Why No Chinese Teahouse Matches Starbucks' Success

In Hangzhou, a magazine editor named Xia visits the Starbucks West Lake Tiandi branch — for the third time this week. She’s far from alone. Millions of Chinese consumers frequent coffee shops weekly, but very few step into traditional teahouses. This pattern is not incidental: it reflects a major imbalance in China’s beverage culture landscape.

No Chinese teahouse brand has come close to matching Starbucks’ scale or cultural presence. While coffee shops grew nearly 100% from 2007 to 2012, teahouse numbers increased by just 4%. Not one teahouse has built a national chain rivaling Starbucks.

A Rapid Rise for Coffee, Stagnation for Tea

According to a 2012 report by global market researcher Mintel, China’s coffee shop count surged from 15,898 in 2007 to 31,783 in 2012 — almost doubling in five years. In stark contrast, teahouse numbers rose by a mere 4% over the same period. No Chinese teahouse brand has achieved the visibility or expansion rate of Starbucks, which entered China in 1999 and has since grown aggressively.

Starbucks opened its first China store in Beijing’s Guomao district and rapidly expanded, adding locations at a pace approaching one per day. By the time the company went public in 1992, it had already posted annual sales growth above 20% and profit growth over 30%. Starbucks China & Asia Pacific president John Culver stated in 2015 that the company aimed to operate 1,500 stores in China, with further expansion into second- and third-tier cities. Other coffee chains, like Across Coffee and Dio Coffee, also flourished domestically.

Mintel’s data shows that 12% of urban respondents visited a coffee shop at least once in the past year, while 20% went at least five times. Only 5% claimed they had never bought anything in a café. Meanwhile, although 70% of urban Chinese say they regularly drink tea, just 20% have ever been to a teahouse. The preference is clear.

Teahouses Lose Ground to Changing Lifestyles

The decline of the teahouse sector isn’t just about coffee’s rise. Traditional teahouses in cities like Hangzhou, home to the famed West Lake Longjing tea, have struggled to retain customers. Among Hangzhou’s top ten teahouses cited by local netizens, including Qingteng Teahouse and Lakeside Teahouse, several have faltered. Men’er Teahouse (Ruyi Fang), once prominent, shut down in September 2014.

Hangzhou media interviewed Ni Wen, chairman of Hangzhou Men’er Teahouse Tea Co., who cited rising rents and labor costs — issues common to all service industries — but identified customer attrition as the core problem. From 1999 to 2003, Hangzhou’s teahouse scene boomed, with over 800 venues averaging more than 1,000 square meters in floor space. At the time, high profit margins sparked industry-wide discussion. But starting in 2004, new leisure options like KTVs and foot spas diverted customers away from teahouses. As much as half of the customer loss was due to competition not related to tea. Adding insult to injury, over 50% of Hangzhou’s coffee shops also serve tea, pulling in even more potential teahouse patrons.

Why Coffee Chains Succeed Where Teahouses Don’t

Coffee chains like Starbucks succeeded by offering more than just beverages — they provide a consistent, comfortable, and stylish environment. Xia, the magazine editor, appreciates Starbucks’ “petite bourgeois yet elegant” decor, its large windows framing views of West Lake and pedestrians on Nanshan Road, making it ideal for solo work or casual meetups.

The growth of coffee retail giants in China, beginning in the late 1990s, cultivated a new generation of coffee drinkers. That investment in branding, atmosphere, and customer experience created an enduring edge. In comparison, teahouses remained fragmented, traditional, and slow to adapt to modern consumer expectations for ambiance, service consistency, and brand identity.

To make matters worse, coffee shops began selling tea beverages, attracting younger consumers with more choices. Mintel reported that 23% of Chinese consumers buy tea drinks in coffee shops. Ironically, Chinese consumers now enjoy tea in cafés — but rarely visit teahouses to try coffee.

Frequently Asked Questions

How many coffee shops were there in China in 2007 and 2012?

In 2007, China had 15,898 coffee shops. By 2012, that number had nearly doubled to 31,783, according to a Mintel report.

What was the percentage increase in teahouses over the same period?

Over the same period (2007–2012), the number of teahouses in China increased by just 4%, a stark contrast to the near 100% growth seen in coffee shops.

Has any Chinese teahouse brand become as big as Starbucks?

No Chinese teahouse brand has achieved the national presence, brand recognition, or rapid expansion comparable to Starbucks in China.

Why did many traditional teahouses in Hangzhou close?

Traditional teahouses in Hangzhou faced customer attrition, rising rents, and competition from new leisure options like KTVs and foot spas. Over half of the city’s coffee shops also serve tea, diverting potential patrons.

What do consumers prefer: coffee shops or teahouses?

Mintel data shows 12% of urban Chinese visited coffee shops at least once in a year, and 20% went at least five times. Only 20% of urban consumers had ever visited a teahouse, despite 70% saying they drink tea regularly.

Do coffee shops in China sell tea?

Yes, many coffee shops in China, including Starbucks, sell tea beverages, attracting 23% of Chinese consumers who choose to drink tea in cafés.

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