As coffee growers worldwide continue to grapple with low prices, the International Coffee Organisation (ICO), the apex body of the sector, has been advocating boosting domestic consumption to combat market volatility. On his fourth visit to the country, Jose Sette, Executive Director, ICO, tells Business Line that the private sector in India should step up its act. Excerpts from the interview:

How do you assess the current scenario in the coffee sector?

Our estimates in the current coffee year 2017-18 is that the supply-demand is very tight, they are almost equal with a bit of surplus in supply. But prices have fallen in recent months and are now at a 21-month low. The market, which always looks ahead, is factoring a bigger crop next year, especially from Brazil. We still have to wait for it, till it becomes a reality on the tree. On the consumption side, we expect a growth of 1.6 per cent this year, a bit higher than the previous year, and 2 per cent in the long-term.

Overall, we see a healthy outlook especially in Asia, where people are consuming more and more coffee driven by rising incomes and aspirational value. India and China are very big prospective markets.

What should be done to boost domestic consumption of coffee?

Consumption is definitely growing in India, may be not as fast as we would like. It is primarily the job of the private sector to promote domestic consumption. We always like to emphasise the importance of domestic consumption as it is good for the growers, providing a stable source of demand and shielding them from market volatility.

Brazil is the perhaps the best example. Today, Brazil consumes about 40 per cent of what it produces — the private sector helped to boost domestic consumption at a time when a lot of adulterated coffee was sold which was mixed with corn, rice and the industry really took steps and brought out a campaign on purity of coffee, investing a lot of money — $20 million per annum to promote pure coffee through the 90s — which was a huge success. Brazil is now the second largest coffee consuming market after the US, with a per capita consumption of 6 kg with just over 200 million population.

That’s what makes the India and China markets so exciting – they are the two most populous countries in the world, but consume very less coffee.

How can India differentiate its offering in the world market?

India is a medium-sized producer that needs to differentiate itself from other producers. I think what is more important for India is to develop the internal market.

In the long run, I expect it to become a net importer of coffee, that will take time. Promotion is important and building the internal market is important. The government can help but the industry has to really step up its act. For most countries, going directly to the consumer is a difficult proposition. The Columbians have done it very well, but it took them a long time and considerable amount of money and its model has been hard to replicate. So the producing countries must work through the industry to build a brand. The growers should visit speciality coffee fairs and promote their products and not go directly to consumers.

Is promoting pure coffee key to boosting domestic consumption?

That’s just one way to do it. Purity is one thing, quality is another thing. Brazil was an adulterated coffee market, but in the US and in Europe, for example, it is quality that counts, not purity. The coffee is already pure in these mature markets and its all about driving consumption through speciality coffee shops. But in low income countries, its all about purity and not quality so much.

How is the climate change affecting coffee cultivation?

In the long-term, climate change is one of our biggest concerns. Arabica is sensitive to temperatures. As the temperatures rise, some parts of the producing countries may become unsuitable for cultivation. Similarly, extreme events like the Carribean hurricanes. These two affect coffee cultivation. We are already seeing the impact of climate change on coffee. In Central America, where I visited in November, many countries were already concerned about the impact of climate change.

Do you think rising crude will have any influence on coffee prices?

There is no direct co-relation but many times commodity prices tend to rise and fall together, but it is not automatic. It could bring some relief in terms of prices though I don’t think it would be a major factor. In comparative terms, coffee is much smaller than crude. It does not affect the prices that much.

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