India is a confirmed chai nation. In the north, east, and west, it is tea that is the most-ordered beverage on the streets, and in offices, and most-offered one at homes. Only in the south is there a prevalent, and large scale coffee culture, and that too filter coffee. But things have changed over the past few years. The entry of foreign coffee shops like Starbucks, growth of Indian ones, and the mushrooming of both premium (Blue Tokai), and less-expensive franchises across the country hint at a change in hot beverage consumption.
The sound of coffee machines, and the aroma of freshly-ground beans are slowly finding their way into Indian homes. From single-serve pod systems to fully automatic espresso makers, a new class of consumers is treating coffee as an experience, rather than a mere caffeine fix. The question is whether India is truly ready for the premium end of coffee, and what this means for the Indian and foreign brands that are betting on this transformation. The Starbucks and Blue Tokai depend on the members of the middle class, and upper middle class to throng to their outlets.
In terms of numbers related to national numbers, coffee consumption has not reached there yet. Over the past decade, the demand grew modestly in volumes, but more significantly in aspiration. The Coffee Board of India estimates that the per capita national consumption is 0.07 kg a year, which is peanuts, or coffee beans, compared to the global average of more than one kg. Despite the dismal numbers, a quiet shift is underway. Urban households are experimenting with pour-overs and cold brews. Cafés have expanded beyond the metros.
Online sales of beans, grinders, and capsule systems are rising faster than before. According to the IMARC Group, India’s coffee pods, and capsules market was worth $967 million in 2024. It is expected to reach $1.69 billion by 2033, or a growth of 6.4 per cent annually. This has enthused both the Indian and foreign firms to test, and change, the beverage taste of India. Nestlé’s Nespresso, considered a pioneer in single-serve systems, entered India in early 2025 with its first boutique at Select Citywalk in Delhi. The firm sells its machines starting at Rs 16,500, and capsule sleeves of ten priced Rs 950.
These are clear attempts to tap the growing appetite for in-home coffee experiences. “In recent years, coffee consumption in India has witnessed a surge, with a discernible trend towards in-home consumption,” claimed Suresh Narayanan, CMD, Nestlé India, at the Nespresso launch. He added that the country is one of the company’s fastest-growing coffee markets. Nespresso’s global chief executive, Guillaume Le Cunff, described the Indian entry as an effort to bring its signature coffee experience to local homes, and to deepen the appreciation for quality coffee. Even at the market outlets, Indians experiment with coffee flavours from abroad.
The economics of the premium and quality segment are simple and straightforward, but challenging. The price of a single Nespresso cup works out to Rs 95, placing it below a café latte at a decent outlet but more expensive than a pack of instant coffee. This positions the capsules as affordable, but still a luxury that is acceptable to affluent urban consumers. The brand’s razor-and-blades model depends on steady capsule sales once a household invests in a machine. If Nespresso can capture 10-20 per cent of the pods market, it can generate $100-200 million in annual revenues within a few years.
Add to these revenues the sales of machine, and B2B placements in the hotels and offices. The opportunity becomes meaningful for a category that barely existed a few years ago. To accelerate adoption, Nespresso has partnered with Thakral Innovations for distribution across retail and professional channels. The Delhi boutique functions as both a store, and a sensory space where customers can sample blends and receive guidance. Industry watchers expect the next boutiques to appear in Mumbai, Bengaluru, and Hyderabad over the next two years, following a metro-first approach.
The larger task will be to ensure consistent service, and build the infrastructure for capsule collection and recycling, which remains limited in India. For the industry segment, Nespresso’s arrival has had a ripple effect. Starbucks, which has nearly 500 stores in the country, has witnessed fluctuating footfalls as consumers weigh in, and adopt, at-home alternatives. Local but large players like Blue Tokai, Third Wave Coffee Roasters, and Sleepy Owl are expanding furiously, and educating a new generation of coffee drinkers about drinking, flavours, brewing and taste profiles.
The success among retail outlets has created a customer base that appreciates quality, and may eventually upgrade to the home machines. This is a win-win for both the suppliers of the machines and coffee, and outlets that serve the beverage. Although both categories will initially compete for market shares, over the years, they will gain in revenues, and grow. Some of the smaller, and mid-size retail outlets may lose out, but this is the nature of competition. The tea-focused retail outlet brands like Chaayos and Chai Point will continue to dominate the mass beverage market, even as coffee’s growth is limited to the largely premium and urban segment. However, there are several risks on the horizon. Import duties and exchange rate fluctuations can make the foreign coffee capsules costlier. Competing products such as compatible pods or premium Indian roasts can erode loyalty, and market shares of the foreigners. A slowdown in the economy may limit discretionary spending on luxury beverages. Yet, the present underlying consumer trends appear durable. Coffee in India is evolving from an occasional café outing into a ritual that reflects lifestyle, convenience, and status.
India may still be a tea-drinking nation in volume terms. It may still be common, even in large offices, to consume chai with snacks like samosa and bread pakoda. But recent trends indicate a change in attitude and mindset towards a premium coffee nation. It is hip and cool for the youngsters to meet at cafes over coffee and cookies. This segment will increase as more retail outlets begin to compete with Starbucks, and Blue Tokai. In time, it will become convenient to invite guests and friends at home for a coffee. As more homes invest in machines, and more consumers choose to brew instead of buy, the sound of coffee grinding early in the morning, or late in the evening may soon become as familiar as the whistling of a pressure cooker.
