Research Paper – Coffee Machine Industry By Knowledge Exchange

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[RESEARCH PAPER – COFFEE MACHINE INDUSTRY ] March 22, 2013

CONTENTS GLOBAL COFFEE & COFFEE MACHINE MARKETS......................................................................................... 2 COFFEE & COFFEE MACHINE INDUSTRY IN INDIA: ...................................................................................... 3

FUTURE OF COFFEE MACHINE MARKETS & NEW AREAS TO BE EXPLORED ......................................................... 5

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[RESEARCH PAPER – COFFEE MACHINE INDUSTRY ] March 22, 2013

GLOBAL COFFEE & COFFEE MACHINE MARKETS There are many untapped opportunities in the global coffee machine market, and they are not just in pod formats. True, pods are driving sales in North America, the world’s biggest coffee machine market and also the most dynamic. Here overall volume sales of coffee machines are forecast to expand by an additional 6 million units annually by 2017. In context, this is six times bigger than the absolute growth expected in Western Europe. Behind this phenomenal growth in North America lies the success of hard pod coffee machines which, according to new data from Euromonitor International, are set to become the preferred format by 2014, overtaking cheaper and traditionally more popular filter coffee models.

 Interesting Coffee Fact The world's most expensive coffee is made from the excreta of a cat - like animal called 'Kopi Luwak'

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Western Europe: penchant for premium The standard coffee machine market, which includes all standard brewing systems (espresso, filter, percolators and combination coffee machines) is worth over US$2 billion in Western Europe, almost double that of North America. In the old continent consumers spend an average of US$144 on a standard coffee machine, in North America it’s just US$42. Standard Coffee Machine Sales, US and Western Europe, 2012-2017

Source: Euromonitor International

Look for value growth beyond pod machines So while it is true that, in absolute terms, consumption of coffee pods in Western Europe is expected to post the largest growth in the mid term, it is also true that fresh ground coffee and coffee beans combined still account for 74% of the total fresh coffee market value, and this predominance won’t change in the near future. Western Europeans do spend more than anyone else on their coffee, and are prepared to pay for a coffee machine that does it justice it. The coffee machines market has already proved itself responsive to innovation, and Western European love of coffee is certainly resilient enough to suggest there is scope for premium options beyond the pod. www.knowledgeexchange.co.in

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[RESEARCH PAPER – COFFEE MACHINE INDUSTRY ] March 22, 2013

COFFEE & COFFEE MACHINE INDUSTRY IN INDIA: From teetotaler to coffee buff, India is undergoing a taste-lift and how. The foresight of home-grown brands like CCD and Barista created a global drinking experience locally some two decades ago, and set the stage for redefining the way India drinks. Coffee drinking has become fashionable over the last decade. Driving this boom is India's growing youth segment with a propensity to spending: around 50 per cent of India's 1.2 billion people are 25 or younger.

 Interesting Coffee Fact After crude oil, coffee is the most sought commodity in the world

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After Starbucks with Tata, Dunkin Donuts is also entering Indian market. Coffee, a drink so long mostly limited to cafes in a tea-loving India, is making a fresh charge into urban households with the rising popularity of specialized coffee makers and ready-to-brew capsules that offer cafe-like blend. With coffee chains such as Cafe Coffee Day and Lavazza and appliance makers like Philips, Panasonic and Morphy Richards pushing ready-to-brew coffee and specialized coffee makers, many wealthy urbanites across the country now enjoy coffee in most flavors and varieties available in cafes in the luxury of their homes. Estimated growth in coffee consumption in cafes & five-star hotels is 20%. The growth rate may speed up with the increasing popularity of coffee machines. Nonetheless, India being predominantly a tea drinking nation is severely underfed with café chains unlike several developed nations. The nation's per capita consumption of coffee is just 85 grams, compared to 4.5 kilograms in France, 4.6 kilograms in Japan and 6 kilograms in the U.S. This offers a lot of space for growth for coffee chains. STATISTICS While South India accounts for the largest number of coffee drinkers, the Coffee Board estimates that 50% of the growth in consumption is coming from other regions, including the North. Cafe chains have played a big role in expanding coffee consumption in pre-dominant tea markets such as the North and East. Home coffee makers is still a niche segment due to high prices of the machines, but it is growing more than 50% a year. COFFEE OUTLETS IN INDIA Sr. No. 1. 2. 3. 4.

Name Café Coffee Day Barista Lavazza Starbucks

Current No. of outlets 1270 160 2

Total Outlets

1700-1800

Targeted No of outlets Increase by 250 (within a year) Increase by 150 (within a year) Increase by 50 (within a year) Targets around 3,000 outlets over a few years 5,000 (within 5 years)

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[RESEARCH PAPER – COFFEE MACHINE INDUSTRY ] March 22, 2013 Total Revenue Generated from coffee consumption

USD 200 Million/ Rs. 1,100 Crs.

Estimated Growth Rate 25% to 30%

Standing of India in World Coffee Production

Fifth

FDI Provisions 51% investment in single brand products is permitted

Beverage Preference

54% of Indians still prefer tea, 17% prefer plain milk while only 13% of Indians prefer Coffee

Overall Coffee Consumption in India 1 to 1.1 Lakh Tonne

Estimated growth in coffee consumption in cafes & five star hotels 20%

Consumption Pattern Urban consumption dominates with about 73% of total volumes and the remaining 27% accounts for rural consumption

Coffee Machines Price Range: Sr. No. A.

Lavazza

Brand

Price Range [Rs.] 12,000/- to 60,000/-

B.

Café Coffee Day

4,000/-

C.

Philips India

13,995/- to 74,995/-

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[RESEARCH PAPER – COFFEE MACHINE INDUSTRY ] March 22, 2013

FUTURE OF COFFEE MACHINE MARKETS & NEW AREAS TO BE EXPLORED With the markets being bullish on the coffee industry in India [as seen in the above statistic], it is but natural that the markets for coffee vending machines, coffee pods & capsules and related products is set to boom in India. Hence, there will be a lot of new areas to be explored to capture these markets. 1. Newer Markets – Exploring and targeting new markets for coffee machine like Hospitals, Highway Cafes, College Canteens and college fests, Parlor, Spas & Massage centers etc. can boost the sale of coffee machines to a great extent. 2. Entering the premium markets – New concepts like ‘The Lounge’ introduced by CCD provide a huge markets for the coffee makers. 'These places charge on an average 40 per cent more than they do at the usual cafes. In return, these stores offer a more diverse menu, including gourmet coffees prepared in exotic ways and customized to individual tastes

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Interesting Coffee Fact In the 1600s there was a controversy over whether or not Catholics could drink coffee, luckily Pope Clement VIII said it was okay.

3. New Concepts of Coffee Machines – Portable and mobile coffee and tea machines that can be used in cars on office desks etc. are being developed. Coffee machine manufacturers are developing coffee holders that a can help a consumer heat his coffee by recharging with the help of laptops or desktops using a USB cable of recharging it in the car. Also, Starbucks has developed new innovative milk pitchers, specially designed by it to helps its baristas turn cold milk into sweet, creamy steamed milk with the thick, velvety foam that just tastes best.

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4. Tea Makers – India is predominantly a tea drinking nation. 54% of Indians still prefer tea. Hence, to capitalize on the same, some Cafes are opening up to serving tea too. Hence, dealing in the tea machines as also catering to events in form of tea bars etc. will have a good growth potential in India. 5. Coffee Bars / Tea Bars – These are cafes that serve exotic and customized beverages and are becoming quite popular with the upmarket and corporate crowd. The number of specialist coffee shops are projected to double by 2015 with some 4,000 outlets as coffee consumption has doubled in the last few years, according to a latest study Rabobank International. Targeting these bars and innovating products specially made for them will have a good boost to the sales of coffee makers.

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[RESEARCH PAPER – COFFEE MACHINE INDUSTRY ] March 22, 2013

www.knowledgeexchange.co.in This paper has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this paper and to the extent permitted by law, Knowledge Exchange does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this paper or for any decision based on it.

Sources:       

The Economic Times Coffee Board of India Statistics Report Euromonitor International Technopak Advisors www.indianhospitalityreview .com Business Insider www.google.com

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