How Pacific Coffee Became China’s Second-Largest Chain

When you think of the biggest coffee chains in China, Starbucks is an obvious answer. But who’s number two? For years, many assumed it was Costa. Not anymore. A major shift has taken place: Pacific Coffee has quietly overtaken Costa to claim the number two spot in China’s coffee chain rankings.

Pacific Coffee now operates 458 stores across China, surpassing Costa’s 344 locations by over 100 shops, according to the latest data from Costa’s parent company Whitbread and internal sources. This shift happened within just a year, flipping the previous "big three" order.

The Rise of Pacific Coffee

Pacific Coffee’s story began in 1992 when American couple Tom and Lori Neir founded the brand in Hong Kong, targeting the business crowd. In 2010, it was acquired by China Resources Enterprise (CRE), and entered mainland China in 2011. Initially operating under CRE’s retail arm, it was later restructured under CRE Holdings directly in April 2023, giving it a more prominent corporate position.

The brand has always maintained a low-profile, “quiet elegance” image—what some might call a “normcore” or “” brand in today’s market. Unlike the loud, bustling atmosphere of Starbucks or the fast-fashion flair of Korean-style coffee chains, Pacific Coffee opts for a subdued, mature presence. Its aesthetic and service style appeal to a more reserved, quality-focused customer.

How It Beat Costa

In 2011, Pacific Coffee faced a tough market: Starbucks dominated, Korean brands like Coffee Bean and Café Bene were expanding rapidly with K-pop appeal, and independent coffee shops were carving out niche audiences. To navigate this, Pacific Coffee set a clear strategic goal: resist the “Korean wave,” overtake Costa, and share the market with Starbucks.

Pacific Coffee CEO Lan Yi identified three types of coffee shops in China: high-street chains (like Starbucks, Pacific, and Costa), Korean-style franchise cafes driven by celebrity appeal, and independent shops. He argued that while independents had charm, they lacked scalability, and Korean chains suffered from inconsistent supply and standards. In contrast, classic chains with solid operations—especially Pacific and Costa—had the best long-term potential. But among those, only Starbucks was truly untouchable; Costa was vulnerable.

This strategy proved prescient. While Costa’s parent company Whitbread reported plans to grow to 900 stores by 2020, actual expansion slowed. In 2014, Costa opened 43 new stores; Pacific Coffee opened 78. By leveraging CRE’s resources and maintaining steady growth—even through economic downturns—Pacific Coffee not only caught up but pulled ahead. In 2023, it added 75 new stores and achieved 15% overall growth and 12% same-store sales growth.

Brand Identity and Customer Strategy

Pacific Coffee has built its identity around a specific customer profile: professionals who value quality of life, aesthetics, social responsibility, and a touch of tech-savvy sophistication. Instead of mass advertising, it focuses on targeted engagement.

The brand concentrates on high-footfall areas like office buildings and partners with interest-based communities such as theater groups, book clubs, business schools, marathon clubs, and music festivals. For example, it became the official beverage sponsor of the Shanghai World Music Festival and is negotiating music licensing for in-store playback. It also collaborates with influential media figures like Wu Xiaobo for events such as the “2016: ,” streaming the event in nine of its stores and engaging members in real time.

To build loyalty, Pacific Coffee runs a robust membership program. Its initiatives include:

• Theme coffee workshops where members learn from experts and connect over brewing techniques
• Complimentary tickets to films, plays, and concerts
• Free access to a selection of ebooks via its app, reinforcing its literary brand image

As of November 2015, Pacific Coffee had 120,000 active members in Hong Kong and 208,000 in mainland China, with over 100,000 registered members in each market.

Business Model: More Than Retail

Pacific Coffee’s success isn’t built on retail alone. The brand operates three key business pillars:

• Retail coffee shop operations
• Corporate coffee solutions (“”)
• Franchise operations

The corporate coffee arm, exemplified by its “volgo coffee” kiosks in convenience stores like Vanguard and Suguo, offers turnkey coffee solutions for supermarkets and startups. These include equipment, sourcing, training, and branding—solving a critical gap for non-specialist retailers wanting to offer quality coffee without managing the complexities themselves.

Franchising, meanwhile, uses a single-city exclusive model outside CRE’s six core regions (Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Xi’an). However, franchise growth has been slower due to investor caution amid economic pressures.

Lan Yi reports that retail and corporate coffee solutions have exceeded growth expectations, while franchising lags—highlighting the brand’s balanced but adaptable approach to market conditions.

Frequently Asked Questions

How many stores does Pacific Coffee have in China?

As of the latest data, Pacific Coffee operates 458 stores in China, which is over 100 more than Costa’s 344 locations.

What is Pacific Coffee’s market position in China?

Pacific Coffee is now the second-largest coffee chain in China, having overtaken Costa. Starbucks remains the market leader.

How did Pacific Coffee beat Costa?

Pacific Coffee implemented a strategy to resist the “Korean wave” of coffee chains, focus on classic chain scalability, and directly compete with Costa for the number two spot. It expanded faster, opened more stores per year, and maintained steady growth during economic downturns.

What kind of customers does Pacific Coffee target?

Pacific Coffee targets professionals who value quality of life, design, social responsibility, and a refined, low-key aesthetic. Its branding appeals to a mature, thoughtful customer rather than a trend-driven one.

What are Pacific Coffee’s main business areas?

Pacific Coffee operates in three main areas: retail coffee shops, corporate coffee solutions (such as in supermarkets), and franchising. The first two have seen stronger growth than franchising.

Does Pacific Coffee advertise heavily?

No, Pacific Coffee maintains a low-profile marketing strategy. Instead of mass advertising, it focuses on targeted engagement with specific communities like book clubs, music festivals, and marathon groups.

Recommended FrontStreet Beans for Pacific-Style Coffee

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