Walk into any mid-to-premium café in Mumbai, Bengaluru, or Hyderabad right now and you will find a matcha latte on the menu, priced between ₹300 and ₹450. The drink has become something close to a generation-defining signal — part beverage, part identity marker. What the menu board does not tell you is that the bright green powder behind that latte has become one of the most contested agricultural commodities in global specialty food trade, and that the café owner serving it is almost certainly absorbing a cost spike they are choosing not to pass on to you.
According to a LiveMint industry report published August 2, global wholesale prices for matcha have climbed 30–75% over the past year, driven by demand outpacing supply from Japan. Importers are paying up to 75% more for premium ceremonial-grade matcha; lower grades are up 30–50%, the result of poor harvests, labour shortages, limited production of tencha — the specific tea leaf from which matcha is milled — and higher freight costs. Hojicha and yuzu, two other imported Japanese ingredients now embedded in Indian café menus, have followed the same trajectory, compounded by a weaker rupee and rising logistics costs. Coffee and whey prices have climbed roughly 20% as well.
The Demand Side Is Holding — So Far
Indian consumers, at least in urban markets, have shown no price resistance. The same LiveMint report notes that premium beverages are selling at ₹250–450 a cup, against ₹100–200 for regular iced teas, juices, and soft drinks — and footfall has not collapsed. India's speciality tea market has more than tripled to about ₹1,000 crore over the past five years. The bubble tea market alone is estimated at about ₹3,800 crore and is expected to grow at an annual rate of 8.3% through 2030.
Those numbers have pulled in everyone from Starbucks to Boba Bhai, Coffee Island, and abcoffee, each rapidly expanding premium beverage portfolios. Premium drinks carry higher unit economics, drive repeat visits from younger, aspirationally-oriented consumers, and differentiate brands in a market where a plain cappuccino is no longer enough.
But the arithmetic is tightening. Dhruv Kohli, founder and CEO of one of the chains quoted in the report, said input costs on imported ingredients have risen roughly 5–10% over the past year, with matcha seeing the steepest jump due to the global demand-supply imbalance, rupee depreciation, and freight costs. Most operators are absorbing the difference rather than adjusting menus — a choice that protects footfall but steadily erodes margin. Smaller operators, with less purchasing power and thinner buffers, are increasingly likely to pass the cost on to consumers.
A Structural Fault-Line, Not Just a Supply Blip
Indian premium F&B brands have built their growth around imported ingredients — Japanese, Taiwanese, Vietnamese, Korean — whose supply chains they neither control nor can readily substitute. When a Japanese harvest shortfall and a freight cycle combine with a depreciating rupee, there is no domestic fallback. The industry is dealing with the consequence of building a premium consumption segment on a foundation it did not build.
Premium beverages sit at the top of the margin stack for café chains — they are the highest-contribution SKUs, the items that justify real estate in expensive high-street and mall locations. Sustained cost inflation in exactly this category reduces profitability and forces a rethink of menu engineering, store economics, and expansion pace. Private equity capital invested in several of these chains over the past three years was priced against a certain margin profile. That profile is now shifting.
There is also a second-order effect on urban retail. Premium café chains anchor the experiential retail ecosystem in malls and high-streets across Indian cities. If premiumisation-led footfall growth slows because the drinks that drive it become structurally more expensive to serve — or to buy — the knock-on effect reaches landlords, co-tenants, and the broader organised F&B ecosystem.
The Tea Board Has the Tool It Has Not Yet Used
India is one of the world's largest tea producers, with estates in Darjeeling, Assam, and the Nilgiris that have spent decades cultivating a reputation for fine-quality leaf. Ceremonial-grade matcha is made from shade-grown tencha, a cultivar of Camellia sinensis — the same species from which Indian teas are produced. The agro-climatic conditions in parts of Darjeeling and the Nilgiris are suitable for shade-grown green tea cultivation at high standards.
The Tea Board of India noted in its 2023–24 annual report that there is untapped potential in value-added green tea products, though it has not yet specifically targeted matcha-equivalent ceremonial-grade output as an export-competitive segment. The gap is consequential. Global demand for premium matcha is not a passing trend — it is driven by structural shifts in Western consumer preferences toward functional beverages, with demand in North America, Europe, and Southeast Asia expanding alongside India's own. A domestically developed ceremonial-grade green tea product, even if not branded as matcha (a denomination tied to Japanese geographical indication), could serve both the Indian café market and premium export channels simultaneously.
The India-Japan Comprehensive Economic Partnership Agreement, in force since 2011, already governs tariff treatment on agricultural imports including green tea derivatives. A targeted review of duty structures on specialty tea imports could provide near-term relief to domestic chains while a longer-term domestic development programme takes shape. These are not complicated asks — they are institutional follow-through on a strategic opening that has been sitting in plain sight.
Menu Engineering vs. Supply Chain Engineering
The choices facing Indian café chains right now are essentially two: absorb costs until the global supply cycle eases, or restructure how they source. Most are doing the former, which is defensible in the short run — Japanese matcha supply will normalise eventually, and raising prices mid-cycle risks training consumers to reconsider the habit. But the cycle has lasted long enough, and the rupee depreciation is structural enough, that the smarter chains are exploring domestic substitutes.
Blue Tokai's co-founder Aneesh Bhasin has publicly acknowledged that sourcing costs for non-coffee specialty beverages are increasingly unpredictable and that chains are exploring domestic alternatives. That search, if it connects with estate-level investment from the Tea Board and APEDA, could accelerate the development of a genuinely Indian premium green tea product — one that does not simply substitute for matcha in café kitchens but competes in its own right on quality and provenance.
India has built premium consumption categories before from domestic raw material — single-origin coffee from Coorg, specialty spices from Kerala, craft spirits from Goa. The premium green tea opportunity is structurally similar, except that it has an urgency attached: the market for it already exists inside India's own café chains, and those chains are currently paying a foreign premium to fill it. The matcha squeeze is uncomfortable for café operators today. For India's tea estates, it is an unsolicited brief — and the question is whether the institutions with the mandate to act on it move before the cycle turns and the urgency fades.
