the coexistence of both segments, stating, “The coffee customer today is more discerning about taste, quality and origin, more than the format of brewing. The biggest USP of instant coffee is the convenience, and that can be bridged too with innovations in the non-instant category as well.”
Tarun Jain, CEO of Tim Hortons, echoes the sentiment, noting, “Instant coffee has been a very basic need and I think people are growing out of it. While it may stay relevant at home, nowadays, I think people are willing to learn more about coffee. They want to upgrade to a better experience and therefore, the inquisitiveness and the curiosity to see what are the different types of coffee and roasting methods.”
However, the shift has not gone unnoticed by industry heavyweights. Puneet Das, President - Packaged Beverages, Tata Consumer Products, acknowledges the diverse consumer base, stating, "Today, there are all kinds of coffee consumers – the value seekers, the convenience seekers, the experience seekers, etc. We have strengthened our coffee portfolio to offer a wide range that resonates with diverse consumer preferences."
Pricing & Accessibility
From the value-conscious to the connoisseur, brands are racing to cater to every palate and price point. However, as with any growing industry, the coffee market in India is also not without its challenges.
Price sensitivity is one of the most significant hurdles, particularly in a market where instant coffee sachets priced between Rs 2 and Rs 10 account for a staggering 55-60 per cent of consumption, according to Das. However, coffee adoption isn't solely about price but rather habits and preferences. "Coffee consumption/adoption doesn't seem to be so much about price but more about habits and preferences," he remarks.
Today, brands are rising to these challenges, devising innovative strategies to cater to diverse price points while maintaining quality and authenticity.
The price points for Blue Tokai Coffee Roasters are consumer-friendly and their offerings have been well received in Tier-2 cities as well. Shahi mentions, “Our financial model is carefully designed to avoid charging our customers a premium, while maintaining the quality of our products at each stage of the value chain.”
He emphasises the importance of educating consumers about specialty coffee and bridging the gap between convenience and quality. "The specialty coffee segment is only a decade young. The challenge of educating the consumers about specialty vs commodity coffee and bringing them to ease with brewing is still relevant," Shahi explains.
Tata Starbucks, for instance, introduced the Picco Cup, a smaller size tailored to the Indian consumer's preference for moderate portions, allowing first-time coffee drinkers and price-sensitive consumers to sample their signature beverages at an accessible price point. "Building on the insight that consumers in India generally consume their beverages in portions of 180 ml, the new cup size allowed first-time coffee drinkers and price-sensitive consumers a chance to sip and savour a cappuccino or latte, in a size that is comfortable for them," explains Dash.
Among these challenges is the country's deep-rooted tea-centric culture, a heritage that has endured for centuries. As Jain acknowledges, “Every coffee player, every coffee cafe brand will have a different culture. A major challenge the cafe industry would face is that cafes, people say, are not relevant to the meal period, which is not the case with us because we have a lot of sandwiches, wraps, salads, rice balls on the menu.” He emphasises on real estate being a critical challenge, with cafe chains vying for prime locations that offer accessibility and ambiance. "Retail presence is a huge challenge because you have to be in the right place for people to visit and access you," says Jain.
Nonetheless, these challenges also present opportunities for innovation and growth. As Indian consumers become more discerning and their coffee choices more refined, the industry is poised to witness a surge in product differentiation, experiential marketing. and a focus on quality and origin.
Emerging Players
Both established and emerging players in the coffee industry are utilising innovative marketing strategies to disrupt the dominance of instant coffee. They're highlighting Indian specialty coffee, crafting personalised brand experiences and adapting to evolving consumer tastes. From teaming up with cultural figures to embracing digital platforms and introducing unique products, the industry is embracing creativity and flexibility to attract and retain consumer loyalty.
Das highlights Tata Consumer Products' efforts, stating, "We have strengthened our coffee portfolio to offer a wide range that resonates with diverse consumer preferences. Our journey from a single brand to a robust coffee portfolio showcasing innovative product offerings is a testament to our commitment to delivering excellence in the coffee category."
Tata Coffee, for example, recently partnered with a rap artist in Tamil Nadu, ‘Arivu’, to create a coffee anthem that celebrates the culture, places, cinema and the love for coffee. Similarly, their association with the popular TV show ‘Koffee with Karan’ for Tata Coffee Grand Premium allowed them to reach a premium audience in non-south markets.
Blue Tokai, on the other hand, has carved a niche by focusing on the experiential aspect of coffee consumption. "Our aim is to be the go-to cafe for people, no matter where they are – at work, home, shopping, or during their moments of leisure. At our 100-plus cafés, our brewing classes, community meetups and appreciation for Indian art and artists through our artworks and the Play Bar Project are our ways of bringing people with shared interests together, the Blue Tokai way," explains Shahi.
Cafes As Experiential Hubs
Beyond the coffee itself, cafes are emerging as experiential hubs, offering a distinctive proposition that transcends mere beverage consumption. Jain underscores the importance of creating a holistic experience that caters to diverse customer needs.
"Cafes give you a little more space and occasion to be yourself. To spend more time, to engage socially, have meetings, make a presentation in a cafe. I think the cafes also have their own unique proposition, which is over and above the food and beverage proposition," Jain explains.
Das believes that India's evolving coffee culture is a testament to the country's changing preferences. "In the recent years, we have witnessed a variety-seeking behaviour in India's beverage preferences, with several Indian consumers embracing coffee and its different formats," he says.
A Caffeinated Future
While tea retains its place in the nation's heart, coffee is rapidly staking its claim as a beverage of choice, becoming a lifestyle statement.
As India's coffee culture continues to flourish, the future holds immense potential for both established and emerging players. With a growing middle class, rising disposable incomes, consumers increasingly gravitating towards premium coffee experiences and diverse brewing methods and a younger generation embracing global trends, the demand for coffee experiences is poised to soar.
However, the question still remains: Is India ready for a significant shift in coffee culture?
"India is definitely an emerging sector for coffee. The coffee experience and the fact that it's a drink which is still evolving in India, in some markets, still developing, people are inquisitive and curious. They're still just discovering the whole gamut of cafe products," observes Jain.
Das echoes this sentiment, stating, "With an increased demand for coffee, we anticipate growth and innovation in the coffee category, not only in metros but also across tier 2 cities."
The Indian coffee market is at the cusp of a transformative era, driven by changing consumer preferences, the emergence of a cafe culture and the influx of new players. As the country embraces a newfound appreciation for coffee, the industry is expected to cater to diverse tastes and preferences, ranging from the convenience of instant coffee to the allure of freshly brewed, artisanal blends.
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