Last Updated on August 2, 2024
Coffee first emerged in the Chinese market way back in the late 19th century. However, modern coffee production and cultivation only began around 1988. Since then, the local consumer demand for these beverages has been relatively consistent.
China’s coffee consumption reached 5 million bags per season between 2023 and 2024, making the country the seventh-biggest consumer of this beverage in the world.
In this post, we’ll examine the trends shaping China’s coffee market. On top of that, we’ll also discuss the best digital marketing strategies foreign coffee brands can use to reach and connect with Chinese consumers.
The Rapid Growth of China’s Coffee Market
Given China’s rich historical ties with herbal teas, it’s not surprising that the majority of Chinese people are initially not fanatic coffee drinkers. However, the influence of Western culture around the 1980s has made the younger generation more keen on drinking coffee.
In the past few years, China’s coffee industry has seen strong growth, with its market size reaching approximately $2.06 billion in 2023.
China’s coffee market was among the least affected business segments during the pandemic. In fact, the period has seen many store openings and an influx of sales in the first-tier and second-tier cities.
With the growing demand of this market segment in Mainland China, most Chinese consumers have developed a taste for specific product types. Right now, the most prevailing preferences among locals are Ready-To-Drink (RTD) and instant coffee products.
Does China have a traditional coffee culture?
The coffee consumption in China is a developing market. Therefore, the beverage has no specific culture or practices deeply rooted within the country. However, the market is highly diverse and influenced by regional tastes.
Middle-aged consumers consider drinking coffee a social experience for business meetings or to showcase their financial standing. To some locals, buying from foreign specialty coffee shops like Starbucks is a sign of high earning capacity compared to purchasing from a local brand.
The availability of coffee beverages in convenience stores, supermarkets, restaurants, and other food-related establishments has also made the product more appealing to modern consumers.
Shanghai International Coffee Culture Festival (Source: China Daily)
Chinese Millennials and Gen Z grew up with the presence of foreign brands in the local market, making them the country’s native coffee consumers. With the influence of social media platforms and online retail stores, they adopted purchasing behaviors similar to those of consumers from countries with mature coffee markets.
Meanwhile, older generations see coffee chains and products as a novelty. They don’t actively seek these beverages like the younger consumers since it’s not part of their lifestyle. However, these customers are open to drinking or receiving them as gifts.
5 Latest Trends in China’s Coffee Industry
1. The Change in Coffee Consumption Patterns
The main appeal of the Chinese coffee market mainly relies on its refreshing taste. In a report by iiMedia, more than half of local consumers who took their survey say that they drink coffee due to its unique flavor.
The other 30% of these consumers drink these beverages because of the atmosphere and service brought by coffee shops. This preference correlates with some coffee drinkers viewing these establishments as a place to socialize with their family and peers.
Health and wellness trends have also influenced the Chinese coffee market, with locals drinking the beverage solely for its digestive benefits.
Factors of Coffee Consumption in China (Source: China Briefing)
2. China’s Coffee Consumption is Mostly Imported
Despite the homegrown coffee production in the Chinese market, you’d be surprised to know that most of the market’s consumption came from imported products. In 2022, the importation of these beverages reached over $548 million.
Based on recent reports, many Chinese coffee consumers enjoy beverages mainly from the country’s top suppliers, such as Ethiopia, Columbia, Brazil, Vietnam, Italy, Japan, Malaysia, and many more.
3. Foreign Coffee Brands Still Have a Strong Presence in China
Despite the recent success of domestic brands like Luckin Coffee and Cotti Coffee, foreign players still have a strong foothold in the Chinese market. Starbucks, for instance, maintains a local presence with over 7,000 stores across the country.
The global brand has adapted its offerings to local tastes, introducing unique flavors similar to the Maotai-flavored latte released by Luckin Coffee and collaborating with Chinese platforms for special promotions.
Nestlé, another global coffee giant, has leveraged its extensive distribution network and manufacturing expertise to boost its presence in China.
The company’s partnership with Starbucks has been particularly fruitful. It has allowed the company to introduce a range of Starbucks-branded products to Chinese coffee consumers. These include ready-to-drink beverages and coffee capsules, which have been well-received in the market.
Source: Starbucks China
4. The Charm of Artisan Coffee Shops & Specialty Beverages
Freshly ground coffee beans are slowly taking hold of the Chinese market, with a growing demand for artisanal and specialty beverages.
This growth can be attributed to several factors, including increasing urbanization, rising disposable incomes, and shifting consumer preferences toward premium and unique coffee experiences.
Younger consumer groups aged between 16 and 24 mainly lead the rising demand for coffee shops, seeking both the social and aesthetic aspects of coffee culture.
Tim Hortons at the 2021 China International Import Expo (Source: China Daily)
Specialty coffee shops often emphasize craftsmanship, with baristas meticulously preparing each cup using traditional and innovative methods.
Some of them feature a rotating menu of creative beverages not commonly seen in other brands, like the steeped black lemon oolong tea flavor that Tim Hortons exclusively introduced in China.
5. Mini-Programs for Coffee Companies
Beyond coffee consumption from brick-and-mortar shops and convenience stores, this market segment is also driven by online retailing and the innovative use of sub-applications.
These online retail stores have transformed how major companies interact with coffee drinkers, offering a seamless blend of online and offline experiences.
In Starbucks’ WeChat Mini-Program, coffee consumers can order and pay ahead, locate nearby stores, and earn rewards, streamlining the entire customer journey.
Coffee brands can increase engagement and sales by utilizing WeChat’s social features and one-to-one marketing model. Interactive campaigns, such as advertisements, games, flash sales, or limited-time offers, can also attract a large audience and encourage social sharing.
Starbucks China’s WeChat Mini-Program
Best Marketing Strategies for Entering the Chinese Coffee Market
● Localize Your Coffee Products & Digital Assets
While it’s true that China adopted a Western coffee culture, this doesn’t mean that Chinese consumers are not looking for a localized experience when purchasing and drinking these beverages.
That’s why foreign businesses often align their new offerings with the upcoming holidays and festivities in Mainland China to appeal to local coffee drinkers. The best example of this is Starbucks’ Dragon Boat Festival campaign, where they introduce new rice dumpling flavors to pair with their coffee products and other beverages.
The localization of the brand’s packaging and product offerings during these cultural events can also create a bridge between the business and its target audience. It shows the eagerness and dedication of a brand to resonate with its customers and meet local standards.
Starbucks’ promotional activities for the Dragon Boat Festival
Localizing your website and social profiles should also be a priority as a non-Chinese brand. Remember, local consumers are tech-savvy online shoppers. Before patronizing your brand, best believe most of them are already scouring the internet for information about your business.
You can maximize your brand’s visibility in local search engines and social media channels by translating your digital content to simplified Chinese, optimizing industry-related keywords, and aligning your overall marketing strategy to the latest industry trends.
Localized Website of Luigi Lavazza SpA
● Build Presence on Social E-Commerce Platforms
In the digital era, e-commerce is no longer a minor distribution channel. Whether you’re introducing a product within the local instant coffee market or opening a physical storefront to sell freshly brewed coffee beans, these online sales platforms open doors to China’s 915 million online consumers.
Social media integration is the cornerstone of the astounding success of online retail stores in China. Platforms like WeChat, Pinduoduo, Taobao, and Douyin are no longer just social networking sites but also e-commerce channels that offer shopping experience directly within the app.
Source: Jing Daily
These social e-commerce platforms facilitate consumer journeys, from organic or advertised product discovery to purchasing and payment. Beyond that, brands can also host different interactive content types like live streams to engage audiences and encourage sales conversions.
Starbucks has been using the live-selling strategy in the Chinese coffee market since 2020. They even worked with a top KOL to boost the visibility of their campaign. As a result, all kinds of products, from specialty coffee items to mugs, were sold out at their Tmall flagship store.
● Launch Co-Branding Marketing Campaigns
The Chinese coffee market has a competitive business landscape. So, if you want to stand out, you must think creatively and find a way to appeal to the changing preferences of a local consumer.
What better way to do that than by collaborating with other local brands and tapping into their customer base? Co-branding campaigns not only provide your consumers with something new but also give you the chance to ride into the credibility and popularity of a well-known domestic brand.
Luckin Coffee did just that when it collaborated with popular distiller Kweichow Moutai. These specialty coffee lattes infused with alcohol helped the coffee shop sell over 5.42 million cups of “soy sauce latte.” Their single-day revenue even exceeded $13.69 million in all physical and digital sales channels.
Source: Luckin Coffee
This co-branding campaign was one for the books for the local coffee industry, as “soy sauce latte” gained massive traction in social media for its unique take on the beverage. The hashtag garners over 86.48 million views on Weibo, with terms like “Luckin” and “Moutai” also flooding Xiaohongshu during the campaign.
This viral marketing move has served a ton of benefits for Luckin Coffee to this day. Last year, the popularity of this Chinese coffee chain led it to surpass Starbucks in terms of store count.
● Participate in Trade Fairs Related to Coffee Brands
With the rise of coffee consumption in China, events related to the industry are also coming to the surface to encourage foreign investors and cultivate the segment’s community.
These trade fairs help businesses understand market trends, establish relationships with distributors and partners, and directly engage with potential customers.
Additionally, they provide exposure to new technologies and practices within the coffee industry, which can be crucial for maintaining a competitive edge in the Chinese market.
Cafe Expo China Official Website (Source: CAFEEX)
How does the Chinese Government Regulate China’s Coffee Market?
All coffee products, whether imported or domestically produced, must comply with China’s stringent food safety regulations. These include adherence to the General Food Safety Law, which mandates comprehensive testing for contaminants and compliance with labeling requirements.
Given the significant role of e-commerce in the coffee market, the Chinese government also regulates online sales and digital marketing practices through mandates like digital advertising laws.
These regulations ensure that advertisements are truthful and that platforms are accountable for the products sold on their sites. Foreign coffee brands leveraging online sales channels must also ensure compliance with these regulations to avoid penalties.
Source: Freepik
The Chinese government is increasingly emphasizing sustainability in the agricultural sector, including coffee production. Regulations encourage sustainable farming practices and the reduction of carbon footprints.
Companies that align with these sustainability goals may benefit from government incentives and positive consumer perception.
This trend is notably catching on with many major companies within China’s coffee industry. Brands like Starbucks and Luigi Lavazza SpA even include details about their sustainability campaigns on their localized websites.
Quick Q&A
Why is coffee becoming more popular in China?
Over the past decade, coffee has transitioned from a niche beverage to a mainstream lifestyle choice, particularly among younger generations and major cities. The desire for a cosmopolitan lifestyle has also made coffee shops popular social spaces where people not only enjoy a cup of coffee but also engage in social interactions and conduct business.
What is the most popular coffee in China?
The most popular coffee in China is primarily influenced by the proliferation of coffee chains like Luckin Coffee and Starbucks. Cappuccinos are among the top choices, favored by more than 61% of Chinese coffee drinkers, followed by lattes and macchiatos.
This trend reflects the growing coffee culture in China, driven by the convenience of mobile pre-orders and delivery services offered by leading coffee brands.
Who are China’s coffee drinkers?
China’s coffee drinkers are predominantly young, urban professionals. The majority of coffee consumers are between the ages of 26 and 35, reflecting a demographic that values both convenience and the social aspect of coffee culture.
This age group often frequents coffee shops not just for the beverage but as a place to work or socialize, contributing to the rapid expansion of coffee chains like Starbucks and Luckin Coffee across major cities in China.
Ready To Dominate The China Coffee Market? Get In Touch With Us Today!
With the presence of highly trusted domestic brands and globally renowned products, the Chinese coffee market is undoubtedly a competitive business landscape to enter. However, with the country’s diverse online retail structure and the changing preferences of local consumers, these challenges can turn into golden opportunities.
You may also want to read:
At Sekkei Digital Group, we understand the importance of China’s digital ecosystem in establishing your brand’s position in the local market. Our dedicated team has extensive industry experience and expertise to help your company thrive in the country’s cutthroat coffee business scene.
Whether you intend to launch an advertising campaign for your coffee brand or you want to launch a virtual storefront, we have all the digital solutions you need. Contact us today, and let’s start working together.
References: