CoffeeSarfaraz taibani ʘ Amit Arora ʘ Tanay Dwivedi

Section C,Batch 2009’11

• Overview• Production Centers • Domestic Industry

• Trend in Export• Major Export Destinations • Export from India for last three years

• Major Competitors in the global market• Provisions in India’s Foreign Trade Policy • Quality Standards • Problems / Challenges faced by the exporter

Contents

Overview• Coffee is a brewed drink prepared from

roasted seeds, commonly called coffee beans, they are seeds of coffee cherries.

• Once ripe, coffee berries are picked, processed, and dried. The seeds are then roasted to varying degrees, depending on the desired flavor. They are then ground and brewed to create coffee. Coffee can be prepared and presented in a variety of ways.

• coffee is the third most popular drink in the world, behind water and tea.

Overview• Discovered in the northeast region

of Ethiopia, the cultivation of coffee first expanded in the Arab world and spread to Italy, then to the rest of Europe, Indonesia, Asia, to the Americas and Africa.

• The two most commonly grown are the highly regarded Coffea arabica, and the 'robusta' form of the hardier Coffea canephora.

• Arabica,the original and most highly regarded species, is native to the southwestern highlands of Ethiopia

• robusta (canephora) is native to western and central subsaharan Africa• Less popular species are C. liberica, excelsa, stenophylla, mauritiana,

and racemosa.• Arabica coffee is generally more highly regarded than robusta coffee;

robusta tends to be bitter and have less flavor but better body than arabica. For these reasons, about three-quarters of coffee cultivated worldwide is C. arabica.Robusta strains also contain about 40–50% more caffeine than arabica.For this reason, it is used as an inexpensive substitute for arabica in many commercial coffee blends

Production Centers• Arabica coffee beans are cultivated in Latin America, eastern Africa,

Arabia, or Asia. • Robusta coffee beans are grown in western and central Africa,

throughout southeast Asia, and to some extent in Brazil.

• Beans from different countries or regions can usually be distinguished by differences in flavor, aroma, body, and acidity..

These taste characteristics are dependent not only on the coffee's growing region, but also on genetic subspecies and processing. Varietals are generally known by the region in which they are grown, such as Colombian, Java and Kona.

Production Centers• The coffee industry of India is one of

the largest producer of coffee in the world

• There are over 170,000 coffee farms in India. Most coffee production in India is on small farms, with over 90 percent of all farms consisting of 10 acres or fewer. However, such farms account for just over half of all land used for coffee production and a minority of all coffee produced.

The traditional coffee producing areas in India:• Karnataka – Chikmagalur, Coorg including

Mysore, Hassan districts• Kerala – Wyanad, Travancore,

Nelliampathies• Tamil Nadu – Pulneys, Nilgiris, Shevroys

(Salem), Anamalais (Coimbatore)The non-traditional coffee producing regions • Andhra Pradesh, Orissa, Assam, Manipur,

Meghalaya, Mizoram, Tripura, Nagaland, Arunachal Pradesh.

2007-2008 2008-2009 2009-2010 2010-2011*

0

50000

100000

150000

200000

250000

300000

350000

Robusta Arabica

Source :coffee Board, annual report

Domestic Industry• India accounts for about 3 to 4 percent of world coffee production• The industry provides employment to 6 lakh people. • Karnataka accounts for 70 percent of country's total coffee

production followed by Kerala (22 percent) and Tamil Nadu (7 %)• India, a major coffee producer, has traditionally been a tea

drinking nation but a growing middle class has increased the popularity of coffee shops.

• Coffee (robusta) futures are traded at the MCX and NCDEX commodity exchanges.

Domestic Industry• Variety Coffee :Important Varieties grown in India are Kents, S.795,

Cauvery, Sln.9• Decaffeinated Coffee: Caffeine removed artificially, health

consciousness consumers• Organic coffee: without using chemicals and pesticides,Great

demand in the developed countries• High Grown Coffees :Grown at higher elevations i.e. 4000 ft , high

quality with dense beans.• Estate Coffee/Specialty Coffees: Variety, cultural practices and

special processing techniques.Famous for the distinct identity in terms of flavour and aroma characteristics.eg.Monsooned Malabar AA, Mysore Nuggets Extra Bold, Robusta Kaapi Royale

Harmonized System Codes (HS Code)

• 06-15 Vegetable Products• 09 COFFEE, TEA, MATE & SPICES

0901 coffee, coffee husks etc, substitutes with coffee• 090111 Coffee (Not Roasted, Not Decaffeinated)

090112 Coffee (Not Roasted, Decaffeinated)090121 Coffee (Roasted, Not Decaffeinated)090122 Coffee (Roasted, Decaffeinated)090130 Coffee husks and skins090140 Coffee substitutes containing coffee

Trend in Export• India exported over 440,000 pounds of coffee in the 2005-2006

season, slightly less than in 2005 and nearly 5 percent less than 2004. Over a quarter of the India's coffee exports go to Italy. Russia is a distant second place, importing nearly 15 percent of India's exports

• Indian coffee growers are closely linked with global markets as the country exports more than 80 percent of its output.

• Coffee is an important export commodity, it is exported to 74 countries. However, the major destination of India’s coffee export is Europe. Coffee exports from India witnessed a 10-year low in 2009, exporters believe the trend would change and exports will pick up in 2010 because of good output.

2007-08 2008-09 2009-10 185000

190000

195000

200000

205000

210000

215000

220000

225000

Quantity Tonnes

Quantity Tonnes

Source :coffee Board, annual report 2009-10

96.59%

3.41

2008-09**

World production India's production

96.63%

3.73

2008-09**

World exports India exports

Source :coffee Board, annual report 2009-10

top ten Otherstop ten 141378Others 77618total 218996

top ten Others

top ten 125778Others 71396taotal 197174

top ten Others

top ten 129514Others 74957total 204471

ʘ ʘ

ʘʘ

TOTAL PRODUCTION OF EXPORTING COUNTRIES

Country 2008(000 bags)Brazil 45992Vietnam 18500Indonesia 9612Colombia 8664Mexico 4651India 4371Ethiopia 4350Peru 3872Guatemala 3785Honduras 3450

Country Year 2009(000 bags)Brazil 39470Vietnam 18000Indonesia 11380Colombia 8500India 4827Ethiopia 4500Mexico 4200Honduras 3527Guatemala 3500Peru 3315

Country Year 2007(000 bags)Brazil 36070Vietnam 16467Colombia 12504Indonesia 7777Ethiopia 4906India 4460Mexico 4150Guatemala 4100Honduras 3842Uganda 3250

Major Competitors in the global market

<http://www.ico.org/coffee_prices.asp?section=Statistics>, International Coffee Organization, accessed on 28th dec,2010

Provisions in India’s Foreign Trade Policy

• In Exim policy 2009-14 With a view to continously increasing percentage share of global trade and expanding employment opportunities, certain special focus initiatives have been identified and many continued for Market Diversification, Technological Upgradation, Support to status holders.

• Agriculture, Handlooms, Handicraft, Gems & Jewellery, Leather, Marine, Electronics and IT Hardware manufacturing Industries, Green products, Exports of products from North-East, Sports Goods and Toys sectors. Government of India shall make concerted efforts to promote exports in these sectors by specific sectoral strategies that shall be notified from time to time.

• Export and trading house status scheme : Merchant as well as Manufacturer Exporters shall be eligible for status.

• MAI Scheme on promotion of Indian coffee exports to Russia and CIS countries and a manual on coffee retailing.

• Under MDA Scheme, financial assistance is provided for a range of export promotion activities.

• A new scheme called the Vishesh Krishi and Gram Udyog Yojana (Special Agricultural and Village Industry Scheme) for promoting export of fruits, Vegetables, Flowers, Minor Forest produce, Dairy, Poultry and their value added products and Gram Udyog products has been introduced.

• Price Stabilization Fund Scheme of Govt. of India to the growers of coffee, tea, rubber and tobacco.

• Rainfall Insurance Scheme for Coffee growers.• Coffee board functions under Exim policy : In order to encourage coffee

exporters the Board has instituted eight Export Awards every year commencing from 1999-2000 for the top most exporters of Indian Coffee in terms of quantity

• Awards have been instituted in categories:Green Coffee ,Specialty Coffee Instant Coffee and for region-wise exports : USA, European Union, Russia and CIS Countries, Far East Region, Middle East Countries.

• Scheme of support for coffee processing• A new scheme on Export Promotion of Coffee and the scheme on Support

for Coffee Processing have been approved by the Government of India with a total financial outlay of Rs.45 crore on April 10, 2008.

• Coffee development programme for non traditional areas of Andhra pradesh and orissa state

• The Government of India has approved the Development Support Scheme for coffee sector with a total financial outlay of Rs.310 crore during the month of March 2008.

Quality Standards• The Quality Control division of the Coffee Board has set

specifications for the processing, grading and garbling of specialty coffees to ensure the quality of these coffees.

• Eg. only ’A’ or ‘1’ grade of both Arabica Cherry and Robusta Cherry are subjected to monsooning.

Source: Green Coffee Classification System Poster from the Specialty Coffee Association of America.

Grade 1: Specialty Grade Coffee Beans: no primary defects, 0-3 full defects, sorted with a maximum of 5% above and 5% below specified screen size or range of screen size, and exhibiting a distinct attribute in one or more of the following areas: taste, acidity, body, or aroma. Also must be free of cup faults and taints. Zero quakers allowed. Moisture content between 9-13%. Grade 2: Premium Grade Coffee Beans: Same as Grade 1 except maximum of 3 quakers. 0-8 full defects. Grade 3: Exchange Grade Coffee Beans: 50% above screen 15 and less than 5% below screen 15. Max of 5 quakers. Must be free from faults. 9-23 full defects. Grade 4: Standard Grade Coffee Beans: 24-86 full defects. Grade 5: Off Grade Coffee Beans: More than 86 full defects.

• ICB Grading Standards: Coffee Board issues Export Permits for export of coffee only to the Specified Types and Grades of coffee.

• Eg.Major Types And Grades Of Coffee : Arabica Coffee, robusta, coffee; washed,unwashed coffee; Plantation PB,A,B,C,AA, Blacks/BrownsBits,Bulk, EB

• QMS or Logo scheme has been framed in order to protect the Image and Quality of Indian Coffee in the International Market and to gain the confidence of the overseas buyers.

• Anamalais (Tamil Nadu): Wildlife sanctuaries in this region are the abode of spotted leopards,while the plantations are home to fine, high-grown Arabicas,including the exotic Kents.

• Bababudangiris (Karnataka):Bababudan brought seven ‘magical’ beans from Yemen and planted them in the lofty hills of this region. Deer is often spotted here, grazing alongside plantations abundant with full-bodied Arabicas.

• Biligiris (Karnatka/Tamil Nadu): Besides full-bodied Arabicas, this region is noted for the sambar - the largest Indian deer with huge antlers.

• Chikmagalur (Karnataka): Chikmagalur’s forests and wildlife sanctuaries are abundant with beautiful peacocks, India’s national bird. The peacock loves to show off its colourful feathers, especially during its elaborate courtship dance.

•

Problems / Challenges faced by the exporter

• Labor costs, which accounts for almost 65 percent of the coffee cost of cultivation, continue to escalate. With off-farm employment opportunities increasing, coffee planters have started experiencing shortages of skilled labor.

• Limited mechanization is taking place in some coffee plantations, large-scale mechanization is difficult in India because of uneven plantings and small sized holdings.

• Coffee growers are likely to face working capital issues with the onset of the harvest season, on account of confusion and delays over the implementation of the Coffee Debt Relief Package.

• Many farmers in India found they could no longer afford the pest management techniques that kept away the pests and diseases threatening their crops. The incidence of borer pests like the Coffee Berry Borer and the Coffee White Stem Borer, along with Leaf Rust and Coffee Wilt Disease, rose dramatically

• In the case of coffee, the EU has fixed a new ochrotoxin limit of 5 ppb with a tolerance of 40 per cent for import of coffee. The coffee rejected in one EU country is taken at a discount into other countries, thus resulting in loss of foreign exchange. It is pointed out that in certain grades of coffee, the European trade uses this threat to drive down prices at origin

• The problems faced by the coffee growers are low productivity, high cost of production, shortage of laborers, poor technology, poor marketing, price fluctuation, dependency on natural whether condition, high cost of inputs and indebtedness of planters.

Relevant Articles• Cafe Coffee Day buys Czech

chain

• Cafe Coffee Day To Acquire Sical Logistics

• Czechoslovakia Republic based cafe chain Cafe Emporio for Rs 15 crore. Cafe Emporio has 11 outlets with seven of them inrague,one each in Brno and Olomouc and two in Freeport-Hate.

• In the next 2 to 3 years we plan to have 50 international outlets.

• Tanglin Retail Realty Developments Pvt. Ltd, a group company of Coffee Day Resorts Pvt. Ltd acquires 15% stake in Sical Logistics Ltd for around Rs.200 crore.

Read more: Trouble brewing over coffee plantations - The Times of India http://timesofindia.indiatimes.com/city/hyderabad/Trouble-brewing-over-coffee-plantations/articleshow/7130024.cms#ixzz18knS3pq9

http://www.vccircle.com/500/news/news-roundup-cafe-coffee-day-to-acquire-sical-logistics

Relevant Articles• Trouble brewing over coffee

plantations• 200 hectares of coffee plantations in

Kumkumpudi,Eetaroppala, Lankapalaku, Kottapalli and Sapparla areas in the Agency to tribals.

• The plantations are in the custody of AP Forest Development Corporation.

• Maoists warned the APFDC officials not to venture into the Balapam-Korukonda coffee estates.

• They were expecting an yield of 16 tonnes from the area. But with the Maoist pressure, the corporation end up with a loss of Rs 30 lakh,

Read more: Trouble brewing over coffee plantations - The Times of India http://timesofindia.indiatimes.com/city/hyderabad/Trouble-brewing-over-coffee-plantations/articleshow/7130024.cms#ixzz18knS3pq9

Relevant Articles• Coffee exporters fail to crack

North American markets • The US is the world’s largest consumer of coffee with an estimated consumption of 12 million tonnes per annum.

• Indian coffee exporters are steadily losing ground in the US and other North American countries.

• At present, it and other North American countries depend on Mexico, Costa Rica and Brazil due to lower freight costs because of the proximity of these countries.

References• <http://www.crni ndia.com/commodity/coffee.html>, Crn finance

india,commodity coffe,viewed 12th dec 2010• <http://www. coffeeresearch.org/agriculture/main.htm>, Michael Griffin,

Coffee Plant Agriculture, viewed 14 nov 2010 • <http://www.cafebar.co.uk/coff ee_sch ool/coffees_of_the_world

/world_coffee_production.aspx>, Beverage solutions,uk,viewed 19 dec 2010

• < http://www.ico.org/coffee_prices.asp?section=Statistics>, International Coffee Organization,Department of Commerce,viewed 19 feb 2010

• <http://commerce.nic.in/ftpa/comq.asp>, Foreign Trade Performance Analysis (FTPA),Viewed 18 december 2010

• <http://www.indiacoffee.org/indiacoffee.php?page=CoffeeRegionsIndia>, coffee board,accessed on 14 jan,2011