Export Performance-Indian Coffee

Project Report on Export Performance of Indian Coffee- Industry Analysis Report 

 Case Study on Indian Coffee-Export Performance Analysis

Synopsis on Export Performance of Coffee

The price realisation of coffee depends on the international market as 70 percent of the coffee produced in the country is exported. This paper analyses the performance of coffee exports from India for a period of 1996-97 to 2010-11. It is found that Italy is the strong partner with four percent compound growth rate. Ukraine and Finland are the small importers. Exports grew at 38 percent and 14 percent respectively. The exports to USA, Russian Federation, Germany and Japan declined. The markov chain analysis indicated that Italy is retaining 50 percent of the market share of the previous year and Japan, Russian Federation and Germany retained 80 percent, 39 percent and 32 percent respectively. USA, Greece, Spain, Belgium and other countries are not loyal. This study reveals the strategies to diversify India's coffee exports by increasing India's exports to the loyal importers and to identify new markets.

Raj Gopal (1999) reports "Coffee in India is grown under two tiers of shade trees and are generally associated with other crops like orange, pepper, ginger and cardamom. In addition to this, variety of shade trees can be spotted in Indian plantations. As a result of diversity coffee beans acquire certain aroma and flavour components from the surrounding species which can be spotted in the final Indian cup making it as an Indian unique coffee." This is where specialty coffee comes into picture. Since it is grown under monsoon rainfall conditions is also termed as "Indian monsooned coffee." Its flavour is, it defined as: "The best Indian coffee which has the flavour characteristics of Pacific coffees. Coffee grown in India has huge reputation in world markets in terms of grade and quality. Hence there is a scope to branding the coffee with characteristics of estates and other unique quality parameters. However, with less percentage of volume of produce/sales it can hardly make a dent on the huge shadow cast by the World's largest producers namely Brazil and Vietnam. Moreover, the Indian planters with small land holdings with lower volume of produce and lack of market expertise cannot take advantage of direct marketing. Thus the industry is exposed to high

level export risk. As a result, they are forced to depend on the market intermediaries who are interested in farmers who have large quantity of the produce for sale. Moreover the products available for sale are innumerable small quantities which are of inconsistent in quality. Hence, they get little attention from marketing agencies and also the charges per unit of product are higher for small lot than for a larger lot.

The global coffee market has become increasingly competitive and sophisticated as the process of producing products is by its nature global in scope. Studies on direction of India's coffee exports over the years suggests that majority of the importing countries are not loyal except Italy which is the major trade partner. This calls for developing appropriate marketing strategies and strengthening value chain management. The consumer preferences for various types and brands of coffee vary across the countries especially in Europe. 'Focus market approach' in major coffee consuming countries helps in gaining market share. The advantage of India producing fine shade grown coffee under environmental friendly conditions which is the need for the hour can be highlighted by vertically integrating the firms that they produce products from "cradle to grave" or from "conception to customer." In the liberalised front the relationship between the producer and the world market should be built up to enhance the competitive strength. The quality of coffee should be improved through adopting good agricultural, processing and manufacturing practices. Value addition throughout the chain at each point like input application, harvesting, drying, pulping, curing, grading, storing will enhance value to the produce. Therefore there is a great need for capacity building and education at the farmer level. Quality and safety are key drivers of vertical integration. The introduction of private standards and product traceability ie a record of production information about coffee throughout the value chain helps in identity and preservation along the chain. This helps in quality factored pricing at farm gate. Certification, GI indicators, growing specialty coffee, organic coffee, single origin is the approaches for better price realization. This will ensure that the coffees are produced and delivered in a consistent and reliable manner in order to ensure consumer loyalty. The result will be a sustainable and commercially advantageous coffee business for all parties in the supply chain from farmers to retailers. 

Source:SCMS Journal of Indian Management; Oct-Dec2012, Vol. 9 Issue 4, p46-54

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