China Coffee Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

China Coffee Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

The Chinese coffee market is projected to witness a CAGR of 10.42% during the forecast period 2022-2027.

The overall Chinese coffee market has been the least affected by the COVID-19 pandemic. As per the analysis, in 2020, an average of one new coffee shop opened every day in China's Chengdu City. This pushed the total number of coffee shops in the city to over 4,000, just after Shanghai and Beijing. Chengdu is the third-largest coffee market in China. Moreover, with strict lockdown measures being imposed in the country, consumers in China have been resorting to at-home coffee consumption, thus, increasing the sales of instant coffee in the country during the COVID-19 pandemic.

While tea remains the traditional drink in China, the demand for coffee continues to grow, especially in urban areas and among younger professionals. To promote the international coffee trade and coffee drinking culture in China, the Chinese government supported the I-coffee Exposition in Haikou. The I-coffee Exposition is focused on coffee production, trade, and consumption.

According to data from the China Coffee Association Beijing (CCAB), coffee consumption is increasing at an annual rate of 15%. The current leaders in the market, like Starbucks and Nestle, have played a significant role in the growth of the coffee culture in China.

China’s commercial coffee production is limited mainly to the two southern provinces of Yunnan and Hainan, while a smaller amount is produced in the Fujian province. Yunnan produces more than 60% of China’s coffee. Recently, Yunnan’s local government established the Tea and Coffee Industry Bureau, whose mission is to promote Yunnan’s coffee in the domestic and international markets. China lags behind other nations in the production of coffee and is dependent on imports. According to the US Department of Agriculture (USDA), coffee production in China in 2020 was 1800 thousand 60 kg bags in 2020, whereas China imported 3804 thousand 60 kg bags in 2020. Thus, the government and manufacturers need to invest more in R&D activities and come up with better measures to increase the production of coffee.

The instant coffee segment held a significant market share owing to its convenience. Moreover, the rising household expenditure, changing lifestyles, and acceptance of western culture trends by middle-class consumers have contributed to the increased demand for instant coffee across the country. In line with the growing preferences for coffee over other beverages among consumers, instant coffee manufacturers have launched several flavored products to attract a wider audience. Online retailing has been a minor distribution channel for instant coffee in China for the past few years. It is likely to gain prominence in the market during the forecast period owing to the convenience it provides to consumers. Consumers find it easy to choose their preferred brands from the wide variety of product choices available.

The Chinese coffee market is highly competitive, with a strong presence of local and global players operating across the country. Thus, in order to sustain their positions in the market, the active players are bringing innovation in packaging and product offerings to cater to consumers’ increasing demand for coffee. Key players are now focusing on social media platforms and online distribution channels for online marketing and branding of their products to attract more customers. Owing to a significant rise in the consumption of coffee, global and local players are investing in expanding their production facilities across the country. The key players in the market are Starbucks Coffee Company, Nestle SA, and Luigi Lavazza SPA.

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