It's the world's most expensive coffee and is made from faeces, but connoisseur drinkers should feel most squeamish about the "horrific" abuse that mars its production process, animal welfare groups have claimed.

Kopi Luwak, or civet coffee, is created mainly in Indonesia from beans of coffee berries that are fed to Asian palm civets – small, cat-like creatures found in south-east Asia.

The brand has experienced a recent surge in popularity, fuelled in part by a memorable appearance in the 2007 film The Bucket List, pushing its export price up to $230 (£145) a pound.

Kopi Luwak has spread from Indonesia to the US and Europe, with a London outlet last year announcing that it will charge patrons £70 for a cup.

But its high-end pricing and idiosyncratic origin mask the grim reality of the coffee's production, which has morphed from a casual cottage industry for rural Indonesians to intensive farming.

The Guardian visited a coffee shop in Medan, on the Indonesian island of Sumatra, where a female civet was kept in a cramped cage at the back of the premises. Her two young offspring were separated from her in a similarly small cage, with a further 20 cages hidden away from view on the shop's roof.

Animal welfare groups contend that growing numbers of such civet "farms" are emerging across south-east Asia, confining tens of thousands of animals to live in tiny cages and force-fed a debilitating diet. The Asian palm civet is common, but conservationists claim that related species are sometimes used which are under threat of extinction. The binturong, another cat-like species that is sometimes used to produce Kopi Luwak, is classed by the International Union for the Conservation of Nature's red list as "vulnerable".

The animals are almost exclusively fed coffee berries, which they then excrete. The enzymes in their stomach acid help produce a bean that is washed and roasted to create a coffee that has been lauded for its smooth, caramel-like taste.

"The conditions are awful, much like battery chickens," said Chris Shepherd, deputy regional director of the conservation NGO Traffic south-east Asia. "The civets are taken from the wild and have to endure horrific conditions. They fight to stay together but they are separated and have to bear a very poor diet in very small cages."

"There is a high mortality rate and for some species of civet, there's a real conservation risk. It's spiralling out of control. But there's not much public awareness of how it's actually made. People need to be aware that tens of thousands of civets are being kept in these conditions. It would put people off their coffee if they knew."