Coffee consumption is gaining a foothold among 56% of Indians, particularly women, younger generations, affluent classes, lower-tier city residents, and those in the southern region according to Mintel research. However, coffee’s wider adoption and growth are challenged by its perception as expensive and unhealthy among non-consumers (41% and 29%, respectively) and by tea’s dominance in the Indian market.
The launch activity for coffee, including RTD coffee, has been steady. Hot coffee dominated the market between June 2020 and May 2023 (89% compared to 11% of RTD iced coffee), according to the Mintel Global New Products Database (GNPD).
The growing popularity of café culture among the young generation and its aspirational sentiment among the lower-tier towns is the fodder for the growth of RTD coffee in India. It is important to position RTD coffee as an affordable and indulgent substitute for cafe-style cold coffees and other cold beverages
There’s potential to deep-dive into coffee’s established energy function to cater to consumers’ diverse needs. Consumers’ reasons for consuming coffee reveal diverse facets of human energy needs, including emotional (stress relief, mood boost), mental (focus), and physical energy. Brands can position coffee to cater to these specific energy needs.
Market size of the Coffee segment
As per the findings from BlueWeave Consulting, the India Ready to Drink (RTD) Coffee Market reached an estimated value of USD 9.33 billion in 2023. Projections for the forecast period from 2024 to 2030 anticipate a steady growth trajectory, with the RTD Coffee Market size poised to expand at a CAGR of 4.99%, ultimately reaching a value of USD 11.98 billion by 2030.
The coffee segment comprises instant coffee, roast and ground coffee, as well as coffee beans, catering to varying consumer preferences.
In parallel, BlueWeave Consulting’s estimates place the total coffee market size at USD 9,240 million in 2023, with a projected robust CAGR of 11.99% anticipated between 2024 and 2030. This growth trajectory will propel the total coffee market size to USD 20,410 million by the year 2030.
The middle class is also willing to experiment more with tea blends, thus, providing impetus to segments like herbal, flavored blends, and other specialty variants. With busier lifestyles and a growing workforce, the sales of herbal tea are expected to rise, as consumers seek healthier alternatives to beverages like carbonated drinks. The urban sector is currently a major consumer of herbal tea. The market will also be driven by increasing innovations in packaging and flavors in the coming years.
The consumer demand that is compelling manufactures to launch improved product range are:
- Wider beverage options
- Innovations like eco-friendly packaging
By volume, the India Ready to Drink Coffee market size was estimated at 5.15 billion liters in 2023. During the forecast period between 2024 and 2030, the market size is projected to grow at a CAGR of 7.64%, reaching a volume of 8.62 billion liters by 2030.
Currently, the market offers a diverse range of RTD Coffees such as :
- Espresso-Based Drinks,
- Iced Coffee,
- Cold Brew,
- Flavored Coffee
These variants cater to varying price points and models that align with the distinct needs and preferences of Indian consumers.
The monthly per capita consumption for coffee in the southern region is Rs. 17 against the national average of Rs. 5. In contrast to the market for tea, the one for coffee is more urbanized with 67 per cent share coming from urban consumers. Urban consumers love to spend twice the per capita amount spent on coffee at the national level. However, from market share point of view, coffee is stronger in the rural areas of the southern region. Here it holds 90 per cent share in the overall rural coffee market.
Trends in the Coffee segment
While the average coffee consumption in India stands at about 30 cups per person per year, significantly lower than the global average of around 200 cups, there is a growing interest and experimentation with both hot and cold coffee formats, primarily led by young consumers.
Over the past 2-3 years, India has experienced an accelerated coffee culture. Prominent drivers of the market are the increasing trend of online shopping for at-home consumption, necessitating adaptation from retailers, roasters, and consumers. The demand surge for RTD coffee is driven by the contemporary lifestyle characterized by business, attracting both the younger demographic and the working middle-aged population seeking convenient and instant energy sources.
Additionally, the escalating number of health-conscious consumers, responding to concerns related to sedentary lifestyles, increased obesity, and a heightened awareness of health and fitness, is fostering a demand for quick and nutritious energy supplements. This trend is further propelled by the growing participation of the younger population in sports, gym activities, and physical exercises. As a result, the market is witnessing an increased popularity of healthy RTD coffee products across the country.
Road Ahead
In the next five years, the coffee segment is poised for remarkable growth, as regions in India that were traditionally known for their tea-drinking habits have gradually adopted the coffee-drinking habit, expanding the coffee consumption market
A notable innovation in this trend is the rise of ready-to-drink coffee in cans, which has gained traction, especially among young consumers. As observed in other product categories, e-commerce is making premium coffee more accessible and offering consumers the opportunity to explore various coffee variants. As consumer demand for such options increases, coffee-producing companies are gearing up to provide these at-home consumption choices.
