The Rise And Evolution Of Coffee Culture In India

As a Bangalore native, South Indian filter ‘Kaapi’ has always been a significant part of our tradition. Personally, I kick off my day with a cup of coffee as soon as the market opens at 9 a.m., followed by another one at 12 p.m. Since I follow intermittent fasting, these first two cups satisfy my craving and keep my hunger at bay until lunch.
Historically, coffee in India was predominantly an out-of-home experience, sparking the café culture in the country and leading to the rise of branded service stores like Café Coffee Day (CCD) and Starbucks. Kudos to CCD for really igniting the coffee culture in India. Suddenly, traditional dates were being swapped for coffee dates, and Starbucks became a symbol of affluence. Today, Gen Zs prefer to socialise in cafes, making them popular hotspots. Times have changed, and places like Third Wave, Hatti Kaapi, and Subko are elevating the coffee culture, catering to the Indian crowd, and highlighting Indian-produced coffee from small towns like Chikmagalur and Hassan.

India consistently ranks among the top 10 coffee-producing countries by volume, with most production coming from Karnataka. The Indian government supports coffee farmers with financial aid of $2,500 to $3,000 per hectare for cultivation and an additional Rs 2 per kg for high-quality green coffee sold to key markets. Currently, there’s a gap in the Indian coffee market with low competition, creating an opportunity for more support for Indian brands to appeal domestically and internationally, aided by government incentives.

Huge Growth Potential
Despite the global average of 200 cups per year, India's average coffee consumption is a modest 30 cups. The untapped potential for market growth in India is enormous. Coffee consumers here no longer view coffee as merely a morning jumpstart. Brands like Third Wave and Starbucks are educating people about specialty and artisanal coffee, helping Indians explore their coffee palate. Co-working spaces like WeWork provide free coffee, making it a core part of busy schedules.

India’s young population is leading a shift towards premium, specialty coffee consumption, marking a significant generational change. In Tier-1 cities, cafes are crucial spaces for exchanging ideas and building businesses. Wi-Fi has replaced books, and today's coffee shops are bustling with young people at work. Consumers' knowledge of coffee has grown, thanks to internationally renowned Indian shops like Third Wave, Blue Tokai, and Hatti Kaapi. While Tier-2 and Tier-3 cities don’t have the same access, there is a consumer base there as well. Brands offering packaged products are entering these markets with sachets, differentiating themselves and reaching rural areas where 70 per cent of the population resides.

This trend is reshaping cultural norms and impacting daily lifestyles across the country. Financially, 100 million Indians now belong to the ‘middle-income’ group, with disposable income for non-essential items like specialty coffee and gourmet foods. If 10-20 per cent of India’s top earners adopt branded coffee culture, the hyper-specialty coffee market could rival many European countries and is poised for growth.

These insights reveal a gap and opportunity ready to be explored. Current coffee chain brands in India are priced based on the UK and US markets, creating opportunities for startups to cater to Indian budgets.

I visited Subko a few months ago and saw a homegrown brand showcasing the potential of Indian specialty coffee along with allied products like bread and natively grown cocoa-chocolate. I am impressed by Subko's commitment to highlighting the finest Indian craftsmanship on a global platform. My journey with Subko, transitioning from a customer to an investor, has given me unique insights into the brand's evolution and potential.

Evolving Trends
Experts note various waves of trends in the coffee industry. It began with coffee as a commodity, then the boom of instant coffee, followed by emerging brands like Starbucks. The third wave brought specialty coffee, where people began paying attention to the origin of the bean and latte art. The fourth wave focused on innovation in home brewing, especially post-Covid, as people sought to recreate café experiences at home. The fifth wave centres on the business of coffee, including boutique coffee shops like Subko, blending traits from all previous waves, emphasising consumer focus, innovation, and technology to enhance the coffee experience.

New players are also driving attention to health-focused trends. There is a notable interest in non-dairy milk options like almond, soy, and oat milk in coffee shops. Additionally, the cosmetics industry is increasingly using coffee. Robusta coffee prices are at an all-time high due to changing plantation conditions in India. The challenge now is to add a sweeter note to the complex taste of Robusta coffee.

The coffee market in India has immense scalability, and I am eager to see how this chapter unfolds in the coming years.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the publication.
 

Nikhil Kamath

Guest Author Co founder & Chief Investment Officer, True Beacon, Zerodha and RainMatters.