How Fast Is China's Coffee Market Growing?
China's coffee market grew at an average annual compound rate of 29.54 percent from 2013 to 2018, then climbed 31 percent year on year in 2021. The market scale is expected to reach 180 billion yuan in 2023, with forecasts pointing to one trillion yuan by 2025. The projected compound annual growth rate from 2022 to 2025 is 9.63 percent.
Chain brands opening stores in lower-tier cities, livestreaming and mini-program sales channels, and coffee habits spreading among young consumers are the main drivers. Freshly ground coffee is expected to pass 51 percent of the market, while instant coffee falls below 40 percent. The shift points to consumption upgrading across the industry rather than simple volume growth.
Over the past two decades and more, coffee in China has gradually integrated into daily life from a novelty, with the market scale continuing to expand. Data from multiple institutions show that from 2013 to 2018, the industry's average annual compound growth rate reached 29.54%; in 2021, the year-on-year increase was 31%; and the compound annual growth rate from 2022 to 2025 is expected to be 9.63%. In 2023, the market scale is expected to reach 180 billion yuan, and by 2025 it may exceed one trillion yuan. Chain brands accelerating their expansion into lower-tier markets, the rise of livestreaming and mini-program channels, and the development of coffee consumption habits among young people together constitute the core drivers of growth. The share of freshly ground coffee is expected to rise to over 51%, while instant coffee will drop to within 40%, and the industry is ushering in a period of consumption upgrading and rapid growth.
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Over the past twenty-one years, the domestic coffee consumption landscape has undergone profound evolution. From an initial novelty beverage to today's daily necessity, the Chinese market achieved rapid overall expansion in just ten years.
Data compiled from multiple institutions show that from 2013 to 2018, the market's average annual compound growth rate reached 29.54%; in 2021, China's coffee market climbed 31% year-on-year; and the compound annual growth rate (CAGR) from 2022 to 2025 is expected to be 9.63%.
The latest analysis of the global coffee market points out that in 2023 China's coffee market scale will reach 180 billion yuan, and by 2025 it is even expected to reach 1,000 billion yuan.
Such rapid growth is mainly attributed to intensifying industry competition, chain brands accelerating their pace of store openings, the rise of mini-programs and livestreaming channels, and the rapid spread of coffee-drinking habits among young consumers.
/ Accelerated expansion of chain brands
After the pandemic, people generally face rising pressure from work and life, and the need for refreshment has driven coffee consumption to continue rising. With the spread of specialty coffee culture, some analyses predict that in 2023 the market share of domestic freshly ground coffee will rise to over 51%, while instant coffee will shrink to within 40%.
It is evident that China's freshly ground coffee is a typical consumption upgrading track, with very broad room for future growth. In terms of industry growth rate, freshly ground coffee is likewise in a high-speed growth channel.
Market analysis believes that in the next five years the compound growth rate of global freshly ground coffee consumption will be 5.7%, while the compound growth rate of China's freshly ground coffee consumption can reach 24.6%. Such high growth provides coffee chain enterprises with ample room for error tolerance and opportunities to overtake on the curve.
At the same time, in recent years many people working in large cities have flowed back to small and medium-sized cities, driving coffee demand in third-, fourth-, and fifth-tier cities. Therefore, over the past year, major chain coffee brands have focused on lower-tier markets, accelerating store layouts to win more new customers.
Statistics from Narrow Door Restaurant Eye show that in 2022 the three brands with the largest number of newly opened stores were Luckin Coffee (2,939 new stores), Lucky Cup (1,521 new stores), and McCafe (763 new stores). As of the time of statistics, the brands with the largest number of operating stores in China were Luckin Coffee (8,171), Starbucks (6,882), and McCafe (2,530).
/ The rise of mini-programs and livestreaming
Livestreaming and online shopping have developed rapidly in China, injecting strong support into the coffee market. With the vigorous rise of the livestreaming format, more and more consumers are buying goods through such channels and have gradually developed consumption habits of ordering online and pursuing discounts and convenience.
Livestreaming has built a display window for many coffee brands to reach the national public, allowing them to share how to use coffee equipment, the flavor characteristics of coffee beans, and brewing experience. Through livestreaming interaction, consumers' attention to and awareness of coffee can be improved, and combined with the discounts and convenience of online ordering, coffee has gradually penetrated into home scenarios (that is, buying coffee to brew at home).
At the retail level, mini-programs provide consumers with another option beyond traditional stores and e-commerce. At present, the main coffee consumption force is concentrated between the ages of 23 and 40, and this age group values speed and convenience more, so the demand for mobile applications is extremely strong.
The rise of mini-programs has played the function of mini-commerce. It integrates social media and e-commerce platforms, providing consumers with a channel beyond traditional markets and e-commerce. Consumers can order the products they need in advance and shorten waiting time, while merchants can respond to demand more quickly, effectively reducing store operating costs and leaving more room for discounts in product prices.
/ The rapid increase in young consumers' coffee-drinking habits
The rapid expansion of chain coffee, the boost from e-commerce livestreaming, and mini-program-assisted retail work together to promote the rapid formation of young consumers' coffee-drinking habits. Compared with countries with deep coffee culture, the Chinese market is still in its initial stage, which means there is still great room for expansion.
Data show that the three main reasons Chinese consumers drink coffee are currently: refreshment (53.1%), liking the taste of coffee (53.2%), and enjoying the atmosphere and service of coffee shops (31.3%). Consumers' single purchases in coffee shops are concentrated between 10 and 40 yuan, with the largest number in the 15 to 25 yuan range.
The Chinese coffee market is still in its initial stage, which means considerable potential for subsequent expansion. Recent data show that coffee consumers value product quality, and their single purchases fall in the medium price range, indicating that they are more inclined to buy coffee products with high cost performance.
The aforementioned chain brands, livestreaming, and mini-program ordering are precisely the key to providing high cost-performance coffee products and are also important factors prompting more consumers to develop the habit of drinking coffee.
Judging from the current situation, millennials (post-00s) and Generation Z (under 40) consumers occupy the dominant position. The post-00s pursue innovation, novelty, and convenience; Generation Z values experience, stability, and convenience.
Therefore, the future coffee market will focus more on the needs of millennials and Generation Z, while strengthening coffee's social attributes, launching more portable, ready-to-drink products, and increasing the import volume of coffee beans.
Image source: Internet
The above content is compiled by CoffeeHunters, a coffee news website.
