(Vietnambiz.vn) _ Indian coffee exporters not only face a severe demand drop due to the impact of COVID-19 epidemic but also now face the risk of losing market share in the market. The country’s largest export is Italy to Uganda.
According to The Hindu Business Lines, Indian coffee is facing fierce competition from low-cost Ugandan producers in the Italian market, India’s unique market for more than three decades.
Italy is thought to account for one fifth of India’s coffee exports.
Indian coffee in Italy is widely available in the high quality segment of cafes and restaurants.
Brazil is the largest coffee exporter in Italy with more than half of the market share in this country, followed by India with about 20% market share and other exporting countries such as Vietnam and Uganda.
According to Ramesh Rajah, president of the Indian Coffee Exporters Association, “Ugandan exporters are trying to gain as much market share in Italy as possible in the current context and that really makes us afraid.” .
Buyers in Italy are attracted to Ugandan Robusta, which is said to be similar in breed and quality to Indian coffee while being at least $ 200 / ton cheaper, or 20% cheaper.
“Under normal conditions, customers focus on quality and are willing to pay a premium for the desired product. However, the Italian economy is going through a difficult period due to the COVID-19 pandemic, so customers started looking for cheaper coffee products.
They gradually turn to Uganda where the coffee price is 20% lower than India while the quality is similar. Vietnamese coffee is even cheaper, but because of its taste and other factors, it is sold only in packaged form and in the mass segment, not in the high-end segment in Italy.
Coffee in the premium segment was more affected by the COVID-19 pandemic than coffee in the mass market and it really affected us, ”Mr. Rajah said.
Export decreased by 27%
Coffee output shipped to Italy in the first half of 2020 decreased to 36,547 tons, down 27% from 50,513 tons in the same period last year.
In particular, arabica coffee output was at 4,774 tons, down 14% from 5,577 tons in the same period last year and robusta coffee output dropped even more, only at 31,134 tons, down 27% compared to 42,658. tons of the same period last year.
During the same period, India’s coffee exports fell 16% in volume to 178,000 tons. Export turnover reached 404 million USD.
According to Mr. Anil Ravindran, an exporter in Benhaluru and a partner at RV Commdities, “For unfinished robusta coffee, India is facing competition from cheap shipments from Uganda.
Although the quality of Indian coffee has been verified, importers are choosing coffee based on the right price criteria. This is even more evident in the context of the current COVID-19 pandemic, when competitively priced coffee is preferred by buyers ”.
Indeed Uganda is regaining market share in the Italian market that it lost to India 30 years ago.
“We dominated for over 30 years, and now Uganda is back,” said Mr. Rajah.
Challenges related to Logistics
Indian exporters have replaced Uganda in the Italian market as African producers face the challenge of shipping coffee.
“We never squeeze other countries even when we gain market share in Italy. Our commercial goal is to rationalize prices and provide reliable supply throughout the year and our shipments are well prepared.
We sold good quality coffees and started accepting deposits. As the customers get used to Indian coffee, the deposit just goes up ”, Mr. Rajah said.
Therefore, the deposit has become a challenge for Indian exporters to keep the Italian market.
Although the deposit quota has decreased, the price of Indian Robusta coffee remains high on the LIFFE exchange.
Currently, the price of robusta-cherry coffee in India has a relatively high deposit price, about 500-600 USD / ton while the end price of Ugandan Robusta is only about 250-300 USD / ton.
“We lost credibility just because our deposit was too high. Leaving the market in Uganda’s hands will have a long-term impact, ”Mr. Rajah said.
Furthermore, Indian exporters are having difficulty matching Ugandan’s prices as it means they will have to find cheap supplies and lower prices, which will hurt coffee growers. .
Especially in the context of coffee growers reeling from the impact of low prices for years.
Rajah said the government should intervene and immediately support exporters to protect their markets, by increasing their incentives under the Exports of Goods from India Program (MEIS) to 5%, or now eliminate duties and taxes on export products (RoDTEP) as soon as possible, while securing a credit base with reduced interest rates.
