Coffee, please!

Business Recorder

13-05-2025

The coffee culture is gradually taking root in Pakistan. The young population is increasingly drawn to this seemingly better stimulant—it's trending. However, coffee manufacturing and assembling remain absent domestically. In contrast, the tea culture, introduced by the British a couple of centuries ago, is well-supported by policymakers, enjoying fiscal backing for local assembly.
That's not the case for coffee. The imposition of SRO 840(I) in June 2021 has placed coffee production and assembly at a disadvantage compared to tea. A level playing field is needed to support the growing popularity of coffee consumption, particularly among urban youth.
Finished coffee products face duties ranging from 42 percent to 53 percent, while bulk raw material imports (instant coffee) are taxed at a disproportionately high 28 percent. In contrast, the duty on tea imports is only 13 percent. This wide duty gap is stifling the growth of coffee assembly and marketing in Pakistan.
It's important to note that bulk instant coffee is not an elite product, unlike cold brews or French vanillas served at upscale cafés. Policymakers must abandon the outdated view of coffee as an elite drink. That segment is small. The real, silent shift is happening in the mass market, which is highly price sensitive. Higher duties on bulk coffee compared to tea are preventing this potential from being unlocked.
To establish a level playing field, the government should eliminate regulatory duties (RD) and additional customs duties (ACD) on bulk instant coffee imports. This aligns with both the IMF's emphasis on rationalizing trade tariffs and the National Tariff Policy (2019–24) guidelines.
Globally, the coffee market is expanding rapidly. According to Precedence Research, it is projected to reach $256 billion in 2025 and grow to $381 billion by 2034. Meanwhile, climate change is disrupting coffee production in key countries such as Brazil and Vietnam, leading to reduced supply and rising prices.
This creates opportunities for new entrants in coffee production. Pakistan's climate—especially in the Pothohar region near Rawalpindi and Islamabad—is conducive to coffee cultivation. The region's hilly and rainy terrain is well-suited for experimentation, and global players are showing interest. All that's needed is a level playing field and an enabling environment. Several agriculture value chain companies are already exploring coffee cultivation and development.
Eliminating RD and ACD on bulk instant coffee will reduce costs for importers and improve the business case for local manufacturing. Multinationals and local firms can then invest in infrastructure and set up value chains for domestic production.
The logic is simple: lower duties make instant coffee more affordable. As demand rises, more local and international players will enter the market, expanding access and consumption. This will help foster a broader coffee culture, reaching beyond affluent consumers and into lower-income groups.
With 65 percent of the population under 35, coffee's popularity is expected to grow rapidly. Once local assembly begins, marketing and packaging will follow, generating added value. Today, smuggled coffee—violating SRO 237—dominates the market. Formalizing the supply chain will improve efficiency, reduce final product prices, generate employment, spur economic growth, and increase tax revenues over time.