For decades, Indian coffee has been a staple in cafes across Dubai, Kuwait City, and Riyadh. However, the industry fears that up to 80% of its most promising growth market could evaporate due to rising freight costs and naval blockades.
The cost of shipping has climbed so high that it's put a squeeze on the industry, despite a temporary ceasefire between the US and Iran. Trade routes are still tangled, and the negotiations between the two countries have collapsed.
As a result, Indian coffee exporters are facing a long-term crisis, with the Strait of Hormuz disruptions threatening to disrupt their trade flows. India is the world's seventh-largest coffee producer, and exports roughly 70% of its coffee output.
Exporters could face as much as an 80% loss of the West Asia market in the coming months, according to Ramesh Rajah, president of the Coffee Exporters Association of India. This is because more Indian coffee is being shipped through the Strait of Hormuz, and shipments are being delayed, rerouted, or stuck at trans-shipment points.
Freight costs have reportedly doubled since the onset of the US-Israeli war on Iran in February, squeezing margins and threatening India's hard-won market share. Buyers in Europe are already looking toward Uganda as a more reliable alternative.
India's coffee sector had been celebrating a golden era, with export earnings nearly doubling from $1.14 billion in 2023 to a record $2.13 billion this past year. However, the current shock comes at a time when India's coffee sector has been reshaping itself since liberalisation in the 1990s.
