India's coffee scene is coming of age...yet again

Coffee brands in India are gradually brewing a success story, from innovating strategies that helped them ride out the uncertainty of the pandemic to paying close attention to what consumers want

It was at the end of a phone call with Rizwan Amlani, CEO and co-founder of Dope Coffee Roasters that he said, “In fact, Tokyo is the sixth largest city where coffee from Dope Coffee Roasters goes to. We have a large fan following in Japan.” At first, this should be surprising, but given that Blue Tokai Coffee Roasters has already launched a Japanese-language website and is expanding its presence in the country, it is perhaps another sign that India’s coffee scene has come of age.

The coffee sector is growing at the moment, whichever way you look at it. In India, it has grown by leaps and bounds during the last two years, as a segment of the population has been seeking out a quality cuppa while staying largely homebound due to the Covid-19 pandemic and the subsequent lockdowns. Plantations in India are becoming brands in their own right, and roasters are doing the hard work of educating customers about the variety of coffee available. The global coffee market was estimated at $363 billion in 2020, according to a Statista report, and separately, a report by Mordor Intelligence valued the Indian coffee market at $1.46 billion in 2021.

Uncomplicating coffee

Contrary to popular belief, it’s not all about grind sizes and brewing equipment. The instant coffee segment in India is seeing FMCG brands being disrupted by start-ups like Sleepy Owl and Rage Coffee. The first few months of the pandemic-induced lockdown in 2020 saw social media users all over the world united in the dalgona, or whipped coffee craze. As if to prove the ease of making the whipped beverage, Ajai Thandi, one of the three founders of Sleepy Owl Coffee says, “One of the biggest issues and pain points we discovered and the insight we got was that coffee is very complicated, and people want to simplify things.” In their quest to aid that simplification, Thandi and his partners launched their brand with cold brew bags, before expanding into hot brew bags and instant coffee alongside ground coffee. He explains that Indians are used to cold coffee as a treat while growing up, and that nostalgia made cold brew ideal as an initial launch product for the company.

Meanwhile Coffeeza, which was established in 2017, has focused on coffee pods with internationally sourced beans, aiming to be a local alternative that is compatible with Nespresso machines. This comes as no surprise, considering the coffee-pod market globally was estimated at $1.372 billion in 2020, with the Asia-Pacific region expected to lead growth, averaging a compound annual growth rate of 12.7 per cent between 2020 and 2025, according to a research report by Grand View Research.

B2B versus B2C

However, it’s the specialty coffee sector that has grown exponentially, as the pandemic accelerated the adoption and knowledge of specialty brewing equipment and bean processing among many coffee drinkers. Customers are seeking out more nuanced brews, as third-wave coffee shops have done the hard work of introducing and educating them about factors such as terroir, brewing styles and bean processing. In Mumbai, Subko Coffee opened its doors on 15 March 2020, just three days before eateries in the city were compelled to shutter indefinitely owing to the pandemic. In the two years since, the roastery has expanded within Mumbai, with its baked goods gaining a substantial, loyal following. Rahul Reddy, the co-founder, says, “We wanted to build a brand that reimagined and redefined what it meant to craft an experience that was born in the subcontinent [but] for global eyes.”

Like most brands, a direct-to-consumer pivot helped Subko ride out the initial stages of the pandemic. While Reddy is open about being wooed by aggregators, he says the decision was made keeping in mind a long-term strategy. “We set up an e-commerce platform through Shopify so that we got to design our own front-end, all while the first wave [of the pandemic] was raging.”

This direct link to consumers was not without its own issues—for instance, customers were required to pay for delivery separately via cash to WeFast riders after paying for their order online. But Reddy says, “We had a certain amount of runway ready for us, and I said, ‘Hey, I’m going to be challenging this runway very severely by taking these decisions, but this is the kind of risk I think we need to run.” Amlani echoes this view: “By December 2020, we moved from being a 70 per cent B2B-heavy company to a 60 per cent B2C-heavy company. Sales were down by half but you obviously get better margins with B2C.” This shift towards individual orders for people’s homes has driven the need for consumer education and equipment sales.

Maverick & Farmer, a Bengaluru-based brand’s experience bears out the switch to a direct-to-consumer model. They source a majority of their beans from co-founder Tej Thammaiah’s 150 acres of family coffee estates in Coorg-Pollibetta in Karnataka. Ashish D’abreo, another co-founder, says, “Over the last two years specifically, we’ve seen the direct-to-consumer space grow a lot more and a lot quicker.” He elaborates that consumers “were forced to start brewing their coffee at home, so we saw a lot of brewing equipment sales. A lot of information on brewing techniques was consumed, along with questions on what kind of ratios [of ground coffee to water] do you use and how do you make it more economical.” Google’s Year in Search Report backs this up, with search interest in D2C brands having grown a staggering 533 per cent last year with Statista estimating that the D2C market in India will grow three times between 2020 to 2025, to cross $100 billion, across all consumer segments.

A win-win value proposition

For each of these roasters, there is an optimism that has emerged with pandemic restrictions easing across cities. Consequently, the return of dine-in is also the return of a revenue stream. More importantly, as Amlani says, “Customer discovery really starts from the hotels and restaurants sector,” and patrons who have tried their coffee then move to ordering directly from the brand. Dope is served at hotels like Andaz Delhi in the capital city, as well as outlets of Smoke House Deli across the country.

An undervalued factor is a newfound interest in Indian plantations, that, for generations, have been exporting coffee, either to be made into store-ready instant coffee or sold to international blenders and wholesalers. An appreciation for local estates and an urge to educate consumers about terroir has helped push roasters to release small-batch, limited-edition coffees.

Over the last two years, consumers have gotten acquainted with the fact that coffee in India is grown outside of Karnataka and Tamil Nadu too. Roasters are sourcing beans from farmers, cooperatives and estates across the country, from Meghalaya to Odisha. Furthermore, there has been experimentation with aging and processing beans, from Mumbai-based Koinonia Coffee Roasters cask-aging coffee in whiskey barrels to Maverick & Farmer introducing limited-edition variants that have been smoked or fermented in orange juice.

Amlani says, “We realised that every time we were dropping limited editions, it was really going for us.” Some were selling out during pre-orders, but in general, the curiosity generated drove sales. Their Double-Barrel Blend aged in Amrut whiskey barrels is one he elaborates on, “90 kilograms of it just ran out like it was going out of style,” before adding that this was at a time when alcohol wasn’t being sold in the country, when the first lockdown was announced in March 2020.

Going beyond coffee

On the other hand, Kalinga Desiagro Foundation, which works with tribals in Odisha’s Koraput region, has launched its own coffee processing unit last month, after an initial experiment where a limited-edition batch was sold by Dope Coffee. Araku, a coffee brand that gets its name from the eponymous valley in Andhra Pradesh was launched in India in 2019, after it set up a standalone store in Paris’ Le Marais district in 2017. The social enterprise, spearheaded by the Naandi Foundation, works with tribals to grow the coffee and then share in its profits. It is also working towards bringing tourism to the valley, while allowing its inhabitants to live off the land, in an integrated, sustainable fashion.

It's no surprise that the coffee cultivated in India is being exported to Japan and setting up shop in France. A new generation of founders are raising venture capital funds to take Indian coffee global–whether it be via coffee shops or local language websites. As brands–flush with cash and a robust network of growers and estates–look for ways to grow, it’s only a matter of time before it is used to expand internationally, introducing the world to the country’s unique regional variations.

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