China's coffee market is heating up
The coffee market is currently booming in China. According to a study by the American business consulting firm Frost & Sullivan, China's coffee market grew rapidly from 2013 to 2018, recording an average annual growth rate of 29.54%. Based on the forecast that the average annual growth rate of 25.99% will continue, the market size is expected to reach CNY 180.6 billion in 2023.
Graph of China's coffee market size (unit: billion yuan)
The number of coffee shops is also growing. According to the 2022 China On-Site Coffee Product Development Report (2022中国现制咖啡品类发展报告) conducted by Meituan-Dianping (美团美食) and Kamen (咖门), there are 117,300 coffee shops in China as of May 2022, and there was a 14.6% increase compared to the same period last year. In one year, 15,000 new coffee shops were opened.
Not only is China seeing the number of coffee shops increasing but coffee-related businesses are also growing. According to data from Tianyancha (天眼查), as of 2022, there are more than 170,000 coffee-related companies in China, of which more than 23,000 companies were newly registered in 2021. The rate of increase in the number of newly registered companies is 18.9%. In terms of the period of establishment, more than 42.2% of the companies were established within the last 1 to 5 years, indicating the coffee market has been “heating” up in recent years.
Changes in coffee consumption styles among young consumers
According to data from RED (Xiaohongshu [小紅書]), which has many young users in China, more than 70% of accounts on RED have the habit of drinking coffee, and more than 50% of accounts drink at least one cup of coffee every week. We found that drinking coffee has already become a daily habit among RED users.
One of the RED Coffee Life Activities held at Taipingqiao Park in Shanghai in June. Many coffee shops held a coffee stand, and there were many young visitors.
Additionally, “Chinese-style coffee” is becoming popular among young people. According to the data, the number of people searching “Chinese coffee” on RED in the first quarter of 2023 increased by 331% compared to the same period the previous year. This new Chinese-style coffee is called "chaka (茶咖)." The fusion of Chinese tea and coffee culture, “chaka,” has led to an increase in the number of coffee shops designed in a Chinese style, making it a new and popular trend in 2023. From the raw coffee beans, processing techniques, flavors, and in-store aesthetics, there is a growing trend towards Chinese localization, and the appeal of coffee is reaching beyond to include tea lovers.
Furthermore, coffee is no longer a drink only available in coffee shops. It can now be found in a variety of places, including temples, the post office, gas stations, and even the police station. Taking advantage of the high demand for coffee, various places are devising ways to attract young visitors.
A coffee shop built by the public security bureau in Chengdu in Sichuan Province. There are many customers.
More importantly, for young people, coffee is not only a favorite beverage but a new tool for socializing. There is a growing trend where people interact with each other over coffee, connecting with others and, in turn, society, so much so to coin the term “咖啡社交,” meaning “social coffee.” Additionally, in today's highly competitive China market, coffee shops have become a “third place” among young people, a place where they can relax between work and their personal life.
Diversifying coffee sales methods
The diversification of sales methods for coffee is one of the major reasons behind the booming coffee market.
Diversifying the sales methods is a business approach that increases the number of people visiting the physical brick-and-mortar store by attracting attention online. On Douyin, a video-sharing service provided from ByteDance, the enthusiastic discussions surrounding "#咖啡 (hashtag coffee)" has reached 27.39 billion views, and as of April 2023, there are many posts about visiting coffee shops on Douyin. The number of accounts that did so increased by 328% compared to the same period the previous year. This high level of attention to coffee presents significant commercial opportunities for companies in the coffee business.
In 2022, Nowwa Coffee (挪瓦咖啡) has started opening in cities considered third-tier and fourth-tier in China's city tier system, where, previously, there aren’t too many coffee shops. It would have been difficult to attract customers by simply opening the store, but in 2022, a video called “挪瓦咖啡敲椰子 (Nowwa Coffee cracks a coconut)” was posted on Douyin capturing footage of coffee being brewed using a real coconut that is cracked in front of customers garnered more than 260 million views, and it had a huge impact on the newly opened store's rapid customer acquisition. As a result, Nowwa Coffee has now ranked first among coffee shops across many cities on Douyin’s ranking of trending coffee shops.
The actual video of “挪瓦咖啡敲椰子 (Nowwa Coffee cracks a coconut)” posted on Douyin
In addition, Douyin not only allows you to post videos and livestream but it also allows you to purchase products directly from the live broadcast screen or from the Douyin Mall store.
According to the 2023 Coffee Circuit Special Research Report (2023年咖啡赛道专题研究报告) released in collaboration with Douyin Life Clothing (抖音生活服务), etc., it was found that sales through short-form videos and livestreams are on the rise. In particular, the number of purchases made via live broadcasts in April 2023 increased by 22 times compared to the same period the previous year.
The number of coffee-related purchases made through Douyin's short-form videos and livestreams. The green line represents sales made via livestreams, and the red line are those via short-form videos.
In this way, by effectively utilizing Douyin, coffee shops are able to increase their popularity and sales in a short period of time. Customers who visit the store or purchase products after seeing them on Douyin then also share their own experiences on Douyin, creating a positive image of the brand and creating a high-quality cycle.
Another example of diversified sales methods is the sale of coffee via food trucks. There have been more than 1.13 million posts about coffee trucks on RED, and they have been viewed more than 65 million times. Being able to go out and buy a cup of coffee anytime and anywhere gives consumers a sense of convenience and comfort.
We introduced the rise of the coffee market in China and the events that played a major role in its growth. Changes in the coffee consumption styles among young consumers and various places starting to sell coffee with the aim of answering to the demand for coffee among young consumers are expanding the coffee market.
Furthermore, by utilizing social media, such as Douyin and RED, coffee sales methods are diversifying, such as creating a positive cycle that leads to increased customers and sales.
The coffee market in China is expected to continue expanding. It will be interesting to see how coffee consumption styles and the sales methods of coffee-related companies evolve in the future.