India may be a tea-drinking nation, coffee consumption is also growing rapidly thanks to emergence of new coffee chains and new product launches by coffee manufacturers. However, price of your favourite cup of coffee has also been rising and shows no signs of cooling just yet.
In global markets coffee prices have gone up around 25 per cent so far in 2025 on top of the last year’s surge. Mirroring global markets, coffee prices have been on the rise in India too, with reports quoting the Indian Coffee Traders Association indicating this week price of coffee powder is expected to go up around Rs 100 by end of this month and another Rs 100 next month. The hike follows sharp rise in price of both robusta as well as arabica variety of coffee.
A key reason behind the price surge is a supply crunch in two of the world’s major markets – Brazil and Vietnam – on the back of adverse weather conditions.
“It started about two years ago, when production in Brazil was impacted, which led to a short supply in the market. That was the first trigger and prices started to spiral. Then, last year, the crop in Vietnam wasn’t good leading to further supply constraints. At the same time, consumer demand remained strong,” pointed out Praveen Jaipuriar, the CEO of CCL Products. The company is the largest instant coffee exporter from India.
Coffee is one of the world’s most traded commodities and as prices rise, a lot of speculative interest also seeps in, noted Jaipuriar.
Indications are of a good crop in Brazil this year and hopefully the Vietnam crop will also be good, and therefore by the year end as supplies improve, prices should start easing, he opined.
In the October-December quarter, CCL Products reported a revenue of Rs 758 crore, up 14 per cent from a year ago revenue of Rs 664 crore, while net profit was flat at around Rs 63 crore. Almost 80 per cent of the coffee that it uses to manufacture instant coffee for global companies is imported.
Apart from making private-label coffee for other companies, CCL Products, which has production facilities in India and Vietnam, also has its own brand called Continental in the domestic retail market. According to Jaipuriar, plans are at exploratory stage to see if its branded coffee can be introduced in some of the international markets including Vietnam.
In 2023-24 financial year, CCL had acquired the Percol coffee brand, giving it access to major supermarkets in the UK, which is Europe’s largest instant coffee market, with annual retail sales upwards of $850 million.
“A lot of work is going to happen in international markets, both in terms of our B2B business and our own brands,” said Jaipuriar.
In the domestic market, while there has been double digit value (price-led) growth, volume growth has seen some ups and downs. Over the past few quarters, urban demand for fast moving consumer goods has been impacted as high food prices pinched consumer wallets. Coffee, in fact, saw a double whammy.
“On the one side, the general purchasing power of people has been constrained and on the other hand due to inflation in coffee, all the brands have taken a lot of price hike. Because of that there has been a strain in the coffee segment,” sai Jaipuriar.
Despite the recent speed bumps over the last few years, the out-of-home coffee consumption has been on the rise due to coffee chains like Starbucks, Third Wave Coffee and Blue Tokai. That should over time drive coffee consumption in households too, he feels.
“India is a tea drinking country, except for some pockets in South. We can now see around us, so many coffee shops coming, which is an indicator that consumption is growing. The in-home consumption will follow suit. The young generation is drinking more coffee,” stressed Jaipuriar.
According to a recent report by strategy consultants Redseer, “coffee has emerged as a lifestyle and experiential product, particularly among urban consumers.”
Redseer projects the outside coffee market to grow 15-20 per cent compounded annually to around $2.6-3.2 billion by 2028.
“The mid-price coffee segment and shifting consumer preferences toward speciality and experiential offerings open doors for innovative players to lead in this lucrative landscape,” it said.
Off-late there has also been a lot of innovation that has begun to happen in coffee, with respect to flavours, and types of coffee on offer, which should drive the growth, said Jaipuriar. CCL already had a strong presence in the southern states and is now expanding rapidly up north, through quick commerce and e-commerce platforms. It also plans to soon launch new products including flavours as well as products combining Indian coffee as well as some of the coffee it sources internationally.