The consumption of coffee in Pakistan is on the rise, particularly among the youth, making it their preferred hot beverage. However, the high duties imposed on coffee contribute to its high price, posing a challenge to the growth of the coffee market in the country.
The increasing preference for coffee is evident among the youth in colleges, universities, and workplaces, indicating a shift in tastes as the youth population expands.
Faizan Tariq, an advertising professional, and coffee enthusiast, expresses his desire for coffee to be as affordable as tea in Pakistan. He wonders why coffee, like tea, is not priced more competitively, especially considering its popularity as a hot drink for late-night work sessions.
Amna Tariq, a student at Punjab University, turned to coffee during college when the semester system began. She relies on coffee to stay energized during demanding university workloads and considers it a lifesaver during exam season. However, she too, wishes that coffee was more affordable on regular days, just like tea.
Globally, coffee consumption reaches an astounding 2.25 billion cups per day, with projections indicating a market value of $85 billion by 2025. As an emerging market for coffee, Pakistan needs to evaluate and rationalize its duty structure. Currently, the overall duty on finished coffee products, including customs duty, additional customs duty, and regulatory duty, stands at 53 percent, while bulk imports face a duty of 28 percent. In contrast, tea incurs a duty of only 13 percent.
The high duty not only hampers the growth of the coffee market but also creates challenges for formal businesses to invest, leading to the emergence of an illicit trade market. Smuggled international coffee brands are sold at prices that legitimate coffee-making companies cannot compete with, as they comply with duties and taxes.
This situation also violates SRO 237 issued in 2019, which mandates imported products to have a minimum shelf life of 66 percent at the time of import, ingredient labeling in both English and Urdu, and Halal certification from accredited authorities, along with specific logo and labeling requirements. Ensuring compliance is the responsibility of the federal government during importation and provincial governments at the retail stage.
Considering the growing consumption of coffee among the masses, there is an opportunity to localize, assemble, manufacture, and brand coffee in Pakistan, with potential for export. Notably, one of the world's leading multinational coffee producers is already operating in Pakistan and may be poised to seize this opportunity. The government plays a crucial role in creating an enabling environment for such endeavors.
Furthermore, coffee cultivation is feasible in Pakistan, particularly in the Pothohar region, where the climate is suitable for coffee growth. This could diversify the Pakistani agriculture value chain, generate employment opportunities, and unlock growth potential. To facilitate this, it is imperative to rationalize the duty structure for bulk coffee, which would contribute to the development of value chains, attract foreign investment, and foster innovation in the coffee market.
Pakistan's coffee market is offering growth opportunities, but addressing the duty structure, promoting localization, and supporting coffee cultivation are essential to tap into the industry's potential.
