Local brands challenge Starbucks in the world's fastest growing coffee market

The rapid development of Delphi Coffee benefits from the rapid growth of Chinese coffee market. And the taste of the Chinese middle class is affecting the most nervous nerves of global coffee brands and producing countries.

At the closing ceremony of the Qingdao International Coffee Exhibition on September 26, the latest research report released by the Colombian Coffee working Association shows that China has become the fastest growing market in the global coffee market for several years in a row, and is likely to become the core area affecting global coffee prices and production in the near future.

"but for coffee brands and coffee-producing countries, this may have different implications," Wu Jiahang, director of the Colombian Coffee Industry Association, told the media. "Coffee consumption in China may be going through a process of localization. Some foreign brands may face great challenges or even disappear without a trace, and a local style of coffee will gradually mature and become the mainstream of the market."

Colombia is the top producer of coffee. The sharp drop in oil prices in the past four years has brought the Central and South American oil-producing countries around Colombia to the brink of collapse, but with the strong export of coffee beans, the country has become the most economically stable rich country in the region. "Last year, Colombian coffee bean production reached nearly 980000 tons, in addition to entering traditional coffee consuming countries. The biggest increase is China, "Fu Jing, secretary general of the coffee bean branch of the China Fruit Circulation Association, told the media. Last year, China's coffee bean consumption reached 180000 tons, nearly double that of the past three years, while the growth rate was stable at 25%. One reason why coffee bean prices rose again last year is also directly related to demand in China's emerging markets. "Coffee profits in China are actually higher than those in many traditional developed countries, and trade volume is increasing dramatically," she said.

While coffee producing countries have high expectations for China, the psychology of coffee brands is complicated.

In late September, two consecutive events cast a shadow over the psychology of international coffee brands. On September 20, Mondelez International announced that the Maxwell China factory would be closed next year. Maxwell laid off workers as early as May and its consumer hotline has been suspended, according to insiders. The first top coffee brand to enter China has not announced its next strategy for the Chinese market. On almost the same day, Starbucks, the number one brand of coffee culture, also announced the launch of "Chinese tea" in the Chinese market. it is worth noting that Starbucks has always been labeled as promoting coffee culture and has never launched localized drinks in stores in other countries. these two small pieces of news are worrying the global coffee brand business Chinese market.

One of the top international coffee giant researchers, who spoke on condition of anonymity, said: the cake in China is growing tremendously and hardening at the same time.

"by 2015, there are now more than 40, 000 tea-themed stores in China, three times the number of coffee shops, but the cost of operation and promotion is less than 1/4 of coffee. Chinese consumers have a natural sense of closeness to 'tea'. Ten years ago, the exotic cultural allure of coffee was enough to support the profits of coffee, and it was also easy to attract young people who were curious about foreign culture, but this group of young people have grown into the middle class, and foreign culture alone does not work now. "although the market is still dominated by international brands, there are only two options, such as Starbucks to increase Chinese local products," he said. Or you can localize the coffee itself, which seems very difficult, "he says.

According to Euromonitor, the total sales of coffee in China has reached 70 billion yuan, which is not one of the top five coffee consumers in the world, but is expected to be on a par with the United States in 2025.

However, this figure does not reflect the current awkward situation of international brands. Nestl é, which ranked No. 1, had total sales of only 4.4 billion yuan last year, and behind that sales, Nestl é destroyed 4 million tons of coffee products at the end of last year and lowered its sales target. It is believed that the growth rate of this number will continue to slow.

Correspondingly, venture capital has also turned its attention to the coffee market. From 2013 to 2015, nearly hundreds of start-up coffee shops received investment from venture capital institutions. In Shanghai alone, there were 90 venture capital-backed start-up coffee shops in 2015.

Zhang Zhenyuan, a partner at Ouyuan Capital in Shanghai, revealed that "originally Indonesia and Japan were markets for European and American coffee brands, but now these markets are dominated by their own local coffee, and they have created coffee brands in the world," he said. the real opportunity may still be in freshly ground and instant coffee, among the nearly 1,000 local coffee manufacturers that are currently grabbing share with foreign brands. Some may grow into new international coffee giants.

"just as Chinese tea turns into lemon tea only when it is abroad, coffee is bound to become Chinese-style coffee," says Yang Zhiwei, CEO of luxury Coffee. In the summer of 2014, Yang Zhiwei and his partners decided to take a completely different route in China than Nestle style. In the hot summer, they choose offices with coffee machines and give away ice cubes. When they are welcomed, they tell each other that their coffee does not need to be ground or brewed, but can be dissolved in ice water, so it sells well.

At present, this team of less than 20 people ranks first among unlisted coffee brands with sales of 100 million yuan. Yang Zhiwei said that after a lot of inspection of China's local market, they found that in China, people who know coffee and are hardcore coffee users tend to be busy high-end office users. "they are very concerned about the quality of coffee, but coffee with good acidity and aroma generally have to buy coffee beans, which are ground, boiled and slowly filtered. This time is actually a luxury for them. So we use a technology similar to freeze-dried coffee powder in the original juice, so they can make a cup of coffee comparable to the freshly ground taste at any water temperature."

According to him, this process requires a high quality of coffee, so the cost in terms of raw material selection and baking process is 100% higher than that of ordinary instant coffee.

"this method is not needed in the United States, Japan or Europe, but Chinese users do, because it is simple, fast and practical," Yang Zhiwei revealed. Although retail prices are not cheaper than giant brands, the repeat purchase rate has reached more than 50% in the past year, which has caught him off guard. He has even begun to open his own plantation in Colombia. "We are well aware that young users are very demanding of quality. Raw materials must be strictly controlled to ensure the quality of coffee.