The rate at which coffee prices are rising has accelerated due to unseasonal rainfall, a scarcity of labor, and increased demand, particularly from urban youth, in the aftermath of the Covid-19 pandemic, according to experts.
“Torrential rains during off-season caused a lot of damage to coffee. To add to it, shortage of labour has also slowed down the harvest process,” said ND Jayaram, a large grower from Karnataka.
Due to unseasonal rainfall in the coffee-producing states, the Coffee Board of India anticipates that production will be 10-15% lower than the previous estimate of 367,000 tonnes.
In December 2023, coffee prices experienced a 16% inflation rate, marking the fourteenth consecutive month of double-digit inflation. In October, the inflation rate reached its peak at 16.9%, the highest level since 2015.
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Industry executives attribute the rise in coffee prices to an expanding network of coffee chains, which has subsequently boosted demand.
“The demand for coffee has gone up significantly post-Covid compared to the pre-Covid era,” said KG Jagdeesha, CEO, Coffee Board of India.
Jagdeesha stated that even with elevated prices, the consumption of coffee remains unaffected. This is attributed to the rising disposable income among urban youths, coupled with an increased willingness to spend on coffee.
The surge in coffee prices has impacted traditional coffee-drinking communities, particularly in the southern region. Nevertheless, some individuals within these communities opt for a solution by blending chicory, a coffee substitute with a comparable flavor but lacking caffeine.
India stands as the eighth-largest producer of coffee globally, predominantly cultivating robusta beans utilized in the production of instant coffee. Additionally, the country produces some of the pricier arabica varieties.
In 2023, coffee exports experienced a 4.5% increase in value, reaching a record $1.16 billion. However, there was a decline in volume attributed to higher global prices. The Coffee Board of India reported that India exported around 396,346 tonnes of coffee, down from 413,942 tonnes the previous year.
