Coffee going bitter for Tata Global Beverages

After tea plantation, another hurdle for Tatas is coffee.

Due to adverse climatic condition, the coffee plantation did poorly in the last fiscal year wherein the current performance is also predicted to be the same.

Seeing the current position, it will be equally difficult for Tatas to maintain a hold on coffee, mainly because of a bumper crop expected in Brazil this year for both Robusta as well as Arabica varieties.

“There has been a significant Robusta crop shortfall due to extreme unseasonal weather pattern. Arabica prices dropped from 138 cents at the beginning of FY18 to 118 cents per pound at the end of the year. A record harvest in Brazil is expected to keep Arabica prices under check. London coffee prices for Robusta also dipped through the year opening at $2,150 a tonne to $1780 a tonne. Conilon (Robusta in Brazil) is expected to have high crop leading to pressure on prices,” Sanjiv Sarlin managing director and CEO of Tata Coffee, told analysts.

Global coffee supplies would shift to a surplus position in 2018-19 with Brazil, the largest producer, expected to come up with a record crop of 60 million 60-kg bags, made up of 44 million bags of Arabica and 16 million bags of Robusta.

In India, the crop suffered in the previous year because of adverse conditions.

“Robusta in Coorg saw a very low harvest, probably the lowest in the last 10 years due to unseasonal rain pattern last year,” Sarlin said.

Tata Global Beverages has a 57.48% stake in Tata Coffee and would get impacted.

“Operating income and profit was lower impacted by abnormal weather conditions, resulting in lower coffee crop coupled with lower offtake in coffee extraction business,” Tata Global said in a presentation.

Tata Global has been finding it difficult to sustain its tea plantation businesses and has been even trying to sell them off. Tatas have demerged its tea plantation into two separate associate companies controlling estates in Eastern parts of the country.

Tata Global has been trying to divest or turn around the tea estates in Assam and West Bengal on account of unpredictable weather and an onslaught of low-cost small plantations.

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