According to research firm Mintel, coffee sales by value are “thriving” with China’s on-premise market reaching a value of Rmb 64.7bn (US$9.6bn) in 2018, up 7.5% on the previous year.
That compares with 6% growth between 2016-17 and Mintel expects the market to continue to grow at that rate (6% annually) from 2019 to 2023.
Although sales are growing, Mintel also said that growth in the number of on-premise coffee outlets declined 2% from 2017 to 2018 as fewer new stores opened than closed.
Yet the gap is narrowing, Mintel added, with the decline easing from -4.4% in 2016-17 and the market is expected to pick up to reach 1.2% growth in 2019-20.
At that rate of growth, China is expected to have an estimated 74,000 coffee houses by 2020. Luckin Coffee, which is also known by its Chinese name Ruixing, has already signalled that it wants 4,500 outlets by the end of this year, while US rival Starbucks also intends to increase its estate by at least 600 stores.
“With the growing momentum of new retail coffee shops, and an increasing number of international and domestic brands entering the market, consumers today have more options when it comes to coffee. As such, the industry will see positive growth rates over the next two years,” said Belle Wang, a research analyst at Mintel.
“However, this growth will slow down, largely due to Chinese consumers’ traditional behaviour of drinking tea and the country’s thriving tea shops,” she added.
Based on responses from 3,000 Chinese consumers aged 20 to 49, the Mintel study also reveals that more than half (52%) prefer to buy their coffee at convenience stores rather than from a traditional coffee house chain (44%).
Meanwhile, about a quarter (23%) of consumers who drink on-premise coffee at least once a month do so at new retail coffee houses.
“Our research shows that more on-premise coffee users get their coffee from convenience stores than from traditional chain coffee houses. This is perhaps due to Chinese consumers associating convenience stores with a full range of breakfast options,” said Wang. “Convenience stores are also viewed as easily accessible and affordable.”
Sourced from Mintel; additional content by WARC staff