While tea remains India’s dominant beverage, growing café culture in metropolitan areas over the past decade has fuelled the rise of speciality coffee shops. From boutique roasters to global chains, coffee consumption is steadily rising—making price hikes more impactful than ever.
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Prices of Arabica and Robusta beans—the world’s two most widely consumed coffee varieties—are at multi-year highs due to supply shocks in Brazil and Vietnam, the world’s top producers. Coffee futures in New York and London have surged over the past year, forcing Indian brands from Blue Tokai to Nestlé to either hike prices or absorb losses.
Brazil, the largest Arabica coffee producer, is experiencing its worst drought in over four decades, severely impacting coffee flowering and reducing the expected yield for the 2025-26 harvest. Meanwhile, Vietnam, the top producer of Robusta, has been hit by typhoons and erratic rainfall, disrupting the harvest and lowering bean quality.
Robusta futures hit a record high of $5,849 per tonne last week. Arabica coffee prices were among the strongest-performing commodities in 2024, rising by about 70%, and have continued to climb this year, reaching a record $4.2995 per pound on 11 February, Reuters reported.
India’s coffee chains and packaged coffee brands are bracing for higher input costs. Many companies have already implemented price hikes, while others are considering further increases in the coming months.
“On a per cup basis, prices will go up by ₹5- ₹12. Though it needs to be four to five times of this if you want to maintain your margin, consumers are not going to accept that kind of an increase. Some costs will have to be passed on, and some will have to be borne by the coffee chains,” said Matt Chitharanjan, CEO, Blue Tokai. The speciality coffee chain raised prices in November and may implement another round in May.
The packaged coffee segment is also feeling the squeeze. Karnataka-based Indian Coffee Roasters’ Association has announced a ₹200 per kilo hike in powdered Arabica and Robusta, implemented in two phases— ₹100 this month and another ₹100 next month.
“(E)verybody will hike prices because now you are selling below cost,” said Perikal M Sundar, president, Indian Coffee Roasters’ Association.
Powdered Arabica prices touched ₹900 per kg this month and are expected to reach ₹1,000, Sundar said. A year ago, they were around ₹600 per kg. Robusta prices have climbed to ₹750 per kg and could hit ₹850 in the coming months, Sundar said.
Meanwhile, buyers and growers are waiting to see how the market stabilizes.
“Growers are waiting too because they expect the price to go higher. So it’s a bit of wait and watch to see where it will finally settle. But there’s no doubt that this year’s harvest will be significantly higher than the last,” Blue Tokai’s Chitharanjan said.
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Major coffee brands are responding differently. Nestlé, which sells Nescafé, has acknowledged the impact of skyrocketing coffee costs.
Coffee has seen almost chaotic inflation, with prices up 75% year-on-year, said Suresh Narayanan, chairman and managing director of Nestlé India. “It is very difficult for any company to survive with 75% increases and still manage growth,”
The company is expanding its coffee production capacity in Nanjangud to improve efficiency and mitigate costs, Narayanan said.
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Tata Consumer Products Ltd, which operates Starbucks in India, declined to comment, while CCL Products, a major coffee exporter and private-label manufacturer, has already implemented price hikes in its B2B vertical.
Some chains, however, are trying to avoid passing the burden onto consumers.
“We believe that shifts in commodity prices are a part of market dynamics, especially on coffee the rise is beyond ordinary for sure. However, we always strive to ensure that a cost increase is not passed on to our customers as is. We work in several ways to maintain price stability for the best consumer experience and business continuity,” said Westlife FoodWorld that operates McDonald’s as well as McCafe restaurants in southern and western India.
“Price increases have a significant impact on gross margins,” said Abhijeet Anand, founder and CEO of abCoffee. “We haven’t made a decision on pricing yet. Our focus is on further reducing operating costs. Our business model is already quite lean, with low rental expenses and minimal staffing. This gives us greater control, as our fixed costs are low.”
Chitharanjan said the chain has not yet seen a slowdown on account of price hikes. “We have not yet experienced the slowdown that has impacted others in the quick service restaurant industry. Coffee is about habit and consumers are unwilling to give up on it,” he said.
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India’s coffee market was valued at approximately $478 million in 2022 and is projected to reach $1.2 billion by 2032, per government estimates. Domestic coffee consumption has grown from 84,000 tonnes in 2012 to 91,000 tonnes in 2023, reflecting a shift in urban drinking habits.
But with rising costs, will this growth continue, or will budget-conscious consumers switch back to tea?
