Indian café chains are betting on premium beverages to drive growth in an otherwise sluggish quick-service restaurant market, but these same drinks are becoming increasingly expensive. According to reports from Mint, a global supply squeeze is driving up the cost of imported ingredients such as matcha, hojicha and yuzu, with most operators absorbing higher costs rather than raise prices. The sharpest squeeze is in matcha, with global wholesale prices climbing 30-75% over the past year as demand has outpaced supply from Japan.
Imported matcha has seen the steepest price increases, with importers paying up to 75% more for premium ceremonial-grade matcha, while lower grades are up 30-50% amid poor harvests, labour shortages, limited production of tencha—the tea leaves used to make matcha—and higher freight costs. As reported by industry executives, coffee and whey prices have also risen by around 20%, while imported hojicha and yuzu have become more expensive amid similar supply-chain constraints, a weaker rupee and higher logistics costs.
Despite higher prices, consumers have shown little resistance, paying ₹250-450 for premium beverages such as matcha lattes, bubble teas and Vietnamese coffees, compared with ₹100-200 for regular iced teas, juices and soft drinks. According to industry estimates reported by Mint, India's speciality tea market has more than tripled to about ₹1,000 crore over the past five years, while the country's bubble tea market is estimated at about ₹3,800 crore and is expected to grow at an annual rate of 8.3% through 2030.
The very drinks driving growth are becoming the industry's costliest to serve, with input costs on imported ingredients rising 5-10% over the past year. As reported by Mint, Dhruv Kohli, founder and chief executive of Boba Bhai, said gross margins on drinks made with imported ingredients have compressed by about two percentage points. The Bengaluru-based chain, which operates about 100 outlets, has absorbed higher procurement costs through sourcing improvements and operational efficiencies rather than raise prices, with standard matcha beverages starting at about ₹199, unchanged from a year ago despite higher costs.
Despite margin pressures, premium beverages remain attractive because they command higher prices and create opportunities for seasonal launches. At Boba Bhai, beverages contribute about 45% of overall revenue, while premium drinks have helped lift average order values to around ₹400 online and ₹330 in stores. As reported by Mint, operators are looking to reduce dependence on overseas suppliers, with Boba Bhai evaluating Indian-grown matcha and working with domestic tea estates to develop hojicha alternatives, though most cafés continue to rely on imports for consistency in flavour and quality.
