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Coffee finds a home in China

From the April 2019 issue.

Rising incomes and an expanding population of increasingly aspirational and digital consumers are helping a vibrant coffee culture flourish in a country that still largely prefers tea.

Coffee ChinaWhile coffee growing in the Yunnan Province in southwestern China is experiencing quite the renaissance, coffee consumption on the other side of the country is also seeing significant action. The predominantly tea-drinking country has developed a strong appetite for coffee, with both consumption and the number of offerings increasing at rapid rates.

According to a 2015 report (latest data available) from the International Coffee Organization (ICO), coffee consumption in China increased an estimated 16 per cent per year on average in the 10 years to 2015. While the growth is significant, China’s massive population of 1.4 billion people brings down the country’s global ranking of coffee consumption at the per capita level.

Although the vast majority of that consumption has been instant, according to ICO, “the rising popularity of coffee shops and coffee culture in general is promoting growth in fresh roast and ground coffee”.

Coffee’s third wave has been taking a greater hold in recent years, with Chinese coffee consumers increasingly interested in high-quality coffee and exceptional café experiences. As China’s consumers have been turning their attention toward third wave coffee, investors and foreign coffee brands have been turning their attention toward China.

Starbucks was first to open shop in China back in 1999. Today, it has 3600 stores and nearly 50,000 employees in more than 150 cities. While the company has steadily expanded there despite skepticism over entering a tea-drinking country, Starbucks has recently ramped up growth plans in line with growing consumer appetite. China is now the company’s fastest-growing market, with a new store opening every 15 hours, according to the Seattle-based company.

Chinese consumer market analyst Joel Bacall attributes some of China’s coffee boom to Starbucks itself. “It’s such a strong success story here in that it really did drive the category,” says the Associate Director at The Silk Initiative in Shanghai, a brand strategy consulting firm specialising in food and beverage. “They have done really well not only with their product mix, but also with selling the experience and the lifestyle, which is really driving the emotional bond with the consumers here.”

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