The Development of Coffee Consumption in China

For as long as most people in China can remember, tea has been the preferred national beverage. However, since the early 1980s, when Nestle first entered the Chinese market, coffee consumption has steadily grown year-over-year.

Western coffee giants have accelerated the adoption of coffee by opening thousands of branches that offer coffee in various forms. Before coffee became popular in China, it was mainly consumed in two forms; instant coffee and ready-to-go.

Today, coffee is offered in different forms. There is fresh coffee with the largest market share at over 37%, ready-to-drink coffee with a market share of over 36%, instant coffee, ground coffee, and single-serve coffee.

China’s relationship with coffee pods and capsules

Considering that single-serve coffee is one of the main product types in demand in the Chinese market, private-label businesses have an opportunity to expand their reach.

According to Future Market Insights, the Chinese capsule coffee market was worth an estimated 1 billion dollars in 2021. Combining this with the average 14% capsule coffee growth rate, China promises to be a fertile ground for capsule coffee businesses. These numbers are tangible proof of the growing culture of single-serve coffee consumption.

Coffee pods and capsules are not new to the Chinese population. In the past, tea has been sold in pods. Pods are great for people looking for an easy way to make a cup of tea before they head out to work.

Consumers are ready to buy when coffee is made available in pods and capsules because they’ve been exposed to the technology and appreciate its convenience. Additionally, as the Chinese economy keeps growing, more disposable income is available for people to spend on new technologies like coffee makers.

Why is coffee consumption in China on the rise?

Since it built its first store in Beijing in 1999, Starbucks has opened over 6,000 more stores across more than 230 cities in China. These stores are aesthetically pleasing.

Aesthetics and ambiance attract people to go and spend time there. However, this is just one reason that explains the consumption growth. Here are more reasons.

• Government involvement. The Chinese government is aware of coffee consumption’s impact on the economy. It has been encouraging foreign investment in China’s coffee market.
• New coffee products. New coffee products have, without a doubt, intrigued non-coffee drinkers. Today new products like fruity coffee have new “fans.”
• Different people have their reasons for consuming coffee. Anyone who drinks coffee has their reasons for choosing it over another drink. Most drink coffee because it is refreshing. However, there are more reasons.
  • They simply like the taste of coffee.
  • Drinking coffee at a coffee shop places people in positions where they can socialize with others.
  • Some people drink coffee because they like the status it brings them.
  • Some drink it because it helps with digestion.
  • For others, it is a part of their routine.
• Fierce competition among different brands. Companies like Nestle and Starbucks have been in China for decades. However, new companies seek to establish themselves by acquiring customers from other brands or recruiting new coffee drinkers.To achieve this, they spend millions of dollars on marketing, primarily through ads and tv commercials. This is slowly helping to increase the coffee consumed in the country. This is where you, a private-label capsule coffee entrepreneur, come in.
• Millennials and other generations that come after have lived through a time when coffee is readily available in China. They might be considered native coffee drinkers. Compared to their predecessors, they consume much more coffee.
• The coffee market is growing. This sounds absurd. How can a market grow because it’s growing? Well, it is possible. Sometimes, people do things because the people around them are doing those things.China’s growing coffee market is partially fueled by the fact that it is experiencing growth in every part of the coffee supply chain. More farmers are getting into coffee farming. More entrepreneurs like yourself are exploring the possibilities of getting in on the action.

  More people are trying coffee out because their friends are drinking it or because they keep seeing it on TV or social media, or in Western movies.

What is the place of capsule coffee businesses in all this?

Despite China being Starbucks’ second largest market, it is still a young market. The population that has embraced coffee consumption is only a fraction of the entire Chinese population. This is evident in the low consumption per capita of four cups compared to Europe and America’s over 400 cups annually.

This presents a great opportunity to fulfill the insatiable demand that will only keep growing. However, there are fundamental questions you have to ask before you begin. These questions help you craft a marketing strategy for your business.

Additionally, they help you set practical goals for your business and help you establish a loyal customer base over time.

What quality of coffee are Chinese consumers looking for?

You shouldn’t worry about a bigger chunk of your customers being connoisseurs. However, that doesn’t mean they’ll buy anything that hits the shelves.

For many consumers, coffee is also a status symbol derived from Western cultures. Most people have traveled abroad and seen Americans and Europeans consume coffee as much as Chinese consumers drink tea. They brick this back home as a symbol of pride.

This is why unique, high-quality fresh coffee infused with various flavors may perform well as a private-label product.

What is your ideal demographic within the Chinese market?

Coffee consumption started rising in the 1980s when Nestle first invested in China. Ever since more coffee companies have popped up all over China. Ideally, anybody born after the 1980s found coffee in the Chinese market.

They are also more influenced by Western culture and are more likely to drink coffee than the older population. This is who you should be targeting. Identify interests within smaller groups of this demographic and create customized products like flavored capsule coffees for them.

Which coffee products do Chinese consumers prefer?

When it comes to the choice of products, it is essential to watch what bigger businesses are doing. Companies like Nestle are innovating and creating flavored coffees to attract younger consumers.

Also, it may help to take advantage of the highest-selling coffee product (fresh coffee) and integrate that into your product line.

Conclusion

China is an emerging market as far as coffee consumption goes. Private-label investors have endless opportunities to carve out a niche for themselves. Chinagbao reported that coffee consumption is growing at a rate of over 20% per year. This is well over 2% over the global average of 18%.

However, China is not an easy market to penetrate. Tea is tightly knitted in China’s history, which goes back thousands of years. It is unlikely thsat coffee will replace tea anytime soon as the national beverage. However, for those who are prepared and willing to take the risk, the growth rate of coffee consumption presents a golden opportunity to create a thriving business.