Exporting Coffee Powder...............
HS Code : 21011120
When we want a stimulant, we want it instantly. We don’t really care about the taste, do we? Well, some do. But for most, and the numbers in this category are adding up by the day, speed scores over taste. Hence, when it comes to coffee – the most popular stimulant of modern man – despite its inferior taste, instant coffee is more popular than its older cousin: filter coffee. What’s more? Other than adding taste to those rendezvous with significant someones, it’s also raking in the moolah for Indian exporters
Have a mind block? How about a cup of coffee to unblock it? A lot can happen because of a cup of it, or that’s what coffee lovers believe. They swear by its powers to stimulate ideas in an instant. Be it the midnight canteen in an Ivy League college or the corner office of a MNC behemoth, coffee is omnipresent. Its fans are everywhere. But this was not always the case. Before the birth of its instant version, coffee was not everyone’s cup of tea (no pun intended). Preparing filter coffee was not only expensive, but also messy and time consuming – all that instant coffee is not.
Traditional coffee lovers don’t like instant coffee. Its taste doesn’t even come close to that of filter coffee. You don’t believe us? Ask Challa Srishant, Managing Director, CCL Products. “Filter coffee is far superior to instant coffee. Instant coffee can’t even come close to filter coffee,” Srishant, with more than a bit of vested interest in instant coffee, since CCL Products is the biggest exporter of instant coffee from India, tells us. What makes instant coffee a hit, though, is the ease of preparing it. “Just add boiling water and you get the foamy cup of your energy booster. For its quick and easy preparation, I have switched to instant from traditional filter coffee,” Abhijeet Ulal, an IT professional, who does long hours and an instant coffee convert, tells us. And Ulal is not alone. “The convenience, versatility, and branded experience of instant coffee make it an attractive consumer product in emerging coffee markets, while in established markets, instant coffee seeks to shed its commodity image to sustain consumer interest,” market research firm Euromonitor wrote in a June 2014 report.
K. V. K. Raju, Director, Vayhan Coffee, elaborates this further. “Instant coffee is appealing because of its ability to satisfy the needs of new coffee drinkers. It is convenient and comes in a variety of flavours. Unlike established coffee markets, instant coffee is viewed as a multi-purpose product with endless flavours to suit consumers’ requirements. It can be used as an ingredient in several food and beverage products. Another important benefit of instant coffee is its substantially lower cost per cup. Since more number of cups can be prepared per kilogram of instant coffee, as compared to filter coffee powder, it is economical as well,”
Instant coffee is prepared from the same green coffee beans that are used to make regular coffee, but involves two additional steps. First, the beans are roasted and ground to fine particles. Then they are dissolved in hot water to make a concentrate. The concentrate is then either freeze-dried or spray-dried. Once fully dry, the final step involves converting the coffee into either crystals or powdery substance. The entire process of preparing instant coffee doesn’t seem to involve anything that makes it inferior, isn’t it? Why then is it considered so? N. Sathapan, Managing Director, SLN Coffee, has the answer. “Since preparing instant coffee involves heating, a lot of the aroma and flavour is lost during the process,”
An interesting aspect of the instant coffee market is that incremental demand is coming from consumers in traditionally tea-drinking markets in the Asia Pacific region and Eastern Europe. Silu Jacob, Manager (International Markets), Coffee Day Exports, terms them “the new breed of coffee fans”.
"Instant coffee is not only easier to make, but also cheaper than filter coffee"
“Amateur coffee lovers have acquired a taste for this hot drink. Besides, those with hectic schedules and fast moving lifestyles have started viewing instant coffee as a better quality alternative to fresh coffee,” she explains. That coffee and instant coffee, infact all kinds of coffee extracts, are entirely different sets of businesses becomes clear by taking a look at their top exporters and importers. Brazil, which is, by far, the biggest coffee exporter in the world is a distant second when it comes to coffee extracts exports. On the other hand, Germany, which is the biggest importer of coffee, is the biggest exporter of instant coffee. How? Simple, it imports a lot of coffee beans, uses its world class processing technology to convert them to instant coffee, and then exports them all over the world. On the other hand, India also seems to have learnt the benefits of value addition. For, while it is only the 15th biggest exporter of coffee, when it comes to instant coffee exports, it ranks at a respectable no.4.
While coffee can be termed a commodity, instant coffee can never be. Brands do play a significant role in this segment. In fact, according to International Coffee Organisation (ICO), “Nestlé and Kraft Foods account for just under 75% of the world market.” Acknowledging the role that brands play in the instant coffee market and validating ICO’s observations, Srishant says, “Nestle is the premium brand in instant coffee. It has its own global presence. Till date, no other brand has even come close to it. It has its own manufacturing setups. Moreover, they have more than 100 years of experience in the market and that counts.” And this branding has been a big problem area for Indian instant coffee exports. “One of the main challenges is to create brands and consistently nurture them in order to improve the top and bottom lines, so as to compete with competitors operating overseas,” Raju says and adds, “India has good potential to improve its position in the global market but it needs substantial investments in order to make itself more competitive. Higher domestic costs are restricting Indian companies from positioning themselves in the branded segment.” Indian instant coffee exporters, however, haven’t allowed the absence of strong brands to deter them. They have, instead, found a lucrative business in catering to private labels. S. Sivakumar, Group Head (Agri & IT Business), ITC, says, “We don’t export under our own brand. Our exports are primarily to private labels.”
Despite challenges, instant coffee exports from India have grown at a CAGR of 15% over the last 10 years, as compared to a 9.4% CAGR of the overall market. At the same time, they are entitled to 5% incentives under MEIS and 3% duty drawback. Still got a mind block whether to export it or not? You know what to do!
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