Coffee battle brews in China

BEIJING: Brand owners including Nestlé, Starbucks and Mondelez International are heightening their focus on the Chinese coffee market, as consumer tastes change and affluence rises.

Nespresso, the single-serve device made by Nestlé, was rolled out in the Asian nation during 2007. It currently boasts three dedicated boutiques there, acting as flagships to attract shoppers.

It is also launching special Nespresso machines designed in partnership with Shanghai Tang, the luxury group, to commemorate the year of the dragon.

"We are focused on nurturing the budding coffee culture in the country," Mark Leenders, Nespresso's director, Southeast Asia, Greater China and Korea, told BloombergBusinessweek.

"The consumer interest is clearly evident any time you walk down a street in Shanghai or any other city in China and see the proliferation of brands and coffee shops."

Starbucks, the coffee house giant, also intends to introduce its Verismo single-serve machine in China next year, having recently begun selling the appliance in US branches.

Additionally, the organisation hopes to have 1,500 stores in China by 2015, measured against approximately 650 at present, reflecting a high level of confidence in the country.

"We have an extremely ambitious development plan in China," said Belinda Wong, president of Starbucks China. "China has been designated as our second home market outside of the United States. We believe China will become our largest market outside of the US by 2014."

For its part, Mondelez International, which separated from Kraft Foods this month, is considering entering the single-serve sector, as filter coffee may not achieve a similar status as in the US.

"In cities like Shanghai and Beijing, a coffee shop culture is developing and there's a fertile ground for single- serve," said Hubert Weber, president of its coffee division. "I would compare it to mobile phones and landlines – when you've never had a landline, you go straight to a mobile phone," Weber said.

Mintel, the insights provider, has predicted that the soluble coffee category in China should almost double in size between 2011 and 2015, attaining a value of $1.96bn by the end of this period.

"Experience from other markets tells us that once people get used to having a fresh cup of coffee in places like Starbucks, it's very hard to go back," said Jonny Forsyth, an analyst at Mintel in London.

Data sourced from BloombergBusinessweek; additional content by Warc staff, 18 October 2012

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