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Coffee - China - August 2014

“China’s coffee market has enjoyed a rapid rise and its retail market value almost doubled from 2009 to 2013. The market has benefited from China’s ongoing urbanisation, the rising income levels of Chinese consumers and greater affinity towards western culture and lifestyles. As coffee products become more and more accessible and affordable to a larger population, the market is forecast to keep growing at an estimated CAGR of 10.9% in the coming five years.

Brands can market the western coffee culture to Chinese consumers, but still need to localise their products to fit Chinese palates. For the dominant instant coffee segment, growth opportunities come from expanding usage occasions and upgrading the majority medium users to heavy users through product innovation and advertisements. Moreover, there exists opportunities to encourage consumers to drink more premium products, such as premium instant coffee and fresh coffee.”
- Hao Qiu, Research Analyst
This report looks at the following questions:

  • How can brands encourage more habitual consumption of instant coffee?
  • How can brands overcome the taste and cost barriers of fresh coffee?
  • How to change consumers’ negative perception of RTD coffee?
  • How to motivate young consumers to drink more coffee?

Coffee Market in China

The market volume has enjoyed a steady but slower growth than market value in the past five years. RTD coffee drinks achieved the highest CAGR of 16% as companies increased investments in new product development from 2011 to capture increasingly busy Chinese consumers. However, compared to developed markets, such as Japan, the US and the UK, China’s coffee volume consumption per capita is still quite low. In 2013, China’s non-liquid coffee volume consumption per capita was 32 grams, which was about a 30th of the UK’s figure, a 50th of the US’s and a 70th of Japan’s. This indicates great room for growth in the future.

 

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Table of contents

  1. Introduction

      • Definition
        • Methodology
          • Abbreviations
          • Executive Summary

              • The market
                • Figure 1: Retail market value of coffee in China, 2009-19
                • Figure 2: Share of China’s coffee market segment by value, 2009-19
              • Companies and brands
                • Figure 3: Market share of non-liquid coffee retail market, by value 2013
              • The consumer
                • Usage of coffee
                  • Reasons for not drinking coffee
                    • Figure 4: Reasons for not drinking coffee, May 2014
                  • Frequency of drinking different types of coffee
                      • Figure 5: Frequency of drinking different types of coffee, May 2014
                    • Occasions of drinking coffee
                      • Figure 6: Occasions of drinking coffee, May 2014
                    • Consumers’ perception of different types of coffee
                      • Figure 7: Consumers’ perception of different types of coffee, may 2014
                    • Coffee buying and drinking behaviours
                      • Figure 8: Coffee buying and drinking behaviours, May 2014
                    • Attitudes towards coffee
                      • Figure 9: Attitudes towards coffee, May 2014
                    • Key issues
                      • How can brands encourage more habitual consumption of instant coffee?
                        • How can brands overcome the taste and cost barriers of fresh coffee?
                          • How to change consumers’ negative perception of RTD coffee?
                            • How to motivate young consumers to drink more coffee?
                            • Issues and Insights

                                • How can brands encourage more habitual consumption of instant coffee?
                                  • The facts
                                    • The implications
                                      • Figure 10: Examples of instant coffee with added benefits, Mainland China & Hong Kong, 2014
                                    • How can brands overcome the taste and cost barriers of fresh coffee?
                                      • The facts
                                        • The implications
                                          • How to change consumers’ negative perception of RTD coffee?
                                            • The facts
                                              • The implications
                                                • Figure 11: Examples of coffee innovations with “natural” claims, Japan, 2014
                                              • How to motivate young consumers to drink more coffee?
                                                • The facts
                                                  • The implications
                                                      • Figure 12: Examples of coffee and soft drink blends innovation, China, 2006-14
                                                  • Trend Applications

                                                      • Capturing more consumers on the go
                                                        • Figure 13: Examples of RTD coffee packaging innovations, Taiwan, France & Czech Republic, 2013-14
                                                      • Making coffee a mood food
                                                        • Figure 14: Examples of coffee products with emotional benefits, US, Finland & Vietnam, 2014
                                                      • Enhancing the sensory experience
                                                        • Figure 15: Examples of coffee featuring intensified physical and sensory experiences, US & Finland, 2014
                                                    • Market Size and Forecast

                                                      • Key points
                                                        • China’s coffee market value enjoyed a rapid growth in past five years
                                                          • Figure 16: Retail market value of China’s coffee market, 2009-14
                                                        • Great room for future consumption growth
                                                          • Figure 17: Non-liquid coffee retail market volume & volume consumption per capita, China, Japan, US and UK, 2013
                                                        • Coffee market forecast to grow at a double-digit rate in five years
                                                          • Figure 18: Retail market value of coffee in China, 2009-19
                                                        • Forecast methodology
                                                        • Market Segmentation

                                                          • Key points
                                                            • Instant coffee still dominates but is growing at a slower rate
                                                              • Figure 19: Share of China’s coffee market segment on value, 2009-19
                                                            • Fresh coffee grew fastest among all three segments in value terms
                                                              • Figure 20: Retail market value of China’s coffee market, by segment, 2009-14
                                                            • Market volume grew steadily but at a slower rate than market value
                                                              • Figure 21: Retail market volume of China’s coffee market, by segment, 2009-14
                                                          • Market Share

                                                            • Key points
                                                              • Nestle dominates China’s coffee market
                                                                • Figure 22: Share of value in China’s non-liquid coffee retail market, by company, 2012-13
                                                              • Mondelez comes in second place
                                                                • New variety extensions and advert help Mondelez increase market share
                                                                  • China’s coffee market is dominated by multi-national brands
                                                                  • Who’s Innovating?

                                                                    • Key points
                                                                      • Suntory launches Liqu Salty Coffee and Coffee Milk Tea Blends to China
                                                                        • Starbucks launches low-calorie Frappuccino Light Mocha in China
                                                                          • Figure 23: Example of low calorie coffee, China 2014
                                                                        • Brands innovate coffee with new mellow flavours and aroma in China
                                                                          • Figure 24: New coffee products with mellow taste and aroma, China 2014
                                                                        • Nescafe gets innovative with 3D-printed alarm cap
                                                                          • Coffee berries used to make coffee a healthier option
                                                                            • Figure 25: Examples of coffee & juice infusion innovations using coffee berry, Mexico & US, 2011-13
                                                                          • Old Orchard introduces iced coffee concentrates to the freezer section
                                                                            • Figure 26: Examples of iced coffee frozen concentrate, Canada, 2014
                                                                        • Companies and Brands

                                                                          • Nestle
                                                                              • Figure 27: Examples of mellow flavoured instant coffee, China, 2014
                                                                            • Mondelez International
                                                                              • Mocca Foods
                                                                                • Dehong Hogood Coffee Co. Ltd
                                                                                  • Suntory
                                                                                    • Uni-President
                                                                                      • Kirin
                                                                                      • The Consumer – Usage of Coffee

                                                                                        • Key points
                                                                                          • Coffee is far from a mainstream drink in China
                                                                                            • Figure 28: Coffee usage in the last three months, May 2014
                                                                                            • Figure 29: Coffee usage in the last three months, by city tier, May 2014
                                                                                          • Young males in their 20s have the lowest usage rate
                                                                                            • Figure 30: Coffee usage in the last three months, by gender and age group, May 2014
                                                                                          • Income drives coffee consumption
                                                                                            • Figure 31: Coffee usage in the last three months, by monthly personal income, may 2014
                                                                                        • The Consumer – Reasons for not Drinking Coffee

                                                                                          • Key points
                                                                                            • Bitter taste puts consumers off from drinking coffee
                                                                                              • Figure 32: Reasons for not drinking coffee, May 2014
                                                                                            • Negative effect on health by caffeine is another major concern
                                                                                              • Figure 33: Agreement on “I am concerned about the negative effect on the health of caffeine”, by gender, May 2014
                                                                                              • Figure 34: Examples of low-caffeine coffee products, China, 2013-14
                                                                                            • Market barriers vary by city
                                                                                              • Figure 35: Most popular reasons for not drinking coffee, by city and tier, May 2014
                                                                                            • Coffee blends with soft drinks could appeal more to people in their 20s
                                                                                              • Figure 36: Most popular reasons for not drinking coffee, by gender & age group, May 2014
                                                                                          • The Consumer – Frequency of Drinking Different Types of Coffee

                                                                                            • Key points
                                                                                              • Instant coffee is the most consumed coffee
                                                                                                • Figure 37: Frequency of drinking different types of coffee, May 2014
                                                                                              • Consumers from northern cities drink instant coffee more frequently
                                                                                                • Potential for coffee beans and pods as coffee machines are more affordable
                                                                                                  • Families with kids drink coffee more frequently
                                                                                                      • Figure 38: Examples of coffee suitable for children, Europe & Asia, 2011-14
                                                                                                    • Coffee consumption frequencies go up as income rises
                                                                                                      • Figure 39: Frequency of drinking different types of coffee, by monthly personal income, May 2014
                                                                                                  • The Consumer – Occasions of Drinking Coffee

                                                                                                    • Key points
                                                                                                      • Coffee is a mood drink for Chinese consumers
                                                                                                        • Figure 40: Occasions of drinking coffee, May 2014
                                                                                                      • But there is also a functional element
                                                                                                        • Build medium users to heavy users of instant coffee
                                                                                                          • Figure 41: Occasions of drinking coffee, by frequency of drinking instant coffee, May 2014
                                                                                                        • Narrower consumption occasions for singles
                                                                                                          • Figure 42: Most popular occasions of drinking coffee, by marital status, May 2014
                                                                                                      • The Consumer – Consumer Perceptions towards Different Types of Coffee

                                                                                                        • Key points
                                                                                                          • Reinforcing energy boosting feature to meet consumer needs
                                                                                                            • Figure 43: Consumer perceptions of different types of coffee, May 2014
                                                                                                            • Figure 44: Examples of coffee highlighting energy boosting property, Vietnam, 2014
                                                                                                          • The artificial image of RTD coffee hinders its sales
                                                                                                            • Taste and cost put consumers off home-made coffee
                                                                                                              • Opportunities for instant coffee to trade up by premiumisation
                                                                                                              • The Consumer – Coffee Buying and Drinking Behaviours

                                                                                                                • Key points
                                                                                                                  • Make coffee drinking part of lifestyles
                                                                                                                    • Figure 45: Coffee buying and drinking behaviours, May 2014
                                                                                                                  • Half of consumers prefer coffee from chain cafe brands
                                                                                                                    • Coffee with added benefits targets consumers with specific needs
                                                                                                                        • Figure 46: Examples of coffee with added benefits, Vietnam & Thailand, 2014
                                                                                                                      • Only one in four consumers claim to be knowledgeable about coffee
                                                                                                                      • The Consumer – Attitudes towards Coffee

                                                                                                                        • Key points
                                                                                                                          • A high level of interest in fresh coffee products among consumers
                                                                                                                            • Figure 47: Attitudes towards coffee, May 2014
                                                                                                                          • Fulfilling the market gap for premium instant coffee
                                                                                                                            • Figure 48: Agreement on “There is no big difference in taste between instant coffee and freshly brewed coffee”, by monthly personal income, May 2014
                                                                                                                            • Figure 49: Examples of premium instant coffee product launches, China, 2013-14
                                                                                                                          • Potential targets for premium instant coffee
                                                                                                                            • Figure 50: Agreement on “I am willing to pay more for premium instant coffee (eg using arabica beans, made from organic ingredients)”, by gender and age group and city, May 2014
                                                                                                                          • Young consumers, especially women, demand greater flavour variety
                                                                                                                            • Figure 51: Agreement on “there is a lack of various flavours of coffee (eg no coffee with nuts/fruit flavours) in the market”, by age and gender group, May 2014
                                                                                                                        • Consumer Segmentation

                                                                                                                          • Key points
                                                                                                                            • Consumer segmentation
                                                                                                                              • Figure 52: Consumer segmentation on China’s coffee market, may 2014
                                                                                                                              • Figure 53: Consumer attitudes towards coffee, by target groups, may 2014
                                                                                                                            • Quality Coffee Pursuers
                                                                                                                              • Convenience Seekers
                                                                                                                                • Variety Seekers
                                                                                                                                  • Demotivated Drinkers
                                                                                                                                  • Appendix – Market Size and Forecast

                                                                                                                                      • Figure 54: Value sales of China’s coffee retail market, 2009-19
                                                                                                                                      • Figure 55: Volume sales of China’s non-liquid coffee retail market, 2009-19
                                                                                                                                  • Appendix – Market Segmentation

                                                                                                                                      • Figure 56: Value sales of China’s instant coffee retail market, 2009-19
                                                                                                                                      • Figure 57: Value sales of China’s fresh coffee retail market, 2009-19
                                                                                                                                      • Figure 58: Value sales of China’s RTD coffee retail market, 2009-19
                                                                                                                                  • Appendix – The Consumer – Usage of Coffee

                                                                                                                                      • Figure 59: Coffee usage in the last three months, May 2014
                                                                                                                                      • Figure 60: Coffee usage in the last three months, by demographics, May 2014
                                                                                                                                  • Appendix – The Consumer – Reasons for not Drinking Coffee

                                                                                                                                      • Figure 61: Reasons for not drinking coffee, May 2014
                                                                                                                                      • Figure 62: Most popular reasons for not drinking coffee, by demographics, May 2014
                                                                                                                                      • Figure 63: Next most popular reasons for not drinking coffee, by demographics, May 2014
                                                                                                                                  • Appendix – The Consumer – Frequency of Drinking Different Types of Coffee

                                                                                                                                      • Figure 64: Frequency of drinking different types of coffee, May 2014
                                                                                                                                      • Figure 65: Frequency of drinking different types of coffee, May 2014
                                                                                                                                      • Figure 66: Most popular frequency of drinking instant coffee, by demographics, May 2014
                                                                                                                                      • Figure 67: Next most popular frequency of drinking instant coffee, by demographics, May 2014
                                                                                                                                      • Figure 68: Most popular frequency of drinking home-made coffee, by demographics, May 2014
                                                                                                                                      • Figure 69: Next most popular frequency of drinking home-made coffee, by demographics, May 2014
                                                                                                                                      • Figure 70: Most popular frequency of drinking ready-to-drink coffee drinks, by demographics, May 2014
                                                                                                                                      • Figure 71: Next most popular frequency of drinking ready-to-drink coffee drinks, by demographics, May 2014
                                                                                                                                      • Figure 72: Most popular frequency of drinking freshly made coffee at retail channels, by demographics, May 2014
                                                                                                                                      • Figure 73: Next most popular frequency of drinking freshly made coffee at retail channels, by demographics, May 2014
                                                                                                                                  • Appendix – The Consumer – Occasions of Drinking Coffee

                                                                                                                                      • Figure 74: Occasions of drinking coffee, May 2014
                                                                                                                                      • Figure 75: Most popular occasions of drinking coffee, by demographics, May 2014
                                                                                                                                      • Figure 76: Next most popular occasions of drinking coffee, by demographics, May 2014
                                                                                                                                      • Figure 77: Occasions of drinking coffee, by frequency of drinking instant coffee, May 2014
                                                                                                                                      • Figure 78: Occasions of drinking coffee, by frequency of drinking home-made coffee, May 2014
                                                                                                                                      • Figure 79: Occasions of drinking coffee, by frequency of drinking ready-to-drink coffee drinks, May 2014
                                                                                                                                      • Figure 80: Occasions of drinking coffee, by frequency of drinking freshly made coffee at retail channels, May 2014
                                                                                                                                    • Repertoire analysis
                                                                                                                                      • Figure 81: Repertoire of occasions of drinking coffee, May 2014
                                                                                                                                      • Figure 82: Repertoire of occasions of drinking coffee, by demographics, May 2014
                                                                                                                                  • Appendix – The Consumer – Consumers' Perceptions of Different Types of Coffee

                                                                                                                                      • Figure 83: Consumers' perception of different types of coffee, May 2014
                                                                                                                                      • Figure 84: Most popular consumers' perception of instant coffee, by demographics, May 2014
                                                                                                                                      • Figure 85: Next most popular consumers' perception of instant coffee, by demographics, May 2014
                                                                                                                                      • Figure 86: Most popular consumers' perception of home-made coffee, by demographics, May 2014
                                                                                                                                      • Figure 87: Next most popular consumers' perception of home-made coffee, by demographics, May 2014
                                                                                                                                      • Figure 88: Most popular consumers' perception of ready-to-drink coffee drinks, by demographics, May 2014
                                                                                                                                      • Figure 89: Next most popular consumers' perception of ready-to-drink coffee drinks, by demographics, May 2014
                                                                                                                                      • Figure 90: Consumers' perception of different types of coffee, by frequency of drinking instant coffee, May 2014
                                                                                                                                      • Figure 91: Consumers' perception of different types of coffee, by frequency of drinking home-made coffee, May 2014
                                                                                                                                      • Figure 92: Consumers' perception of different types of coffee, by frequency of drinking ready-to-drink coffee drinks, May 2014
                                                                                                                                      • Figure 93: Consumers' perception of different types of coffee, by frequency of drinking freshly made coffee at retail channels, May 2014
                                                                                                                                  • Appendix – The Consumer – Coffee Buying and Drinking Behaviours

                                                                                                                                      • Figure 94: Coffee buying and drinking behaviours, May 2014
                                                                                                                                      • Figure 95: Most popular consumers' drinking and buying behaviour towards coffee, by demographics, May 2014
                                                                                                                                      • Figure 96: Next most popular consumers' drinking and buying behaviour towards coffee, by demographics, May 2014
                                                                                                                                  • Appendix – The Consumer – Attitudes towards Coffee

                                                                                                                                      • Figure 97: Attitudes towards coffee, May 2014
                                                                                                                                      • Figure 98: Agreement with the statement ‘When drinking coffee out of home, the experience/services is more important than the coffee served’, by demographics, May 2014
                                                                                                                                      • Figure 99: Agreement with the statement ‘It is important for me to learn more about coffee’, by demographics, May 2014
                                                                                                                                      • Figure 100: Agreement with the statement ‘Coffee bought in coffee shops tastes better than home-made coffee’, by demographics, May 2014
                                                                                                                                      • Figure 101: Agreement with the statement ‘There is no big difference in taste between instant coffee and freshly brewed coffee’, by demographics, May 2014
                                                                                                                                      • Figure 102: Agreement with the statement ‘It is more time-saving to buy coffee out of home than making it at home’, by demographics, May 2014
                                                                                                                                      • Figure 103: Agreement with the statement ‘Coffee is more effective for energy boosting than strong tea’, by demographics, May 2014
                                                                                                                                      • Figure 104: Agreement with the statement ‘Coffee is a healthier option than energy drinks’, by demographics, May 2014
                                                                                                                                      • Figure 105: Agreement with the statement ‘I am interested in learning more about how to make coffee at home’, by demographics, May 2014
                                                                                                                                      • Figure 106: Agreement with the statement ‘Making coffee at home is an enjoyable process’, by demographics, May 2014
                                                                                                                                      • Figure 107: Agreement with the statement ‘Quality of coffee is more important than how easy it is to make’, by demographics, May 2014
                                                                                                                                      • Figure 108: Agreement with the statement ‘Making coffee at home is a symbol of pursuing better quality life’, by demographics, May 2014
                                                                                                                                      • Figure 109: Consumer attitudes towards coffee, by frequency of drinking instant coffee, May 2014
                                                                                                                                      • Figure 110: Consumer attitudes towards coffee, by frequency of drinking home-made coffee, May 2014
                                                                                                                                      • Figure 111: Consumer attitudes towards coffee, by frequency of drinking ready-to-drink coffee drinks, May 2014
                                                                                                                                      • Figure 112: Consumer attitudes towards coffee, by frequency of drinking freshly made coffee at retail channels, May 2014
                                                                                                                                  • Appendix – The Consumer Segmentation

                                                                                                                                      • Figure 113: Target groups, by demographics, May 2014
                                                                                                                                      • Figure 114: Frequency of drinking different types of coffee, by target groups, May 2014
                                                                                                                                      • Figure 115: Occasions of drinking coffee, by target groups, May 2014
                                                                                                                                      • Figure 116: Consumers' perception of different types of coffee, by target groups, May 2014
                                                                                                                                      • Figure 117: Consumers' drinking and buying behaviour towards coffee, by target groups, May 2014
                                                                                                                                      • Figure 118: Consumer attitudes towards coffee, by target groups, May 2014

                                                                                                                                  Companies Covered

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                                                                                                                                  Coffee - China - August 2014

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