Coffee shops in China are popular. How can Chinese coffee break through with an output value of 20.9 billion yuan?

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2017 Coffee Bean purchase Price-introduction of Coffee prices in various countries

Wang Jingying, CEO of Starbucks China, said at the annual shareholders' meeting of the corporate headquarters in Seattle on the 21st that it plans to have more than 5000 exhibition stores in the mainland by 2021.

On December 5 last year, Starbucks opened Roastery, a Shanghai bakery, which is the second successful bakery in the world after the first Roastery in Seattle in 2014. Although the indoor space is more than 800 ping, the influx of people has forced Starbucks to take current restrictions. For several days in a row, consumers have to wait in line for at least an hour before they can get a cup of coffee.

In the first eight weeks of its opening, Shanghai Zhenxuan Bakery had an average daily turnover of US $64000 (about NT $1.85 million), twice the average weekly revenue of stores in the United States, according to data released by Starbucks. Although Starbucks coffee on the mainland is not cheap, on average, it is about 30% higher than that in Taiwan, but it still can't stop the love of Starbucks on the mainland.

As a result, since it opened its first store in China at the Beijing International Trade Center in 1999, Chinese mainland now has more than 3000 stores in more than 130 cities, making China the second largest market after the United States.

According to a recent report released by the prospective Industrial Research Institute, the number of coffee shops in China was less than 16000 in 2007. However, by the end of 2016, the number of coffee shops in the mainland had reached 85000. In 2017, the market size of China's coffee shop industry will reach 20.9 billion yuan, which is already a huge industry approaching NT $100 billion.

The report said that although the mainland coffee market is developing at an unimaginable speed, and the number of coffee shops has also increased by a large margin, compared with Europe, the United States, Japan, South Korea and other countries, the per capita coffee consumption in the mainland is still on the low side. According to the survey, the annual coffee consumption per person in the mainland is about 20 cups, while that in Japan and South Korea is 200 cups, and that in Europe and the United States can reach 500 cups.

With the gradual rise of the new generation of consumer groups and becoming the main force of coffee consumption, the forward-looking Industrial Research Institute believes that the potential of China's coffee market will be further released. It is estimated that the market will maintain a sustained growth rate of about 11% to 15% in the next few years, and the market size is expected to reach 47.9 billion yuan in 2023.

Combining the upstream, middle and lower reaches of the coffee industry, the Business Review compares and analyzes the future breakthroughs of the trillion coffee market:

Upstream: increased demand for coffee beans, imported boutique beans accounted for 1% and 5%

First of all, in terms of production, Yunnan is the largest coffee planting and export base in China. After years of development, the industrial chain has been relatively mature. From January to October 2017, Yunnan Province exported 44500 tons of coffee beans, worth 1.27 billion yuan, accounting for 57.6 percent of the country's coffee bean exports, according to Kunming Customs statistics.

The report on the Analysis and Forecast of China's Coffee Market from 2017 to 2022 released by Zhiyan Consulting shows that Yunnan small-grain coffee enjoys a high reputation in the world, of which Pu'er coffee accounts for half of the country. More than half of the annual output is exported to Western Europe, Japan, the United States and other developed regions and countries, and the annual export earnings exceed 40 million US dollars.

The well-known demonstration area of the national coffee industry and the national coffee testing key laboratory have settled in Pu'er City, and the local leading enterprises represented by Wall, Aiyi Manor and Manya are engaged in the coffee processing industry.

Global coffee giants such as Nestl é and Starbucks have set up procurement stations or purchasing centers in Pu'er. According to the news on Nestle's official website on January 29 this year, Pu'er coffee currently covers an area of 789000 mu, with an output of 58600 tons, accounting for more than 50% of China's total coffee area and output.

It is worth mentioning that the Yunnan Coffee Trading Center achieved a collection and transaction of nearly 60, 000 tons in 2017, with a transaction value of more than 1.5 billion yuan. By building a complete set of boutique coffee system and industrial model in line with international standards, bring Yunnan producing areas into the global boutique coffee field. In addition to Yunnan, Hainan and Fujian are also the main coffee growing areas in China.

In terms of imports, in the past four years, China's coffee bean imports have been on the rise except for a slight decline in 2015. From January to November 2017, China imported 110000 tons of coffee; market research firm QYR predicts that China's coffee bean imports will reach 124000 tons in 2020.

By contrast, the ten-year compound growth rate of 60kg coffee raw bean imports in the United States and Japan is less than 2%. South Korea's demand for coffee imports has also increased by a certain percentage in recent years, but it is far less than the demand for coffee raw bean imports in the Chinese market.

By comparing the coffee consumption of the United States, Japan and South Korea in the past five years, we can see that the growth of coffee consumption in these three countries has not changed much.

It is worth noting that as the size of the Chinese coffee market increases, so does the demand for boutique coffee beans, with imports from South America, Central America and Africa rising to nearly 20 per cent from less than 10 per cent a decade ago. From a price point of view, according to the analysis and statistics of QYR, a market research institution, the average growth rate of coffee bean imports from 2014 to 2020 will reach 9.6%, and the trend of consumption upgrading is obvious.

Mid-stream: Nestl é wins, coffee drinks are very popular

Instant coffee was the first to enter the Chinese market, after more than 20 years of fierce market competition between Nestl é and Maxwell, Maxwell temporarily closed the Guangzhou production line.

But Nestl é is not the ultimate winner. The chain giant represented by Starbucks also has a layout in the field of instant coffee, coupled with the rise of Internet coffee, coffee brands in China and even around the world are still in a scuffle.

In addition, the market demand for coffee drinks can not be ignored. In the FMCG industry in 2018, coffee is more in line with the health needs of current consumers than refreshing energy drinks. For example, the New Hope Group launched Yun Shang time Milk Coffee, Tianwa launched Barnes & Noble Coffee, Yaha launched the "strong Series", and Coca-Cola launched Joya Coffee.

According to a report by the Food Business Watch (FBC) team, taking a second-tier beverage brand as an example, it is mainly aimed at the third-and fourth-tier markets. The sales of coffee products reached only 700000 cases in 2015 and 5 million cases in 2017, which fully proves that the cognition of coffee consumption is more mature in both the first-and second-tier market and the third-and fourth-tier market in our country. The price range of mainstream ready-to-drink coffee is 7 yuan in 4muri, and the competition pattern has been formed.

Downstream: boutique coffee may be a breakthrough

In the downstream field, it can be divided into traditional chain coffee shops represented by Starbucks and Man Coffee, Internet coffee represented by Lian Coffee and luckin coffee, brand giants represented by McCoffee and Costa, convenience store coffee represented by the whole family and 7-11, and online celebrity boutique cafes represented by Blue Bottle. Among them, Starbucks still accounts for half of the traditional coffee chain channels.

It is worth noting that some emerging coffee chain brands rely on accurate market positioning and unique business model to drive the chain coffee market towards a more diversified direction. Among them, Lian Coffee announced the completion of B+ 100 million yuan financing, Luckin Coffee announced 1 billion yuan to enter the Bureau, Blue bottle was acquired by Nestl é, Coffee Wing entered the new third board, and Yunnan Capital reorganized Lingfeng Coffee.

In addition, non-industry enterprises have also entered the bureau, such as Yongan Bank opened a cafe, Tianjin Goubuli Group won the Colorado Coffee General Generation. The introduction of capital, the integration of giants and multiple runways have made the coffee industry thrive.

In 2017, the traditional chain brands represented by Starbucks and Man Coffee are still ahead of other stores in terms of traffic, and still have a big advantage. In particular, as Starbucks reclaimed its operations in eastern China, British hotel and catering giant Whitbread, the parent company of Costa Coffee, acquired a 49 per cent stake in the coffee chain's joint venture in southern China, meaning the leading companies have begun to consolidate the market.

This paper selects three representative chain coffee brands to analyze the reasons for the success of Starbucks and Man Coffee in the Chinese market and the reasons for the failure of Shangdao Coffee.

Some giant brands are showing a weak trend. The 2017 China Cafe Survival data report released by Meituan Dianping pointed out that Costa from the UK and McDonald's McCoffee were unexpectedly at the bottom in terms of brand traffic and average flow per store.

Although the giants dominate the market, there are still opportunities for fine coffee in the future. At present, Blue Bottle is leading the third-generation coffee trend, which is popular with American coffee lovers for its high-quality coffee beans and coffee blending technology. In moments, many friends who travel to Japan and the United States will post photos in the Blue bottle Cafe.

In addition to Blue Bottle, boutique coffee representatives also include many high-end coffee brands such as STUMP TOWN, Jacobs Douwe Egberts, Peet's Coffee&Tea and other high-end coffee brands owned by JAB Group, a competitor of Nestle in Europe. Starbucks responded quickly and launched a more upscale selection series and baking factory store Roastery.

According to the boutique coffee association (Specialty Coffee Association), boutique coffee already accounts for 15 per cent of the entire US coffee market, accounting for 20 per cent of the market, making it the most promising area right now.

Conclusion

Combined with the analysis of the data of this paper, since 2018, the scale of coffee consumption in China may grow at an annual rate of 30%. In the upstream field, the high-end coffee industry chain in Yunnan, China has been relatively mature, the demand for coffee raw beans, especially high-quality beans is increasing year by year, coffee consumption space is full of imagination.