After tea, it’s time to brew some coffee for Tata Consumer Products

Tata’s cup of coffee

One of the top players in the tea market, TCPL, with its brands Tata Tea Agni and Tata Tea Gold, so far, has had limited success with coffee in the country. However, now, as it eyes a bigger play in the packaged foods market, the company has set its sight on the coffee market.

“Tata is the largest coffee producer in the country. It has the know-how of the commodity chain and back-end. Hence, it becomes a natural extension for the company as it tries to emerge as a larger player in the foods segment,” said a consultant working on a project with the company.

Besides the recently launched Sonnets and Eight O’Clock, the company also has filter coffee brand Tata Coffee Grand in the Indian market, catering mostly to southern India.

“While coffee remains an aspirational product across the rest of India, there is an increased demand for instant coffee, especially during winters. On the other hand, in the south, we see regular consumption of both instant and roast & ground (filter coffee),” the company had said in its annual report for FY21.

According to the annual report, the branded retail coffee market in India was estimated to be sized at Rs 2,600 crore in FY20, and instant coffee, with 80-85 percent of the share, is the largest sub-segment in it. Nestle’s Nescafe is the largest player in the market in India, followed by HUL’ Bru.

The Starbucks factor

Unlike HUL and Nestle, TCPL, however, is positioning its recent launches in the premium segment. The reason, the consultant said, could be its joint venture with Starbucks Corporation in India.

“Starbucks caters to the high-end of the market and TCPL would not like to dilute that image by launching mass-market products,” he added.

Tata Starbucks, which owns and runs 221 Starbucks outlets in 18 cities in India, is a 50:50 joint venture between TCPL and Starbucks Corporation.

However, the company, analysts indicate, can look at a possible tie-up with Starbucks for retailing its coffee brands Sonnets and Eight O’Clock.

Of late, the premium coffee segment has seen the mushrooming of several startups such as Sleepy Owl, Araku Coffee, Rage Coffee, Third Wave Roasters, and more. Most of these companies operate in the D2C space.

“We are seeing the emergence of artisanal and gourmet premium coffee, estimated to be about 5 percent of the organised market,” said the TCPL’s annual report.

TCPL, too, has taken the D2C route for its coffee brands.

“This could be a way to test the waters before introducing these brands in the other channels,” said Manoj Menon, Head of Research and Consumer Analyst, ICICI Securities.

Coffee, unlike tea, is yet to gain mass popularity in India, and, to a large extent, remains a category that is consumed mostly by certain regions such as south India. That coffee comes at a premium and is at least three times costlier than tea also makes it accessible to limited consumer segments.

It is, however, slated for high growth, going ahead. “While tea is a 5 percent growth category, coffee is a 10 percent growth category,” said Menon.

Tata Consumer Products, which has seen success with its coffee brands internationally, now wants to replicate it in India, too.