The new Indian espresso: Can specialty coffee remake a chai nation’s palate?

WHEN MANOJ KUMAR, CEO, Naandi Foundation (which owns specialty coffee brand Araku Coffee), met coffee experts in France and Italy 15 years ago with the claim that his coffee was among the best in the world, all he got was a deaf ear. How can a country, which has been, for centuries, exporting to the world mass grade robusta beans (which typically goes into instant coffee) even dare to call its coffee specialty, was the vibe. After all, specialty coffee was all about fine arabica beans, processed and roasted in small batches with unique flavour notes. It was sold at a 40-50% premium world over.

Kumar’s claim that he produced the highest-quality arabica coffee, that too in the lesser-known Araku Valley in Andhra Pradesh, sounded outlandish to coffee aficionados. But he was obsessed about his coffee and wouldn’t give up — after a few meetings, he managed to convince roasters and green coffee bean buyers to visit Araku and see how they grew their coffee.

The Araku Coffee plantations, in the midst of thick forest cover, are completely rain-fed. At work are over 30,000 marginal tribal farmers who have an acre of land each. They grow coffee in shades; in filtered sunlight, the coffee cherries are hand-picked and sun-dried. Hand-picking cherries and sun-drying them is a rarity today (with coffee growers across the world embracing machines to harvest) but it is the perfect way for brewing a ‘clean cup’.

“I showed them how each farmer has a micro-estate of one acre and how my agriculture is not mono-crop, but bio-diverse. They fell in love with the region and people, and said they will help us. Thereafter, we developed every step of coffee-making, from agriculture to the final brew,” remembers Kumar. Araku’s coffee-making culture, according to Kumar, is a 19-step process that involves plucking only the best cherries, drying under the sun but on raised platforms, and processing in stainless steel to prevent the cherries from picking up unwanted aroma. “Our coffee-making process is like making a Birkin bag. There is so much detailing that goes in,” Kumar adds.

Today, roasters and buyers from major coffee nations come for the Gems of Araku auction every year, on invitation. Its most premium offering, Grand Reserve, sells for as high as $94.72 (₹8,000) per kg in Paris. Araku has two cafés in Paris and the third one is being set up in the U.S. Its coffee scored 91/100 at the Cup of Excellence, considered to be the Oscars of coffee. The Cup of Excellence, organised by the Alliance for Coffee Excellence, is an annual competition held in several countries to identify the highest quality coffees produced.

Arabica Coffee with a score of 80-plus qualifies as ‘specialty coffee’. “In Seoul, my buyer, Coffee Libre, says his costliest coffee is Araku. He has put up a board that says ‘Buy the most expensive coffee from the Gems of Araku Auction’,” Kumar says proudly.

Anand Mahindra-backed Araku Coffee’s journey in the world of specialty coffee isn’t a one-off. From Blue Tokai and Subko to Maverick & Farmer and Kruti Coffee, a bunch of startups are on a mission to make India a destination for superior quality specialty coffee. Out of the 360,000 metric tonnes of coffee that India produces, 30% is fine specialty arabica coffee. While Café Coffee Day introduced Indians to the café culture way back in the nineties and Starbucks gave a glimpse of blends from across the world, the Indian coffee startups are getting consumers to appreciate coffee beyond cappuccinos and lattes.

From pour overs, drip bags, and cold brews to single estate coffees, micro-lots and nano-lots, there’s a whole world out there. “Cafés for us were a necessary evil as that was the only way we could educate consumers about specialty coffee. Even in a cappuccino or a latte, the quality of beans and the skill of the barista have an impact. The difference in taste is noticeable,” says Matt Chitharanjan, co-founder, Blue Tokai Coffee Roasters. With 150 cafés across eight cities and an average revenue run rate of ₹400 crore, Blue Tokai is the largest specialty coffee chain in India.

Indian coffee (both arabica and robusta), grown under the canopy of thick forest cover (in the Eastern and Western Ghats), is the most sustainably grown coffee the world over. Unlike most major coffee-producing nations such as Brazil and Columbia which grow coffee in stretches of open land, Indians grow coffee under forest cover and the cherries often absorb the notes of the local biodiversity. However, the Indian coffee consumer has never looked for flavour notes. Unlike the Europeans, Koreans or Japanese, the ideal cup of coffee for an average Indian has always been strong and darkly roasted beans that can be consumed with milk. In the southern parts of the country, coffee and chicory-blended filter kaapi or degree coffee is a ubiquitous part of every household. Brewed in a stainless-steel filter, the coffee is a strong decoction, mixed with milk and sugar.

Specialty coffee is all about processing and roasting, says India’s first woman coffee taster, Sunalini Menon. “If you want a floral note or sweet and sour plums, I can do a different processing for you. People are beginning to understand that Indian specialty coffee is different in terms of variety, topography, and is very sustainable,” explains the former director of the Coffee Board of India, and president, Coffee Lab.

European specialty coffee brands (the likes of Illy and Lavazza) have been sourcing coffee from India since the 1940s. The Indian robustas, considered the finest in the world, have always been used as a base in the espressos of European specialty coffee brands. “Indian robustas are perceived as the best in quality globally. We get the highest premium in the international market,” claims D.R. Babu Reddy, deputy director, Coffee Board of India. “India gets a 10-15% premium for dry processed robustas and 30-40% over the benchmarked price for washed robusta beans,” he adds.

Specialty business models

Though the bulk of Indians are used to waking up to a steaming hot cup of adrakwali chai every morning, their go-to beverage outdoors is invariably coffee. Bandra, an upmarket Mumbai suburb, for instance, is dotted with cafés, each of them promising an eclectic menu of specialty coffees. Be it business meetings, romantic dates, or just a catch-up with friends, the cafés are perennially overflowing with patrons. The coffee culture has percolated to smaller towns as well. Patna, for instance, has a lane with 12-15 cafés next to each other.

For the specialty coffee startups, there can’t be a more opportune time to popularise made-in-India specialty coffee. India has 5,000 cafés and just 5% of them serve specialty coffee. Each has a distinct business model. While the Araku model is to popularise Indian specialty coffee in evolved markets (in India, it has just three cafés in Bengaluru and Mumbai), Blue Tokai’s focus is to popularise Indian specialty coffee among Indians. Unlike Araku that grows, processes and roasts its coffee, Blue Tokai sources close to 750 tonnes of specialty arabica coffee green beans from estates across Karnataka, Tamil Nadu, Andhra Pradesh, Odisha and the Northeast, which is later processed and roasted.

“For us, it is all about how to make specialty coffee more accessible. Our goal is to make a premium product affordable to a mass premium audience,” explains Chitharanjan. Blue Tokai coffees are 20-30% cheaper than Starbucks despite its specialty positioning. Chitharanjan claims the brand has been investing a fair bit of time and money in educating consumers about fine coffees. “We not just educate them about flavour notes and single estate coffees, we also tell them the temperature at which they should consume their coffee. Most Indians like their beverage hot, but it actually destroys the structure of the milk and burns a lot of sugar. You end up with an inferior product. The ideal temperature that coffee should be consumed is 65 degrees. We tell our consumers we heat the coffee to this level because this is where they can get the maximum sweetness and right balance of the coffee.”

Development economist-turned-coffee entrepreneur Rahul Reddy, on the other hand, found coffee a great way to connect the advanced and the rural economy. He founded Subko Specialty Coffee Roasters (Subko is acronym for subcontinent coffee) in 2020, with the intent to showcase the subcontinent’s agricultural heritage through coffee farmers. Subko procures coffee from not just Indian coffee farmers, but also from adjoining Nepal and Sri Lanka. Unlike Blue Tokai, which is trying to democratise specialty coffee, Subko is offering the Indian coffee farming narrative at a premium. A 250-gm pack of Blue Tokai is priced at ₹500, while Subko is upwards of ₹800.

“We want to talk about the notes of honey and the fruity notes of our coffees. Hence, we never dark roast our coffee, we don’t light roast either, we go with medium in roast level so that consumers are able to appreciate the flavour notes,” Reddy explains. Alongside focussing on creating a superior product, the Subko founder is also trying to build a design-forward brand with South Asian-inspired graphic design on its packs.

“Our goal is not to build hundreds of cafés but experience centres through visual language and farmer storytelling through the product,” says Reddy. Subko currently has five flagship and 10 shop-in stores, but Reddy’s intent is to build FMCG coffee products. From canned ones to sachets and drip bags, he is looking to make his products available at premium stores globally.

In sharp contrast to Subko’s business model is that of the Bhubaneswar-headquartered Kruti Coffee, which sources the bulk of its coffee from the Koraput region of Odisha. An impact-led model, the ₹4 crore Kruti Coffee has brought tribals living in the Koraput region out of abject poverty. These tribals, who until a decade ago barely earned ₹10,000 a year and often had to make do with eating mango kernels, today earn anywhere between ₹1 lakh and ₹1.5 lakh per annum.

Kamakhya Das, co-founder, Kruti Coffee, is building the specialty coffee narrative in Tier II and III India. Barring the one-off café in Mumbai, all the Kruti Coffee cafés are in smaller towns such as Bhubaneswar, Cuttack, Koraput, Jamshedpur, and Raipur. Das claims the RoIs are better in smaller towns and hence, make good business sense. “The challenge of educating consumers about specialty coffee is higher in smaller cities, but the real estate costs are lower, the RoIs are better and there is less competition. It also enables you to create a loyal customer base,” explains Das.

He admits that over 60% of the revenues of a café in smaller towns comes from food and not coffee. “The smaller the location, higher is the contribution of food. We may be passionate about coffee, but we also need to build a sustainable business. Having said that, we are consistently seeing a progression towards more coffee and less food as we incessantly educate consumers about specialty coffee,” he says. Since its sources, processes and roasts its own coffee, it is coffee that generates higher margins for Kruti.

Food has been the cornerstone of all café brands in India. Starbucks had to change its business model when it first entered India and focus more on food. A café experience for an average Indian is never complete without good food, unlike the West where coffee is the hero. It’s no different for the Indian specialty coffee brands either. Close to 50% of Blue Tokai’s revenue comes from coffee, but it took over a decade for the brand to get there. In order to strengthen its food portfolio, the brand has acquired artisanal bakery brand Shuchali, while Subko has curated its own craft bakehouse. Apart from the elaborate coffee experience at its cafés in Bengaluru and Mumbai, Araku takes pride in serving dishes made out of organic vegetables, fruits, and millets grown in its coffee plantations.

However, Ashish Dabreo and G. Sreeram, founders of Maverick & Farmer, firmly believe if the coffee is good, consumers come back for the coffee and not so much for the food. “People are becoming specific about what they want in their coffee, which is a big start for us,” says Dabreo who has been roasting coffee since 2013. The trick, he says, lies in the way one processes and roasts the beans to really unlock flavours.

The brand’s USP, claim the founders, is the innovative ways in which they process and roast the beans on their 140 acre coffee plantation in Coorg. “We have created whole-smoke coffees, we recently launched India’s first whole-bean coffee infused with mushrooms and are now working towards creating jaggery-infused coffees. We are creating our own model, not replicating others,” explains Dabreo.

The ₹15 crore (average revenue run rate) brand has cafés in Bengaluru and Goa, but the scale-up opportunity actually lies in the advisory business, believe the founders. Maverick & Farmer curates the coffee menu of popular café and bakery chains such as Lavonne, Magnolia and Café Diem. “The Indian café market is expanding exponentially and we see that as a great opportunity to help brands curate a coffee menu,” says Sreeram.

Investor interest

Kumar of Araku Coffee first shared his idea of building an Indian specialty coffee brand with chairman and life trustee, Anand Mahindra in 2013, and the latter asked him if Araku Coffee had the potential of being the best specialty coffee in the world. “He asked me if you would open a café where would it be, and I said Paris. I told him my French friends love my coffee and we raised a toast to it at The Oberoi in Mumbai.”

Apart from building the narrative of being the best coffee in the world, it also intends to build 100-200 premium coffee touchpoints in neighbourhoods in India. But raising funds hasn’t been easy for most specialty coffee brands. No wonder most have boutique operations restricted to a few cities. “Investors were not interested in funding a café until post Covid,” says Chitharanjan of Blue Tokai. Fluctuating coffee commodity prices (which have gone up by more than 100% in the past couple of years) and sluggish footfalls in quick service restaurants (QSRs) have been a dampener for investors. “However, cafés have been growing, unlike QSRs, and investors are beginning to realise that,” Chitharanjan adds. Blue Tokai in 2024 raised $35 million in its series-C funding round from Verlinvest, a Belgium-based venture capital firm. The specialty coffee chain, which already has 100 cafés, plans to set up 100 more in the next one year.

Subko raised $10 million last year in a founding round led by Nikhil Kamath of Zerodha. The round also witnessed participation from a clutch of other investors, including Blume Founders Fund, The Gauri Khan Family Trust, actor John Abraham, JSW Foundation’s Sangita Jindal, Srinivas and Pallavi Dempo, and The Mehta International Mauritius Ltd Group, among others.

Attracting large cheques of $50-100 million is still a far cry for specialty coffee startups. The funding interest is largely from high-net-worth individuals and venture capitalists passionate about specialty coffee.

The Indian coffee trail

Inspired by the coffee startups, legacy coffee growers who have been in the trade of selling their coffee in the commodity markets are also upping their ante. Komal Sable and Akshay Dashrath, founders of South India Coffee Company, were busy running their tech startup in the U.K. until a few local roastery-cum-cafés in the vicinity wooed them with some unique coffees.

Dashrath’s family owned coffee plantations in Coorg and the couple decided to get friends, some of whom were coffee roasters, to try out the coffee from their family farm. “Our friends liked our coffee and one of them asked for green coffee because he wanted to roast it himself. He later asked for more green coffee, which meant I had to get into export, and that’s how I set up my export-import company, South India Coffee Company, in 2017,” says Sable.

Sable exports over 100 tonnes of arabica and fine robustas not just from her family’s farm but also from other growers to the U.S., the U.K., the Netherlands, Saudi Arabia, and Singapore.

On the outskirts of Koraput, Odisha, Madhu Agro’s Nirmala Reddy and her daughter Raji Reddy grow arabica coffee over a stretch of 55 acres that they sell to specialty coffee brands such as Blue Tokai, Berkeley-headquartered Kaveri Coffee, and Quarter Horse Coffee Roasters in the U.K. The mother-daughter duo recently plunged into coffee roasting and launched their brand, Kellar.

India’s coffee history dates back to as far as 1600 AD when Arab monk Baba Budan brought a handful of coffee beans from Yemen and planted them in the Chikmagalur region of Karnataka. Over 80% of India’s coffee production till the 1970s came from arabica coffee, until farmers switched to robusta that gave them better yields and higher returns.

India gradually got branded as an exporter of mass robusta beans. However, Indian robustas are the finest in the world and oftentimes as good as the arabica, argues Coffee Lab’s Menon. “I fought for calling robusta specialty, but couldn’t. I was closeted with experts in Uganda working out the scoring system. When I said there is specialty in robusta, they couldn’t believe. We finally coined the term ‘fine robusta’. If a robusta gets a score of 80.5, we call it a fine robusta — something that is superior and has brilliant flavours.”

The Coffee Board of India has started marketing Indian specialty coffees and one of them, Robusta Kaapi Royale, is a fine robusta. The others are arabica coffees Monsoon Malabar and Mysore Nuggets Extra Bold. “Exports of Robusta Kaapi Royale and Mysore Nuggets Extra Bold have also been increasing over the years. We used to earlier export 5,000-8,000 metric tonnes of coffee, now are close to 20,000 metric tonnes of specialty coffee,” says Reddy of Coffee Board of India.

The Indian specialty coffee narrative is still in its infancy, but is definitely gathering steam. A validation of sorts came from Carlo Bereta, the global CEO of luxury brand Tod’s, who was in India last year for the launch of the Tod’s store at the plush Jio World Plaza in Mumbai. Bereta specifically asked for an espresso blended with Indian arabica. “I am diabetic and Indian beans have fruit notes, therefore, I don’t need to add a sweetener,” he explained. Indian coffees are definitely moving on from being perceived as boring, dark roasted, and nutty flavoured.