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INTERVIEW

"Over 1 lakh tonne coffee consumed in domestic market"

Monday, 24 October, 2016, 08 : 00 AM [IST]

Plantrich Agritech Pvt. Ltd is a recognised entity dealing in organic and fairtrade crops and involved in social and ecological initiatives to supply quality and sustainable food products. The company is a Fairtrade & Organic certified organisation constituted in the year 1998 in association with Manarcadu Social Service Society (MASS) which was instrumental in empowering over 2,000 members from the farming community to achieve Organic Fairtrade Certification to enable them exports of their produces like spices, coffee and cocoa to Europe under Fairtrade and Organic standards. Bijumon Kurian, MD, Plantrich Agritech Pvt. Ltd, in an email interaction with Lucy Fernandes spoke about the Indian coffee market, the beverage’s organic avatar and new initiatives. Excerpts:

How has India’s coffee drinking culture evolved over the years? What facilitated the growth of coffee consumption in India?
Over the past few years, coffee has transitioned from being the iconic traditional brew of south India to a beverage with a national presence, reinventing itself smoothly to capture the imagination of a large domestic market. Presently, it is estimated that over one lakh tonne of coffee is consumed in the domestic market, which is estimated to be growing at an attractive rate of 5-6 per cent per annum. The main driver for growth in consumption in India has been not only the significant shift in the demographics with more than half of the country’s population under 25, a rising middle class, and increasing aspirations, coupled with more spending power, increased urbanisation, and greater disposable income levels, but also the opening of branded coffee shops.

How different is organic coffee compared to regular coffee available in the market?
In the case of organic coffee there are no synthetic fertilisers or chemicals used in growing or production, which means cleaner beans, air, land, and water. The coffee is grown with only organic fertilisers like coffee pulp, chicken manure, or compost. Organic farms also combat climate change by emitting less carbon than chemical farms, while also sequestering significant amounts of carbon. As a bonus, organic coffee beans are richer in healthful antioxidants, and many people can even taste the difference. Your health, and the health of the planet, both get a boost.

Second, most conventionally grown coffee plants are hybrids developed to flourish in open sun. Coffee naturally prefers the shade, but a crop grown in thick forest is more difficult to tend and harvest, and cannot be planted as densely.

Regular coffee is among the most heavily chemically treated foods in the world. It is steeped in synthetic fertilisers, pesticides, herbicides, fungicides, and insecticides – a real mouthful with a bad taste. Not only does the environment suffer from this overload, but so do the people who live in it. Farmers are exposed to a high level of chemicals while spraying the crops and while handling them during harvest. The surrounding communities are also impacted through chemical residues in the air and water. These chemical presences are not just unpleasant; many are highly toxic and detrimental to human health.

Which trends are becoming significant for coffee producers? According to you, how have the consumer preferences for coffee evolved?
The market has transformed from a principally ‘bulk’ market to a mainstream market with quality and sustainability claims. The sector is characterised by a rising awareness regarding the implications of climate change, a domination by smallholder producers and the corresponding poverty, (the alignment of) sustainability requirements in mainstream markets and new variations in consumer demands.

What change is expected in the Indian coffee market with regards to entry of players like Starbucks in the next few years?
According to a consultancy firm, Technopak, the organised café market is estimated to be around Rs 6,700 crore in 2014 and is projected to grow to Rs 15,100 crore by 2020 at a compounded annual growth rate (CAGR) of 15%. The chain cafe market is approximately 27% of the total organised cafe market at Rs 1,800 crore in 2014 and is estimated to be 36% of the total organised market by 2020. The chain café market is estimated to grow at a CAGR of 20%.

The entry of global coffee retailer, Starbucks and India’s biggest coffee retailer has turned out to be one of the key growth drivers of the coffee retail market. This increase in the total number of stores and Starbucks brand name has added to the growth and expansion of this market.

Another key driver which has given a boost to the Indian coffee retail space is the increase in consumption culture, Westernisation and increased disposable income. Over the last decade, Indian consumers have shifted from being saving-oriented to be more consumption-oriented, more so in the last four years. This shift in our consumer behaviour has taken away the mental barrier on spending or eating out. Thus, spending Rs 200-400 on a cup of coffee along with some food is not big deterrent for today's Indian consumers.

The coffee cafe segment in India has been through volatile times in the past few years. While Barista changed hands at frequent intervals, another international brand Gloria Jeans decided to shut shop fearing intense competition from new players like Starbucks.

Coffee as a beverage was prominent primarily in south India. India’s per capita consumption of coffee is still about 110 gram a year as against about eight kg in developed countries.

What are the challenges faced by coffee sector in Kerala?
1. Highly fluctuating market;
2. Climate change

(a) How do you plan to overcome them?
Fairtrade and its market linkages is the option for sustainable price model. Control climate change, go in for water conservation, avoid tree cutting, plant more trees and shade grown coffee. We also use eco-pulper for coffee processing which reduces water usage.

(b) What are your expectations from the government for the same?
More governmental schemes on market support, coffee awareness campaign. Climate change special schemes focussed on cash crop like coffee, cotton, sugar to be launched.

Is there an increase in the number of new coffee planters in Kerala, compared to the past? How big is Kerala’s coffee market? How much is the annual export?
In Kerala, which mainly produces robusta coffee, the post-monsoon forecast is placed at 68,650 MT with a marginal increase of 950 MT (1.40%) over the 2014-15 final estimate of 67,700 MT, 75% market share of the country met by Kerala for exports.

Tell us about your product portfolio and plant location.
Plantrich is a green coffee exporter and attended various international fairs including SCAA at USA, placed coffee in the cupping session and got a fantastic response from the roasters. We are also working with Probat to develop the best blend and the blend and the coffee served at the fairs rated as top class. We have got hot enquiries for coffee espresso and filter coffee from various marketing agencies. The turnover of the firm reached to the tune of Rs 300 million during 2015 financial year which constitutes major portion export to the European Union. Located in Kottayam, Kerala.

How do you plan to be distinct from your competitor?
Café de Monde is owned by reputed and experienced export company, Plantrich - which is a professionally run organisation with vision, mission and core values. We are maintaining traceability from sourcing the beans until it reaches the cup. There is community for respective farmers and their source. Café de Monde offers extra service and information than any other coffee brand including coffee harvest, coffee processing, coffee health advantage, mocktails and snacks health tips.

Recently, you announced an initiative to start a coffee chain in Kerala. How will it benefit farmers?
Café de Monde’s objectives for the first two years of operations would be:

Set up India’s first pure organic only coffee shop & café to service only certified Organic and Fair Trade products.
Set up four cafés in the first year of operation (one every quarter) and subsequently set up an additional 12 cafés in the second year of operations (three every quarter). The area of the café would be between 750 sft and 1,000 sft.
All cafés would be on the franchise model and the first year of operation would focus on South India and second would be all over the country.
Maintain a margin of 65% and enable the café to break even and turn in profits by the fourth and turn the RoI positive by the seventh month of operation.
Identify prospective franchisees and enter into agreements.
Employee training to insure the best coffee preparation techniques and high quality service. Marketing strategies aimed to build a strong customer base, as well as maximising sales and retail brand product.

Which are the areas in Kerala or nearby regions where the cafés will be introduced?
For the year 2016, a total of four cafés will be operational in the first year. The franchisees will be located at Kochi, Kerala two café; Bangalore, Karnataka two café. Total four cafés.

In the second year of operation the franchisees will be located pan-India.

(a) How much is the investment behind each outlet?
The startup expenses include Investment of Rs 20,00,000 towards mandatory establishment costs; Apart from the café refurbishment costs this would also cover the legal expenses for obtaining licences and permits as well as the accounting services, marketing promotion expenses for the grand opening of Café de Monde inclusive of advertising expense, consultants fee to be paid to Plantrich for setting up the initial services.

(b) How much is the expected revenue from these chains?
Maintain a margin of 45% and enable the café to break even and turn in profits by the fourth and turn the RoI positive by the seventh month of operation.

(c) Apart from coffee which are the other foods on the menu?
Food & Snacks - Tea Cakes: This would include brownies, cakes, and muffins; Smoothies: This would include tiramisu, mousse, black forest cake, Hawaiian pineapple slice; Dried Fruits & Nuts, this would include Tempura fried fruit, donuts and french fries.

Retail Organic Products: These can be purchased off the shelf such as different blends of organic coffee, chocolates, cinnamon, black pepper, white pepper, vanilla, cardamom, cloves, nutmeg, ginger, turmeric, coconut chips, dry fruit, dry nuts.

What measures are undertaken by your association MASS to revive the coffee sector?
Manarcadu Social Service Society (MASS), incorporated in 2001 as a farmer cooperative to help small-scale farmers, ethically run and value-driven organisation based in Kerala, has been working in the field of organic and fair-trade for a decade, for the benefit of thousands of small and medium farmers, especially coffee farmers for ensuring better market price for their products and sustainable business linkages. The farmers are certified as per national and international organic standards, fair trade and other sustainable standards.

Tell us about your expansion plans for this fiscal. What are your key marketing strategies?
MASS will also be launching a specialty brand of premium organic coffee under the brand Café de Monde. “Café de Monde will be an exclusive top-of-the-line experience café chain. With this brand we propose to redefine the coffee beverage segment through clear differentiating factors.

The Kottayam-based MASS, a first-of-its-kind farmer’s cooperative in Kerala, which is recognised as a leader in the Organic and Fairtrade Crops and Food Produce Sector will be setting up an International Sustainable Academy for Fairtrade and Organic Farming in Kerala. This academy will propagate the importance of Fairtrade and Organic Farming amongst the farming communities across India. This will be an institution for research and knowledge-sharing for both resident and overseas students.

What is the R&D that goes into your organic coffee?
Our initiative started decades back in green coffee export and cupping, for starting a coffee chain viz; Café de Monde will strive to create a unique coffee shop experience where customers can socialise and interact with one another in an ambiance while enjoying the aroma and taste of freshly brewed organic coffee. We have a research team and technical consultant from Europe to brew best coffees and we got best coffee cups recognition from various internal and external assessments of coffee industry.

Is your company into exports? How much is the export of coffee in value and volume, at what rate is it growing?
Plantrich is the accredited supplier of Fairtrade and Organic food products to the European countries besides the United Kingdom, Germany, Switzerland, the Netherlands and Austria. Apart from that, it also exports to the Middle-East, Austria, Italy, the UK and Switzerland. The annual export of coffee and spices is approximately 700 MT with a turnover of Rs 300 million.