China's coffee market shows momentum - food tech news in Asia

As the post-90s and Gen Z become the main driver of the new consumption in China, nascent coffee categories with high quality and good-looking packaging continue popping up. Saturnbird and Yongpu Coffee gradually gained popularity through online sales channels, while offline new coffee chains such as Manner and Seesaw coffee are winning investors’ attention. McCafe is planning to invest 2.5 billion yuan (~USD 378 million) in the coming three years, and even China Petroleum & Chemical Corporation and Chinese old brand Tongrentang have started selling coffee.  

In the era of high-quality consumption of coffee, how to make high-quality coffee with diversified flavors more suitable for Chinese consumers? This is the key factor for brands to maintain their competitive edge.  

In 2021, China’s coffee market reached 381.7 billion yuan (~USD 58 billion) with both online and offline coffee stores actively building brand awareness to reach more consumers. China’s coffee market is entering a rapid development phase with an estimated growth rate of 27.2% YoY. 

The strong performance of the coffee market cannot be achieved without support from investors. Data from IT Juzi shows that around 20 financing rounds took place every year in China in 2019, 2020, and 2021 with 1.51 billion yuan (~USD 229 million), 1.02 billion yuan (~USD 154 million), and 5.921 billion yuan (~USD 896) value respectively. Some “hot” brands have completed two or three rounds of financing in the first half of 2021 alone.  

Consumers in China has already gained the habit of drinking coffee, and coffee has shifted from a fashionable category to a daily-need segment. Brands are striving to innovate tastes and flavors in an effort to localize coffee. In China, more than 300 million people are coffee drinkers, and per capita coffee consumption is increasing year by year. More than 34% of coffee drinkers are accepting a price of 36 yuan (USD 5.5) or more for a cup of coffee, which is the average price of a good meal in China.  

China’s coffee market is still at an early stage compared with the US and European countries, showing a low per capita coffee consumption. Brands are still trying and adjusting, but there is obviously a great potential, especially when venturing to third and fourth-tier cities. 

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