Dr. S. Radhakrishnan and Mahesh Hunasikatti

Introduction
Coffee production and consumption are clearly separated in the world. While coffee is produced by over sixty, mainly developing and less developed countries, the developed countries of Europe, U.S.A and Japan consume most of the production. Coffee is one of the major export driven commodities for almost all coffee producing countries since over 60 % of total production by them is exported. Liberalization of global coffee market from International Coffee Organization's (ICO) supply regulation in 1989, and the market reforms initiated by India (from 1993-96) leading to open marketing system in 1996 were the two structural changes that has significantly impacted the global and Indian markets respectively. Not only. India but also many other producing countries had initiated reforms towards free market. Lifting of ICO's global supply regulation took the global market towards a competitive structure. This has introduced a new dynamics in terms of market share of coffee origins and redefined their competitiveness in the major importing countries each one of which has its own unique import matrix where in coffee origins try to retain their shares while they gain or lose to their competitors. The objective of this study is to understand the dynamics of import market share through a suitable model that will bring out the retention capabilities of different origins as well as transfer of market shares in selected importing markets and to forecast the possible average share during the period 2005-07 based on the performance during 1997-2004.

The world's leading coffee exporting and competing origins chosen for the study were Brazil, Vietnam, Colombia, Indonesia, Mexico, India, Uganda, Guatemala and Ethiopia. All other exporting countries are grouped together under "Rest of the World (RoW) category. Nine major importing countries, which represent over 80 per cent in global imports namely Russian Federation, France, Germany, Belgium, Spain, Italy, USA, Japan and Netherlands, which are also important importers of Indian coffee, were chosen.

In order to gauge the. retention capacity or shift in the market share of different competing origins in any given importing country, first order Markov chain model was employed. Using the Markov model, the transition probabilities were estimated. These probabilities which has a value below 0 to I represent the level of retention, loss or gain of market share. For instance a probability of 0 represents `nil' retention while that of ` 1 ' represents complete retention. The difference between the gain and loss probabilities would indicate the net gain or loses depending upon whether the probabilities are positive or negative respectively. In order to understand the trend in growth of coffee imports and exports two periods one representing the pre reform period 1990-96 and the other the post reform period (1997-2004) were taken up.

Forecast of average share in future was made based on the post reform period data since the forecast made out of the recent data would be more realistic. Moreover in the absence of market intervention, fundamental factors of supply and demand and inventories came under focus during this period. The other standard statistical tools such as the compound growth rate (CGR) and Coefficient of Variation (C.V) were used to measure the growth and variability in exports respectively. The compound growth rate indicate the annual growth rate in percentage while co-efficient of variation is an indicator of stability (or variability). Higher the percentage of CV more would be the variation or instability.

Growth in global coffee exports

In general the world average production increased from 94 million bags to 108 million bags (chart. I) mainly due to rapid increase in production by Vietnam (3.0 to 10. 9 million bags) and Brazil (25.8 to 33.2 million bags).growth in their export earnings (value) though the degree varied. Uganda, Mexico, and India are the countries, which registered a negative growth rate of more than 20%.

Growth in Global Coffee Imports

Chart.2 shows the volume of imports of major importing countries in pre and post reform periods. The average import in post reform period (199704) was 104.19 million bags. USA had a major share of 22.01 million bags followed by Germany (14.76 From a negative growth (-1.59%) during pre-reform period, volume of global coffee exports made a turn around to a positive growth with a CGR of 1.48% in post reform period. On the contrary in value terms, the growth turned negative to -15.48% during the post reform period when compared to the pre reform period growth of+11.04%. This was mainly due to depressed global coffee prices during the post reform period. The countries, which showed significant positive growth in volume of exports in the post reform period were Brazil (7.96%) and Vietnam (14.07%) while India and Ethiopia registered a marginal growth of 0.37 and 0.77% respectively. The growth rate in all other countries in general showed a decline. The countries, which had a decelerated growth, were Indonesia, Uganda, Guatemala, Colombia and ROW. In terms of stability, during pre reform, ROW was comparatively more stable, where as in post reform, Colombia showed comparatively more stability with a CV of 6.64 (Table .1).

in global imports increased from 0.27% in pre reform period to 3.28% in post reform period. While Russian Federation had impressive growth of 8.49 from negative growth, followed by USA (1.28%) and Germany (2.53%). Where as in terms of stability in the imports, France was comparatively more stable in both the periods, where as Russian federation attained stability during post reform period. The notable feature in the post reform period is that imports from ROW became more and more unstable indirectly indicating the scope for switching of loyalties of importers towards different origins (Table.3).

Vietnam, the leading robusta producer, with its competitive pricing had become the most loyal origin with a retention probability of 0.60. Even though it's lost its share to Brazil, to an extent, it was able gain more fl;orn Ethiopia (0.44). Brazil had nil retention but it could maintain its share by gaining from Mexico and Uganda in the Russian market by its aggressive competitive measures. Next to Vietnam, the country that showed high retention and loyalty was India (0.44) because of its traditional coffee trade relationship with Russian Federation. The growing demand for Indian coffee was mainly attributed to the fact that high net transfer gain had occurred from Indonesia and to a greater extent from ROW. The fact that, ROW is making in roads in the Russian market was evidenced by the high net gain transfers to ROW from the leading producers of Brazil, Columbia, Ethiopia and India. Overall, Brazil, India and ROW were significant gainers of market share in Russian Federation while Colombia, Guatemala, Indonesia, Mexico and Uganda were major losers.

Italy: Italy had shown a marked loyalty to Brazilian and Vietnam's coffees at a probability of 0.78 and 0.51 respectively and to some extent to India (0.20) and Colombia (0.13). While Brazilian retention was mainly reinforced by net transfer gains from India, Vietnam and Mexico, Vietnam's reinforcement came mainly from Guatemala. It is interesting to note that even though India's retention was lower it succeeded to gain from major producing origins like Mexico, Guatemala and to an lesser extent from Colombia and Vietnam. Thus India is able to effectively compete Based on their respective retention, net gain and loss of market share, the exporting countries were grouped into high, moderate and low categories (for the period 1997-2004) and the same are presented in the table 4 to 6. In the Markov analysis a value closer to 1 indicates highest retention of share while 0 indicates nil retention. The above is true for loss or gain in market share as well.

Russian Federation: Russian Federation is a major importer of soluble coffees for which robusta coffee is the opreferred choice, had noticeable loyalty. India had lost its share heavily to Vietnam as indicated by high net loss transfer probability of 1.00. Though Uganda's had comparatively lower retention, it enjoyed a high transfer gain from Guatemala and Colombia. Higher retention of RoW did prove that Spain is well diversified in terms of coffee imports and its in this market. Brazil, India and RoW were the highest gainers while Colombia, Ethiopia, Mexico and Guatemala were the substantial losers in this market.

Germany: Germany's loyalty is evenly distributed at a moderate level among Uganda, Brazil and Colombia, (retention probabilities at 0.36,0.30 and 0.30 respectively) and to a lesser extent towards Guatemala (0.16). The major net gainers were Colombia, Vietnam and ROW while the major net losers were are India, Indonesia, Mexico and Uganda. Even though Uganda retained a modest share, it has mainly lost to Ethiopia, while Brazil along with its moderate retention share, gained substantially from Indonesia and Vietnam. Colombia's share was mainly attributed.- by a very high transfer net gain from Mexico and to some extent from Ethiopia and Uganda. Though retention share of Guatemala is minimum, it has persistently gained from Ethiopia. Finally RoW's highest retention probability of 0.65 was attributed very high net transfer gain from India, Colombia and Ethiopia. India has thus lost its loyalty in this market and it* has to compete with ROW for its market share.

France: France is mainly loyal to Guatemala, Colombia and Vietnam coffees with a retention share of 0.60, 0.47 and 0.46 respectively. In spite of higher retention, Guatemala had started losing market share to ROW in this market. France's loyalty towards Colombian coffee was also supported by high net transfer gains from Mexico. Vietnam's competitive strength was backed up by very high net transfer gains from India and Ethiopia at a probability of 1.00. One interesting fact of this market is even the leading producers like Brazil, Indonesia, Mexico and India did not found favour in terms of loyalty as retention probabilities of these origins were closer to zero. While Vietnam and Brazil has gained high market share, Ethiopia, India, Indonesia Mexico and Uganda have lost heavily their share to the other competing origins.

Spain: In Spanish market, only ROW followed by Vietnam and Uganda dependence on few countries is no longer valid. Among the major origins, which supply coffee to Spain, Brazil Uganda & Vietnam and RoW were net gainers while Ethiopia, Guatemala, Mexico, Colombia from Indonesia, India from Colombia, Indonesia from Ethiopia. India, Indonesia and Mexico are net losers.

Belgium: Belgium had shown high loyalty towards Vietnam and Guatemala, with retention probability of 0.52 and 0.41 respectively. Vietnam also had high net transfer gain from Mexico where as Guatemala was able to gain mainly from Indonesia. While India gained market share from Ethiopia, it lost part of its share to Brazil. Overall Brazil, Vietnam and ROW were net gainers and Ethiopia, India, Indonesia, Mexico and Uganda were net losers. in this market.

United States of America: USA had shown very high loyalty to Colombia, and moderate loyalty to Brazil and to ROW. Loyalty towards Colombian coffee in USA is quite understandable due to their long standing relationship in coffee promotion. Brazil, in spite of lower retention was able to wrest its share from Vietnam with a net transfer gain of 0.82. Notwithstanding its proximity to U.S market, Mexico does not appear to enjoy much retention loyalty but could successfully compete with India and Indonesia to take away their shares. Thus, Brazil, Mexico and ROW were net gainers Ethiopia, Guatemala and India are net losers in USA.

Japan : Among coffee origins, Japan had been loyal to Indonesia, owing to its geographical proximity followed by Guatemala and Brazil. The retention probability of Indonesia was reinforced by a high net transfer gain from India. Even though Brazil's retention was insignificant, its high transfer gains from Uganda Vietnam and some extent from Colombia and ROW amplified its growing strength in Japan's coffee market. Thus Brazil and Indonesia were net gainers while Ethiopia, India, Mexico and Uganda were significant losers. It must be emphasized that India had nil retention and lost its share completely to Indonesia and it could not gain any share from any other origins, calls for strategies to improve competition by resolving logistics and quality issues in this market.

Netherlands: Indonesia has been the most preferred loyal origin to Netherlands with retention probability of 0.71 even though it did not gain from its competing origins. Fair amount of retention was seen to coffees of Brazil- (.29) and Colombia (0.24). In terms of dynamics of market share, Brazil had gained from Vietnam; Ethiopia from Guatemala; Mexico from Ethiopia; and Vietnam from Mexico. India is not a favoured origin as shown by zero retention probability and it could not also effectively compete for its share in this market since it is a net loser to ROW. In general ROW was the significant gainer in this market and countries such Colombia, Ethiopia, Guatemala, India and Uganda are major losers

Forecast of market share
Based on the transition probability matrix, forecast of average market share in terms of volume and percentage of different origins in the major importing countries during 2005-07 were made and presented in Table. 7. The forecast shows that India on an average would be able to maintain higher market share in Russian Federation of 31.16% and 10.36% in Italy. In Spain, Belgium and Germany. India would continue to have some visibility on its share though not to any. significant level. In all other importing countries India may not be able to maintain more than 2% share.

Conclusion
The foregoing analysis has brought out the competitive strength of various coffee producing countries in the global market place. In the specific context of India, the extent of gain and loss in key consuming markets has highlighted the urgent need to review the marketing and promotion policies and strategies for Indian coffee in all the major markets keeping in view the quantity, quality, logistics and pricing requirements in these markets. Reinforcing this analysis with a detailed market preference study of coffee roasters and traders in the major import market will enable India to retain and gain its lost market shares.