How Foreign Coffee Chains Are Booming in China

From electronics retailers like Best Buy to home improvement stores such as B&Q, many Western brands have struggled in China. But one of the most unlikely success stories is the rapid rise of foreign coffee chains—even in a country with thousands of years of tea-drinking tradition.

Since the late 1990s, coffee chains from the U.S., UK, and South Korea have expanded faster than almost any other retail sector in China. Their sales more than doubled from under 10 billion yuan (US$1.6 billion) in 2008 to over 20 billion yuan by 2013, and are expected to double again by 2017, according to Euromonitor.

How Starbucks Built a Coffee Culture in Tea-Loving China

Starbucks played a pivotal role in shaping modern coffee culture in China. Since opening its first mainland store in 1999, it positioned cafés as stylish social hubs—places to meet friends and experience a Western lifestyle. This strategy helped it become one of China’s most recognised lifestyle brands, even influencing local tastes toward fresh-brewed coffee.

The Rise of Korean and Independent Cafés

Beyond global giants, niche Korean-style coffee shops have proliferated, while independent cafés have become common in major cities. Even non-specialist chains like McDonald’s and KFC, along with Japanese and Taiwanese convenience stores, now sell freshly brewed coffee, further diversifying the market.

Market Expansion Despite Controversy

In 2013, China’s state broadcaster CCTV criticised Starbucks for high prices in China, but the brand shrugged off the backlash and accelerated expansion. It plans to double its stores to over 3,000 by 2019. Costa Coffee aims to double its presence to 700 stores by 2018, while South Korea’s Maan Coffee intends to grow from 100 to 200 outlets by the end of 2015.

Shifting Market Shares

Starbucks’s market share in China rose from 12% in 2008 to 31% in 2013, while Taiwan’s UBC (Up Coffee) saw its share drop from 33% to 22%. Meanwhile, McDonald’s McCafé expanded from almost zero to 6% market share with 800 locations, and Costa grew from 1% to 5.5%. Even KFC, previously coffee-free in most outlets, has begun selling fresh coffee in first-tier city convenience stores.

Why Foreign Coffee Chains Thrive in China

Analysts attribute the boom to several factors: Starbucks effectively created a new coffee culture, urbanisation increased demand for Western-style social spaces, and diversified offerings from both global and local players captured different market segments. “Korean, American, British, and domestic coffee chains—as well as independent cafés—are creating an increasingly diverse market that will drive further growth,” said Mintel analyst Esther Lau.

Frequently Asked Questions

What was China’s coffee market size in 2008?

In 2008, China’s coffee chain market was worth less than 10 billion yuan (approximately US$1.6 billion), according to Euromonitor.

How much did the coffee market grow by 2013?

By 2013, the market had more than doubled to over 20 billion yuan, and it was projected to double again by 2017.

Which foreign coffee chain grew the most in China?

Starbucks grew its market share from 12% in 2008 to 31% in 2013, making it the most successful foreign coffee chain in China during that period.

Did McDonald’s sell coffee in China before 2013?

Yes, but only recently began promoting coffee seriously. By the time of reporting, McDonald’s had 800 McCafé outlets in China, capturing 6% of the market.

What are the expansion plans for Starbucks and Costa Coffee in China?

Starbucks plans to double its stores to over 3,000 by 2019, while Costa Coffee aims to increase its locations from around 350 to 700 by 2018.

Why did CCTV criticise Starbucks in 2013?

CCTV accused Starbucks of overpricing in China, but the criticism did not slow the brand’s expansion or affect its popularity.

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