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How did world’s largest tea drinking nation fall in love with the coffee? What are the trends to be aware of? Who are the main market players?
Introduction of coffee to the world largest tea-drinking nation started in 18th century, thanks to French missionaries who brought coffee to Yunnan province. However, it wasn’t before 1989 when the launch of Nestlé instant coffee officially marked the start of coffee culture in China.
By 2015, China’s coffee industry already entered the phase of rapid development, demonstrated by numerous local coffee brands and coffee shops that emerged in cities all around the country.
How did world’s largest tea drinking nation fall in love with the coffee?
China's love for coffee was both a result of the country's opening to the west and natural curiosity of Chinese consumers. People traveling abroad brought foreign products and adopted new habits. Among the earliest adopters of coffee were first tier cities office workers who commuted for a long time or stayed up late working overtime. Soon they were followed by the middle-aged group, with high income and good education, who were proactively looking for ways to relax and enjoy life. Finally, the coffee was embraced on a larger scale by women of all ages, who adopted coffee drinking habit partly for the weight loss effect caffeine claimed to cause and partly in the name of following the latest fashion trends. By then, coffee was already a part of the mainstream culture.
Today, Z generation (born post ‘95) is the main force when it comes to coffee consumption. Among them, women are more likely to drink coffee than men.
What are the trends to be aware of?
Modern coffee consumers in China prefer instant coffee, by huge majority. However, with the development of coffee culture, consumers are starting to pay attention to the quality of coffee beans and methods of brewing. This led to the rise of countless specialized coffee shops all around China. Coffee baristas are constantly coming up with new flavors, such as plum blossom coffee, salted egg yolk latte, salty litchi affogato, jasmine soda americano, and similar.
Since January 1999, when Starbucks opened its first store in Beijing, the number of Starbucks stores multiplied year after year, and in 2021 reached more than 5000. Together with the number of coffee shops, the coffee consumption was steadily rising as well.
Within the last recorded crop year (June 2020 – June 2021), 3.9 million bags of coffee were consumed in China. Translated to per capita coffee consumption that would be equal to 32 cups per year. This number, even though today ten times higher than it was back in 2013, compared to other countries, is still low. For example, yearly coffee consumption per capita in US is around 1,130 cups, which is 35 times more than in China. Nevertheless, coffee consumption in China is showing a steady rising trend.
In the meantime, the country started proactively planting coffee and investing in planting technology. The efforts brought expected results and led to the increase in domestic production. In 2021 the domestic consumption soared and reached 3.9 million bags. Domestic coffee production volume of around 1.8 million bags could not satisfy the demand, so the remaining gap of almost 2 million bags had to be filled through imports.
According to Preliminary Industry Estimates Research Institute (前瞻产业研究院), the China's coffee market will maintain an average growth rate of around 10% in the short term future. Both instant coffee and ready to drink coffee consumption are expected to grow. By 2026, China's coffee consumption could reach 5.12 million bags.
Who are the main market players?
Southeast China’s 1st tier cities are the main coffee battle grounds, while cities on the 2nd tier are expected to become high-potential markets in the near future.
Most coffee stores are concentrated in Jiangsu, Zhejiang and Shanghai. These provinces are closely followed by Beijing in the north and Guangzhou and Shenzhen in the south.
Sichuan in the west and Shandong in the east are not yet comparable, but the number of coffee shops in these provinces is on the rise.
Despite the cautiously rising trend, it seems that coffee market in China is on a stable growth path. Paired with the number of potential consumers it understandably draws the attention of the world’s biggest coffee chains. However, the market has been sliced and shared between Starbucks Coffee, Luckin Coffee, Costa Coffee, Kentucky Fried Chicken and McDonald’s. It remains uncertain how quickly it will open up for new brands.
Sources: 百家号, Statista, Urban Bean Coffee, 知乎, Talking Data, Asia Financial, Comuni Caffe
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