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Hot cup, hot trend
2004/10/26
Coffee drinkers in China have a lot of expectation hanging on their shoulders. Coffee is the latest commodity to be pushed hard on local consumers by international corporations and local joint venture companies.

Coffee sales in China were worth more than US$90 million in 2002, but the country accounts for just one percent of world consumption. Still, coffee retailers have much to be hopeful about: local sales are jumping between fifty and one hundred percent annually.

Getting Chinese people to drink coffee won't be easy in a land that cultivated the art of tea drinking. But China's youth and the urban middle classes have been tempted. According to statistics from the China Market Database (CMDB) Chinese people with higher education are most likely to drink coffee. Almost thirty six percent of China's coffee drinkers are university educated while only eight percent of people with only a primary education drink coffee.

At a middle school this reporter visited in south China's Fujian Province, students are taking packets of instant coffee to school. Most of the instant coffee sold in China is packaged as a ready-to-use drink, with sugar and milk added in a powder mix. Because of its convenience and sweet taste, Fujian youngsters have now come to average a cup a day. Children of China's first crop of corporate professionals, these students have gotten a taste for coffee from visits to coffee houses with their parents.

Fujian's neighboring province Guangdong has been more open to Western influence than most Chinese regions. Coffee drinkers in Shenzhen, the province's industrial dynamo, have over a dozen up-scale cafes from which to choose. Lesser-known chain Kosmo has come across the border from Hong Kong to compete with US-owned Starbucks. The company markets itself as a health-oriented cafe business, offering juices and healthy snacks alongside a wide range of coffees, but in its range of coffee and prices Kosmo is similar to rival Starbucks, which has so far opened only one store in this city of over ten million people.

The American giant plans on expanding but is moving carefully to replicate the success it has enjoyed in Beijing and Shanghai. According to Starbucks Store Locations Manager Tiger Li, the secret of the Seattle-based company's phenomenal success in China is the ambience it offers and the strategic locations of its stores. "Starbucks creates a unique experience that cannot be imitated," says Li. "Many people have tried to copy it and they've all failed. We focus on the more prosperous commercial districts of as office buildings, shopping malls and famous tourist locations. "

There are currently 40 Starbucks outlets in Beijing, a city of more than 14 million people. In Seattle the company has more than 400 cafes battling with hundreds of other coffee houses in a city of just 2 million. "From the point of view of population alone, the Beijing market is vast, but if we calculate how many cups of coffee the average person drinks every day, the Beijing market is really smaller than Seattle's," says Li.

Price limits the growth of Beijing's coffee drinking population. Most Beijingers simply can't afford the 12 yuan Starbucks charges for its cheapest cup of coffee. "I go to Starbucks at the most once a month" says secondary school teacher Chen Yuanyuan. "The atmosphere there is very special but I'm not very used to drinking coffee, and I think the prices are too high."

More affordable to the average local perhaps, fast food chains around China also offer coffee on their menu boards. International junk food giants McDonald's and KFC both sell Nescafe blended coffee and Subway, Yoshinoya and regional operators such as Dicos and Chinese Burger's Home also offer coffee at low prices. Quality is variable however and there are huge discrepancies in quality between different outlets and companies.

A number of independent coffee houses established across the city are doing better. Near Fragrant Hills, the popular hillside retreat in the city's northwestern Haidian neighborhood, Sculpting in Time offers coffee in a relaxed bookish environment. The company has opened two more outlets recently on the back of its success. Not far from the bar district of Houhai a roomy cafe-cum-photography gallery called There serves good-quality ground coffee in a cozy cafe of comfortable seats and bookshelves of English-language books.

More cafes and coffeehouse chains are expected in China's cities. Having lost ground to their low-cost Southeast Asian competitors, Brazilian coffee makers have vowed to take on Vietnamese rivals in their own backyard by selling coffee directly to Chinese consumers. The Brazilian Green Coffee Exporters Association, working closely with the Department of Agriculture, is intent on inserting itself into a potentially crucial future market.

Away from Beijing meanwhile, the Taiwanese trio of KoHiKan, UBC and Dante has focused most of its commercial attention on southern provinces but may soon turn northwards. New arrivals Barista, also from Taiwan, and Japan's Manabe have yet to have a large impact with their outlets in Beijing and southern cities.

Outside of the coffee shops, Chinese supermarkets stock sophisticated instant coffee products as local customers begin to buy more elaborate coffee making devices. Italian-made coffee machines sell at most large department stores in Chinese cities and big-city supermarkets sell a range of coffee pots and brewing mugs.

According to Lu Lian, professor of western Culture at Fudan University, "Chinese people now have basic knowledge of coffee and many have accepted it as a daily part of their lives." A 2002 survey published by the Guangzhou Daily newspaper showed that 24 percent of those in the 41-50 age bracket and 18 percent of those aged 20-30 often drink coffee. Competition could get tight unless more Chinese start drinking coffee.

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