Saturday, October 28, 2006

Indian Coffee

Mr.Coffee Bean…..will you move up the value-chain please?

By Harish Bijoor

It grows on bushes. It grows best in the highlands. It flourishes at altitudes that are lofty. It imbibes a character unique to its origin. It employs a large number of people in the plantation districts of India and many, many exciting parts of the world. You find it exciting locales. In Brazil, in Costa Rica and in Mexico alike. It makes good money. It makes for good business. At least it used to….in the good old days!

Coffee, the commodity with the original caffeine kick, makes less and less money these days, it seems. The world market for the commodity is in the pits. There is talk of production that is plentiful and consumption that is rather level to what it used to be in the days gone by. The crop is caught in the vortex of the International commodity markets, right in the middle of an environment that packs the best punch of the good, the bad and the ugly.

The cup of coffee that you pick up in the morning is full of woes. This is the season of all the woes and the coffee industry is living through a self-fulfilling prophecy. Who wants to read about the woes of an industry though? Not on a bright Monday morning. Let me therefore look at the brighter side of the cup that reaches millions of breakfast tables simultaneously brightening up lives and giving a kick-start to the day ahead.

The brighter side is in the story of the commodity morph. The way this commodity that feeds millions of people who work in nurturing, cultivating and harvesting of the magic bean, has morphed from being a mere commodity to a potent value-added part of the daily lives of consumers all across the globe. The whole world has woken up to the coffee-reality in their lives. Britain shows a robust shift to the coffee-beverage in recent years. The United States of America is a coffee-civilization of sorts. There is a coffee-madness in the air. Coffee is everywhere. In your cup, on your bed-sheets, in the scent of your aroma-encapsulated socks and even in the flavour of your once a night fix condom!

All over the consuming world, coffee is today no longer a commodity. Coffee is a subject of high art. A subject of deep involvement. A purchase decision that is always triggered by deep contemplation and not on-the-spur-of-the-moment impulse. Coffee is serious business to millions of consumers all over the consuming world.

Coffee is commodity largely in the producing world and producing world alone.

And sadly, the producing world consumes only a fraction of what it produces. India is the archetypal case. The country produces 2,83,000 tonnes of coffee per annum. The domestic consumption is a bare 55,000 tonnes when last audited several years ago. Nobody has the guts to audit the number again. Nobody wants to admit that consumption has gone southwards still! Not again! Remember, coffee consumption in the country has gone down over the last thirty years from a robust 80,000 tonnes to the current numbers that threaten the beverage and its future franchise within the country.

The North-south trade pattern of the commodity (the South grows it and the North consumes it) leaves this cash crop at the mercy of prices dictated by market-forces not within control of the growing regions of the world. Large volumes of paper trading, investment funds and their fancies, the robust trade of other commodities that interest investor groups and a whole plethora of non-fundamentals rub shoulders with the basics of the supply-demand pattern that runs normal trading in the old economy. The crop therefore remains in the commodity trap in most Asian origins. The crop will remain so, till a decent effort to move coffee from the commodity-mindset to the brand-mindset is attempted with vigour.

Asia today is a booming place to be. Half the population rests here, works here, moves here and make their dreams happen. The throne of the new economy is about to shift to the region, if it has not already happened. The knowledge economy is fast being centered here. The aspirations of the consumer are pretty global, everywhere you look. Singapore, Malaysia, Taiwan, Japan, India and even the bigger cities of China, are agglomerations of the inter-connected consumer with the global aspiration that is 'parri passu' in its attitude and usage. Time then to look within and create centres of consumption for the coffee we grow. Within our own growing economies. Who says that one region must grow and another must consume?!

The chasm between the growing and consuming world needs to be bridged then. Bridged by offering potent value-added offerings to the consumers in these economies. Asia is already witnessing the change. Let's glimpse some possibilities that are already happening around. Only they need to happen more widely and with a greater width and depth of penetration.

My suggestion is to get to the consumer in every which way possible. Wean him and her and them into the coffee habit. Get the commodity onto the fast track of consumer branding. Morph coffee into an attitude that delivers value. Start it in every which way possible.

Bottle-feed the consumer first. Get the commodity into your brand of bottled ready-to-drink coffees. Make it available at every nook and cranny. Market it aggressively. Make the staple beverage of coffee get into those bottles that sell like hell from retail shelves that cater to the needs and aspirations of the young in the outdoor market-place for beverages, staple and otherwise. A moot point to remember is the trend in the Ready-to-drink segment globally. Coffee is the bigger player as yet. While tea of the RTD variety sells a 16 million litres per annum, coffee enjoys a worldwide consumption of 112 million litres! Needless to add, Japan, with its canned coffee revolution leads the way.

Feed the consumer in the outdoors as well. In Cafes and coffee specialty shops that will adorn every corner of the marketplace. Let there be vending machines that dispense quality coffee where there can be no cafes. Get into the marketplace with value-added offerings, brands of roast and ground coffee, soluble coffee and of course the more convenient three-in-one mixes of coffee milk and sugar. In short, offer coffee in a more value-added manner to the consumer at arms-length reach.

The humble coffee bean has suffered in value-realization over the years, especially in Asia and more particularly in India. Time to move the coffee bean up the value chain. Morph it into new consumer 'avatars' that will survive the present and enter the future with confidence.

On a grave note, let's remember that countries which remained in the trap of the 'commodity as commodity' had to forcibly evict themselves from the coffee enterprise altogether. Does anyone out there remember that Liberia, Benin and the Central African Republic once grew coffee as well?

----------------------------------------------------------------------------------------------------------------------Harish Bijoor is a coffee-domain specialist and CEO, Harish Bijoor Consults Inc.

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At 3:06 AM, Blogger Er. AMOD KUMAR said...

Great Man, Great thought !

At 4:04 AM, Blogger 3B said...

Interesting blog post..Coffee is the highest consumed beverage in developing countries such as U.S and major European countries.It the most traded commodity,next to oil in the world..Today,consumers are more curious about the origin and quality of coffee consumed,as a result demand is goes on increasing.
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