The Hindu Business Line : Tata Coffee mulls price hike

IN a bid to offset the impact of exchange rate volatility and rising input costs, Tata Coffee Ltd is contemplating a price hike of its products in the export market after a span of nearly four years.

The Tata Coffee Managing Director, Mr M.H. Ashraff, said the company has been thinking of hiking its prices for both instant coffee and the beans in the near term, but declined to spell out the details. The appreciation of the rupee against the dollar has had a "negative impact" on the company's earnings, Mr Ashraff said but declined to quantify.

Tata Coffee earns about 90 per cent of its revenues from the export market and the billing is predominantly dollar denominated. The company did try to convince several of its customers to switch billing to other currencies such as the euro, but has not been successful so far, he said.

The company is also facing pressure due to the rising input costs over the last six months, which have gone up by Rs 10-12 a kg for the Arabica variety and Rs 2-4 a kg for the Robusta variety, Mr Ashraff said.

"Though there is an uptrend in global coffee prices, it is not enough to offset the impact of rising rupee and input costs," he said adding a hike in prices would neutralise the impact.

Tata Coffee has seen a 30 per cent rise in overall exports in the last nine months, while instant coffee exports have grown by 18 per cent in the last quarter primarily due to the increased demand from Russia and the CIS countries.

For the current coffee year, the company expects to improve on its last year's output of 7,877 tonnes.

Mr Ashraff attributed the increase in the output to the "on-year" phenomenon, wherein the production peaks alternate years.

Tata Coffee, which acquired HighHill Coffee India Pvt Ltd, an instant coffee manufacturing unit in Tamil Nadu last year, plans to hike the capacity of its unit in Hyderabad by 1,000 tonnes. This addition would take the company's instant coffee production capacity to 7,200 tonnes annually.

Meanwhile, the company's plans to acquire a roastry in the Eastern Europe have fallen through. Mr Ashraff said plans in this regard have been dropped.

However, the company sees China as a potential market and expects to start exporting to that country through Hong Kong over next six months, he said.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page