China has emerged as one of the world’s largest and most dynamic coffee markets despite being a mostly tea-drinking nation. With authorities lifting the Zero-COVID policy, both on-premise and on-the-go consumption of coffee will surge going forward. At the same time, at-home consumption habits acquired during the COVID-19 lockdowns and quarantines will remain stable, supported by product innovation and premiumization. As a result, China’s overall coffee sales will rise at an 8.7% compound annual growth rate (CAGR) over 2022–27*, with hot coffee outpacing ready-to-drink (RTD) coffee drinks sales, according to GlobalData, a leading data and analytics company.
Bobby Verghese, Consumer Analyst at GlobalData, comments: “The growth in the Chinese coffee market is driven by the booming café culture among urban students and white-collar workers of the Gen Y and Gen Z generations. With public mobility and tourist arrivals rebounding after authorities lifted the Zero COVID policy, on-premise coffee sales are bouncing back. As consumers flock to their educational institutions, workplaces, and their favorite cafés, coffee is in demand both as an energizer amid hectic schedules and as a social lubricant for leisure occasions.
“Multinational giants, such as Starbucks, Costa Coffee, Lavazza, Peet’s Coffee, and Tim Horton’s, are engaged in fierce competition with domestic operators, such as Luckin Café and Coffee Box, with both parties vying to outdo each other’s network size. With the opening of outlets even in lower-tier cities, the consumer base for coffee will expand dramatically.”
Kiki Wu, Consumer & Retail Leader, Greater China, notes: “The COVID-19 lockdowns in 2022 fueled at-home consumption of both instant coffee and specialty coffee. Urbanites experimented with premium coffee variants, coffee machines, capsules, and pods to recreate barista-quality coffee at home. Manufacturers are intensifying research and development investments to sustain the retail sales momentum even as consumers are leaving their homes more often. They are rolling out authentic and indulgent coffee grounds and blends, novel flavors, and new formats such as drip coffee bags.”
“Similarly, RTD coffee makers are rolling out new variants of cold-brew coffee to attract novelty-seekers. As a result, the Swiss-based MNC, Nestlé, faces fierce competition from innovative and agile local brands, such as Hogood, Lisun, Saturnbird, Tasgear, and Yongpu.”
Verghese adds: “Ecommerce and social media portals are key distribution sub-channels for both coffee vendors and on-premise operators. Marketing promotions launched during the Singles Day and 618 online shopping festivals are pivotal for ramping up manufacturers’ sales volumes and revenues. Similarly, café operators are boosting takeaway purchases by refining their direct-to-consumer portals and partnering with hyper-local delivery services to facilitate faster doorstep deliveries and convenient payment modes for tech-savvy urban workers and students.”
Wu concludes: “With its burgeoning population, rising household disposable incomes, and fluid lifestyle changes, China has become a vibrant coffee market. More companies are expected to enter the fray as coffee accounts for less than 13% of the overall value sales of hot drinks in China*, leaving ample room for future growth. Manufacturers and café operators are also sourcing coffee beans from local plantations to develop ‘Made in China’ labels and capitalize on the rising ‘guochao’ nationalism/localism trend among Gen Z cohorts.”
* GlobalData Consumer Intelligence Center – Market Analyzers, accessed in April 2023
