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June 28, 2023 | Food & Beverage, Sectors & Industries
If you’re a coffee producer looking to break into the Chinese f&b market, you’ll need to understand the unique dynamics at play. This article will give you an overview of the coffee market in China, and offer tips on how to sell your coffee there. By understanding the Chinese consumer and their preferences, you’ll be well on your way to success in this burgeoning market.
China Coffee Market Figures and Trends
China is notoriously a consumer of tea, but nevertheless, in recent years, it has become one of the largest coffee consumers among emerging countries. In particular, coffee consumption has grown among young Chinese professionals.
According to the analysis of the coffee market reported by Chinabgao, the growth rate of coffee consumption in China is about 20% per year, more than 2% above the global growth rate. Experts believe that the Chinese coffee market could reach trillions of yuan within 10 years.
The traditional drink of China is tea, but more and more people are switching over to coffee. The government supports this trend well enough that they’ve devoted an entire event just for the purpose of Haikou’s I-Coffee Exposition for instance.
Figures on the coffee market in china
With a 15% annual growth rate, coffee is the new culture in China. Leaders like Starbucks and Nestle have played significant roles to make this happen with their loyal customers who drink more than ever before!
Revenue in the Coffee Market reaches nearly US$2,087m in 2018. The market is expected to grow annually by 14.3% (CAGR 2018-2021).
The market’s largest segment is the segment Instant Coffee with a market volume of US$2,075m in 2018.
The average per capita consumption stands at 0.05kg in 2018.
The Chinese coffee market is projected to witness a CAGR of 10.15% during the forecast period (2021 – 2026).
The rise of the Chinese middle class and a better standard of living has allowed the opening of hundreds of new coffee shops throughout China. According to m.sohu.com, in 2016 their number has increased exceeding 100 thousand points of sale.
Local Coffee Products is limited, Opportunities for foreign Producers
China is an important producer and consumer of coffee, with production, limited to two southern provinces. Recently a new agency has been established in Yunnan that will promote their local product more effectively for both domestic consumption as well international markets!
Instant Coffee Gaining its Way into Chinese Offices & Household
Instant coffee is a popular choice among the Chinese. With increasing household expenditure as well as changing lifestyle trends we are going to see this trend become more and more mainstream. With the growing preference for instant coffee, manufacturers have launched several flavours (ex: In May 2019, Nestle launched a Fruity Ice Coffee that took 6 months to develop) to attract more people and increase sales overall. The popularization of online shopping platforms is also going to play a major role for instant coffee brands.
Coffee Franchise in China is all the rage, especially in 1st tiers Cities
Making a ranking of the most competitive brands, in the urban cities, where the Western lifestyle is more widespread, Starbucks and Costa firmly hold the top positions in terms of customer flow, according to the statistics of BMI Research in London. On the top list is Starbucks, which has adapted its format for Chinese consumers, with 2800 stores open in 130 cities, as many as 600 in Shanghai alone, more than those in New York or London.
Costa in China has focused a lot on the analysis of the local market and is willing to change its offer according to the tastes of consumers in the various regions. For this reason, it is not strange to hear customers say that, for example, Beijing’s Costa coffee tastes slightly different from that of Shanghai. In addition, the English chain offers different types of tea, a quiet environment, and loyalty programs with cards or apps.
LOCAL COFFEE BRANDS IN CHINA
Despite the predominant position of the big chains, coffee boutiques not affiliated with big brands are very popular: this type of premise offers a more comfortable environment and service.
Lisun: Founded in 1987 in the province of Hainan, Lisun is the first company to introduce instant coffee in China. It became particularly famous for its coconut coffee. The company owns its own coffee plantation on the island of Hainan. Over the years, it has diversified its product range by launching different tastes of coffee, and other types of beverages on the market and also selling roasted coffee as well as soluble coffee.
Luckin Coffee: A relatively new brand in the Chinese coffee industry, Luckin was founded just a few years ago in 2017. Despite its relatively new status, Luckin already maintains over 4500 stores which surpasses the presence of coffee power-house, Starbucks. Luckin has achieved this great growth and popularity by implementing technology to reach consumers and by allowing customers to use their mobile devices to order coffee for delivery or pick-up.
Hogood: Hogood is a Yunnan-based company founded in 2007. It is one of the largest coffee growers grown in China and one of the best-selling local coffee brands in the country. Hogood produces and sells roasted coffee, available in both grains and ground, and instant coffee.
PRESENCE OF INTERNATIONAL BRANDS
Starbucks: Starbucks has had a major presence in China since it started selling coffee there in 1999. With over 4,000 stores throughout mainland China, Starbucks has been a leader in the market for many years. The success of the international coffee powerhouse in China has been attributed to its keen understanding and appeal to Chinese culture.
Tim Horton’s: The Canadian coffee and doughnut brand began operations in mainland China in 2019 and recently received investment from one of China’s largest social media companies, Tencent. The investment deal is set to assist Tim Horton’s in expanding to over 1500 stores and is seen as a direct competitor to Starbucks.
Peet’s Coffee: Peet’s Coffee, which was founded in the United States in San Francisco, first entered the Chinese market in 2017. The brand has been direct to competitors Starbucks in the United States and the battle continues over market share in mainland China. Peet’s Coffee differentiates itself from competitors, however, by providing high-quality experiences in their unique store locations.
Lavazza: Lavazza is an iconic Italian brand that just recently entered the coffee market in China in 2020. They have partnered with a Chinese restaurant conglomerate, Yum China, which has benefited them greatly in penetrating the market and navigating cultural norms in China. Furthermore, the company has its focuses on higher-end consumers.
Coffee brand target: Chinese Millennials
According to m.sohu.com, the young people of the emerging middle class represent the driving force (75%) of the black beverage boom in the eastern country. Within this segment, female customers represent the largest share: 70%. Young consumers are demanding and pay particular attention to professionalism, drinks, and services tailored to their tastes, a style of ceremonial service, the care of the environment, and the diversification of menus among the various coffees.
Various market players operating above all offline are fighting against competitors active in e-commerce and offering high-quality coffee and food as a weapon to attract customers and offer them good reasons for staying in the long and fruitful coffee in terms of consumption.
How to sell your coffee in China?
Foreign companies that have opened successful online stores all have two common characteristics. They have the know-how to export to China and have a deep knowledge of digital technology. We need to do an important job to promote our brand on Chinese eCommerce platforms, with investments in marketing and communication.
eCommerce is key for coffee players in China
E-commerce is playing an increasingly important role in China, especially for small businesses and coffee producers. For coffee producers looking to sell their products in China, having a strong online presence is critical. Here are some reasons why e-commerce is great for coffee producers that want to succeed in China:
E-commerce provides a way to reach a huge chunk of Chinese consumers directly.
There are no intermediary wholesale distributors
No need for brick-and-mortar stores carrying your products – you can sell directly to consumers through your own website or online marketplace store.
In China, the B2C model is dominated by the Tmall portal of the Alibaba group, which holds a 56.6% stake. The other operators are very far. In second place, there is JDcom with 24.7 %. An increasing number of Chinese people are buying imported products online, using some e-commerce platforms authorized by the Chinese government. The marketplace offers obvious advantages:
Existing and known platform
Online payments already active
High traffic
Assistance 24/7
For a marketplace of those mentioned above we are talking about daily visits of millions of users, with an average purchase rate of around 30%, which for some online shops within them also counts in a 50%, once activated optimal customer service and put in place a well-designed promotion and visibility campaign. A thousand billion dollars is what Chinese e-commerce has been worth in 2017.
Coffee Brand Need A Website Designed with Chinese Internet Users in Mind
There are a few reasons why a coffee brand would need a website design specifically for the Chinese internet in order to be successful in China. Some of these reasons include:
The Chinese internet is different than the Western internet. The way websites are designed, the way users interact with them, and the way businesses use them are quite different. A website that is designed for the Chinese internet will be better suited to meet the needs and expectations of Chinese users.
In addition, the Chinese internet is heavily censored, so your website design must comply with government regulations. Many of the elements you use on your global website won’t load properly from China.
Why a Chinese website is a key element in reaching out to Chinese coffee distributors?
To understand why coffee producers need a website in Chinese, it’s important to understand the role that online visibility plays in building trust with distributors.
In China, there are a lot of illegitimate brands and products flooding the market. This makes it difficult for distributors to know which brands are worth carrying. One way they can vet brands is by checking to see if the brand has an online presence.
A website in Chinese signals that a coffee producer is serious about reaching out to distributors in China and values their business. Additionally, having a website in Chinese shows that the company is willing to invest in making its products and materials accessible to Chinese audiences.
Coffee Brands in China Have to Invest in Baidu Marketing
A key operation for your website and consequently company to get visibility online in China is through search engine optimization (SEO) aka the art of ranking on your best keyword – In China, the challenge will be to rank on Baidu.
The other aspect of Baidu Marketing is paid to advertise. The concept is quite similar to google but the ad format is different and of course, better be fluent in Chinese.
In both cases, a focus on initial keyword research and content strategy planning will be key to your success on Baidu.
Being easily findable on Baidu will strongly increase your chance of getting positive answers by distributors and if your coffee brand is branded and you wish to go for a direct selling approach, it will help with your conversion rate.
Coffee Brands have to go full-on storytelling through social media & forums
There are a few reasons why coffee brands need to invest in social media marketing in China.
First, social media platforms are where most Chinese consumers go to find information about products and services. In fact, according to a study by McKinsey, 88% of Chinese consumers say they use social media to learn about products and services.
Second, social media platforms are great channels for driving brand awareness and generating word-of-mouth buzz.
And finally, social media platforms offer brands the opportunity to connect with their customers on a more personal level, which can help build customer loyalty.
Tims Hortons on Weibo
Get yourself an Official Account on the main Chinese Social Media:
Weibo to grow your brand awareness through buzz marketing and KOL
Douyin to promote playful and engaging content through a short video
Xiaohongshu to take advantage of the Instagrammability of coffee
Zhihu to reach out to coffee connoisseurs and reassures consumers about the quality of your beans through peer-to-peer reviews
WeChat for brand loyalty-building and its mini-program function
If you are a Coffee Franchise/store Use WeChat mini-programs
WeChat has gained great traction with the implementation of its mini-programs which are, in essence, an app within the app. These mini-programs are an incredible way for brands to connect with customers by providing unique content and functionality within the WeChat app itself.
These mini-programs allow users to perform a variety of tasks and access features such as purchasing products, ordering take-out, accessing coupons, and much more.
WeChat Mini program of Chinese Coffee Franchise Luckin Coffee
With over a million of these mini-programs in the WeChat ecosystem and over 750 million active users, the creation and implementation of a WeChat mini-program are critical for engaging in the best way with Chinese consumers.
Need help selling your coffee brand in China?
