India’s GDP growth has slowed and the impact of the slowdown is being felt in a big way by fast moving consumer goods companies. Slowing urban demand is one challenge; a surge in input costs is another. Hyderabad-based CCL Products, which is among the world’s largest private label instant coffee makers and also the largest exporter of instant coffee from India, says there is a need for measures in the upcoming union Budget to boost consumption.
“Indicators for the FMCG sector continue to be muted due to softening urban consumption and not-so-robust growth in rural areas. Providing tax benefits and relief to individual taxpayers can increase disposable income, thereby enhancing consumer spending power. This approach aligns with industry recommendations to spur consumption through lower taxes,” said Pravin Jaipuriar, CEO of CCL Products (India) Ltd.
Apart from slowing urban demand in the domestic market, coffee makers like CCL and others have been hit hard by a surge in coffee prices in global commodity markets. Prices of arabica coffee beans, which are the most produced in the world, have risen around 80 per cent in 2024, as bad weather hit Brazil and Vietnam, two of the largest coffee producers.
India is primarily an instant coffee market, pointed Jaipuriar, adding that spiralling green coffee prices have forced manufacturers to implement significant price increases. He says the 18 per cent GST adds to the burden.
The high prices will likely lead to lower consumption, and stakeholders have urged the government to evaluate the proposal to lower the GST rate. India also levies a high import duty on green coffee, which also hurts consumption, said Jaipuriar.
“Considering the recent increase in coffee prices, protectionist policies involving high import tariffs do not serve the intended purpose. In fact, lower import duties would give Indians the opportunity to explore world coffee at affordable prices, thereby increasing coffee consumption in the long run,” he said.
Coffee consumption has been on the rise in India over the last few years amid higher penetration of instant coffee and an expanding number of local and global cafes across the country.
Coffee exports from India are also on the rise, with total exports in the current financial year up to November crossing USD 1 billion for the first time, according to the Centre for Monitoring Indian Economy. Jaipuriar, however, attributed this growth to the rise in green coffee prices, while production has largely been stagnant.
He called for supportive policies to encourage sustainable coffee cultivation in the country, as well as incentives for modernised processing and manufacturing infrastructure. Enhanced support promoting Indian coffee could also make it more desirable in the global market, he felt.
