Coffee Market in Nepal

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Acknowledgements

This term paper was assigned to me for my Micro-Economics class. Firstly, I would like to

express my thankfulness to Kathmandu University School of Management for providing me

such an opportunity to present this term paper on Coffee Market in Nepal, which has helped

me to develop conceptual knowledge and practical research skills in the bachelor level. I am

mostly grateful to the Faculty of Economics, Mr. BInayak Chettri sir, for his valuable

guidance for the preparation of this paper.

I have tried my best to minimize error to the extent possible by consulting real life coffee

house owners and producers.

Thank you.

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Growing Coffee Culture

Café culture is at its peak in Kathmandu. Conversations over a cuppa on the comfortable

couches of various coffee shops have quickly developed as a trend, whether it be busy

students cramming for a test or idle millennials who like to appreciate the artistic displays of

the barista by posting a picture of the decorated cappuccino or serious business meeting,

coffee connoisseurs can be found in every café of K-town. Seeing this peak in interest of

coffee fanatics, it has been only five years that people started to notice that this trend is not

going away. Coffee houses are mushrooming all over the city and in other urban cities of

Nepal.

Coffee houses are filling up a market gap of the need for a semi formal place to meet up with

anyone from business clients to friends and colleagues. Today, there are over 800 coffee

houses in Kathmandu and Lalitpur alone however, that is not the limit of the coffee bug as it

has bitten other parts of Nepal like Pokhara, Dharan, Chitwan and even remote places like

Mustang and Deurali.

Coffee Supply and Demand

The steep increase in coffee consumption has also inspired Nepali farmers to grow their own

organic coffee. Appreciated by locals and expats alike, these processed coffee beans are

exported to other parts of the world. However, more and more coffee shops have opened up

in the valley itself like Coffee Pasal in Durbar Marg, Karma Coffee and Café Soma in

Jhamsikhel which were opened with the intention of promoting home-grown Nepali coffee

for its unique flavors.

Himalayan Java is the first Specialty Coffee House in Nepal. They opened 17 years ago, with

the goal of providing good quality brewed coffee as restaurants back then only served instant

coffee and not a single outlet served brewed coffee. The mission of Himalayan Java remains

“to promote the fledgling Nepalese coffee industry by investing in the people from grower to

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consumer and to create awareness by promoting Nepalese coffee domestically and in the

international niche market.”

Similarly, Café Soma also buys a specific type of coffee beans from Nuwakot called the

Organic Single Origin Arabic Coffee Beans whereas Gaia Coffee Shop gets theirs from

Palpa. Karma Coffee too uses organic Nepali Coffee beans in their coffee based drink. While

these are some popular coffee places that buy Organic Nepali Coffee Beans, there are some

businesses in Nepal that export beans. HimalayanArabica® is an ethical, specialty Nepali

coffee brand. This coffee brand is grown above 1200 meters altitude at the foothills of Mt.

Manaslu by Greenland Organic Farm, a coffee cooperative based coffee farm with over ten

years of experience in growing, processing, roasting and exporting the best Himalayan

Arabica Specialty Coffee in Nepal. They are now growing coffee together with 465

individual households (representing approximately 2325 farmers) who are a part of 12

separate coffee cooperatives. For its vibrant quality, Nepali coffee have been exported to

different parts of the world mostly to Japan, America, and Korea and European countries

since last many years. Of the total production 65% is exported and the rest consumed in the

domestic market. There is increasing demand for Nepal Coffee for its specialty quality.

The Coffee Paradox

Although, taking these businesses are examples of how the Nepali coffee market has grown,

it is still blatantly stated that coffee production in Nepal is not enough to fulfill its market

demand. Till date, 17 districts Coffee Producers Associations have been formed and coffee is

being produced in more than 25 districts. In Nepal, currently there are more than 1700 coffee

producer groups, 120 coffee co-operatives, 41 districts are suitable for coffee plantations,

more than 30,000 coffee farmers are associated with NCPA and more than 20 coffee

industries have been established. However, the demand of Nepalese coffee both nationwide

& worldwide is increasing continuously but the production of coffee as yet to reach its full

potential.

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Coffee is presently known to be grown in about forty districts in Nepal. However, the coffee

growing districts in Eastern Development Region (EDR) are not very suitable for coffee due

to higher rainfall and probability of higher incidence of diseases and pests. Since coffee

producers do not use chemical pest control measures, incidence of any disease in the eastern

region could spread the diseases to other parts of the country too. Besides, EDR is the tea

producing area and expansion of coffee in EDR will have to compete with tea for available

resources and market. The districts in far-west and mid-west development regions have low

potential for coffee production due to the frequent drought problem. The major coffee

growing districts where substantial amount of coffee being traded lie in Central and Western

Development Regions namely Gulmi, Palpa, Arghakhanchi, Baglung, Syangja, Parbat, Kaski,

Lamjung, Gorkha and Tanahu in the Western Region and Lalitpur, Sindhupalchowk, Kavre,

Dhading and Ramechhap in Central Development Region. Below is the graphical

representation of

District-wise Plantation Area and Production of Coffee (2012/2013)

Source: http://www.himalayanjava.com/nepali-coffee-industry/

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The coffee paradox is basically about the ‘coffee crisis’ in production, in Nepal’s case - its

low supply and the ‘coffee boom’ in consumption, Nepal’s high local and international

demand. This huge gap between the demand and supply is being fulfilled by imports of

coffee.

Nepal Coffee Producers Association and future Coffee Production Decline

To reach the potentiality of coffee production in Nepal, Nepal Coffee Producers Association

has teamed up with institutes like Helvetas / Nepal, JAICA and PACT who have been helping

technically and economically for betterment of Nepalese coffee production, technology and

business. Furthermore, to increase their international relations, Nepalese coffee producers

have participated in various international fairs conducted in countries like America, European

Union, China, Japan, Elsalvador and India through NCPA. However, these efforts to grow the

Coffee production in Nepal may go in vain as scientists in China have predicted that Nepal’s

coffee-growing areas are expected to decline by 2050 because of climate change. According

to lead author Dr. Sailesh Ranjitkar, a scientist at KIB, coffee has been identified as a

potential cash crop in Nepal’s recently-approved agriculture development strategy, which

seeks to transform the country's agriculture sector over the next decade.

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Conclusion

The coffee market, although, is growing steadily at this moment and also opening other fields

like travel, trek and tour to coffee plantations, coffee growing and brewing training into the

industry, it seems that the Nepali coffee production may crash if the scientific predictions and

the necessary precautions aren’t taken seriously.

Sources:

http://www.asianscientist.com/2016/11/in-the-lab/climate-change-coffee-banana-production/

http://www.coffeenepal.org.np/index.html

http://www.himalayanjava.com/beans/

http://himalayanarabica.com/

http://www.socialtours.com/get-immersed/coffee-trip-nepal-from-crop-to-cup.html