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Coffee - China - September 2012

“The coffee market has been growing due to a combination of external drivers: increasing population and urbanisation, a rising income level, changing lifestyles, and a growing affinity for Western culture and acceptance of Western taste. The growing middle class, open-minded young people, and Westernised working professionals that constitute the main coffee consumers in China today have increasingly adopted the coffee culture, fuelling the development of the market, especially the premium segment. Their growing desire for quality as well as a broad assortment of coffee varieties has been driving the need for premiumisation of the market. The highest value increase is exhibited in non-liquid fresh coffee including beans and ground/brewed coffee with a 4.6% CAGR in volume but a significant 41.4% CAGR in value, which can be attributed to the growing popularity of the segment and its continuing price increase over the other two segments."

– Nelly Mao – Senior Research Analyst

In this report we answer the key questions:

  • What are the challenges and opportunities regarding Chinese consumers’ health perceptions towards coffee?
  • In what ways do local flavour preferences affect the coffee market?
  • Is there demand for “premium” coffee in the Chinese market?
  • How can the market tap into the consumer demand for convenience and on-the-go consumption in China?
 

Report Description:

China’s retail packaged coffee sector grew at a compound annual growth rate (CAGR) of 18.4% from 2007-12 to reach a market value of RMB9.2 billion. The market rose with the continuing expansion of instant coffee at 17.3% CAGR, fresh ground/brewed coffee at 41.4% CAGR, and RTD coffee at 18.7% CAGR.

The coffee market has been growing due to a combination of external drivers: increasing population and urbanisation, a rising income level, changing lifestyles, and a growing affinity for Western culture and acceptance of Western taste. The growing middle class, open-minded young people, and Westernised working professionals that constitute the main coffee consumers in China today have increasingly adopted the coffee culture, fuelling the development of the market, especially the premium segment. Their growing desire for quality as well as a broad assortment of coffee varieties has been driving the need for premiumisation of the market. The highest value increase is exhibited in non-liquid fresh coffee including beans and ground/brewed coffee with a 4.6% CAGR in volume but a significant 41.4% CAGR in value, which can be attributed to the growing popularity of the segment and its continuing price increase over the other two segments.

Meanwhile, coffee retains a strong association with the modern Western lifestyle. This association helps coffee remain well positioned as an aspirational product able to tap into rising consumer incomes, with potential to drive growth through premiumisation. It is also seen by the majority of users as offering a necessary energy boost, something that should further help the drink to compete with tea as China’s traditional hot beverage. As coffee is becoming more widely accepted, it is also increasingly consumed as a casual drink, continuing to offer growth potential for the RTD segment.
 
 

 

Liqueurs - UK - January 2012

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Table of contents

  1. Introduction

      • Definition
        • Report structure
        • Executive Summary

          • The market
              • Figure 1: Retail volume sales of packaged coffee in China, 2007-12
              • Figure 2: Retail value sales of packaged coffee in China, 2007-12
              • Figure 3: Attitudes towards coffee, July 2012
            • The forecast
              • Figure 4: Forecast of retail sales of packaged coffee in China, at best-, worst-, and central-case scenarios, by value, 2007-17
            • Companies
              • Figure 5: Volume and value share of leading brands in the retail packaged non-liquid coffee market in China, 2009-11
              • Figure 6: Volume and value share of leading brands in the retail liquid packaged coffee market in China, 2009-11
            • Issues
              • Tackling health concerns and leveraging energy benefits can support market growth
                • Flavour variety creates growth opportunities
                  • Figure 7: Repertoire of types of coffee drunk, by gender, July 2012
                • Premiumisation has potential to drive growth
                  • Figure 8: Top three factors to consider when buying coffee, July 2012
                • On-the-go consumption offers further usage occasions
                  • Figure 9: Venue of drinking coffee, by gender, July 2012
              • Tackling Health Concerns and Leveraging Energy Benefits Can Support Market Growth

                • Issues at a glance
                  • Health concerns remain a key barrier to coffee consumption
                      • Figure 10: Attitudes towards coffee, July 2012
                    • Decaffeinated is least consumed coffee, despite its healthy image
                      • Figure 11: Frequency of drinking coffee, by type of drink, July 2012
                      • Figure 12: Usage frequency of decaffeinated coffee, by gender and age group, July 2012
                      • Figure 13: Agreement with the statements “I prefer decaffeinated coffee over standard coffee” and “I try to avoid drinking high-caffeine beverages such as coffee or brown tea as they are not good for my health”, by gender and age group, July 2012
                      • Figure 14: Top three factors to consider when buying coffee, July 2012
                    • Energy boost remains in demand despite health concerns
                      • Figure 15: Top three factors to consider when buying coffee, top five rank, July 2012
                      • Figure 16: Top three factors to consider when buying coffee “Energy boost function”, by gender and age group, July 2012
                      • Figure 17: Agreement with the statement “Coffee provides a much-needed energy boost”, by gender and age group, July 2012
                      • Figure 18: Venue of drinking coffee, July 2012
                    • Coffee can mine image as less calorific
                      • Figure 19: Agreement with the statement “Coffee is a less calorific drink”, by gender and age group, July 2012
                      • Figure 20: Attitudes towards tea drinks, January 2012
                    • Health messaging offers a means to reduce health concern
                      • What does it mean?
                      • Flavour Variety Creates Growth Opportunities

                        • Issues at a glance
                          • Taste and flavour dictate coffee selection
                            • Figure 21: Top three factors to consider when buying coffee, July 2012
                            • Figure 22: Agreement with the statements “I find the taste of coffee too powerful for everyday consumption” and “I prefer the stronger hit of coffee to tea”, by gender and age group, July 2012
                          • Coffee with milk dominates usage
                            • Figure 23: Frequency of drinking coffee, by type of drink, July 2012
                            • Figure 24: Types of coffee bought in the past 12 months, July 2012
                            • Figure 25: Retail volume sales for non-liquid retail packaged coffee, 2007-12
                          • Consumers are happy to try new flavours
                            • Figure 26: Repertoire of types of coffee drunk, by gender and age group, July 2012
                            • Figure 27: Agreement with the statements “I wish retail stores had a similar variety of coffee flavours as offered in coffee shops” and “I am always interested to try a new type or flavour of coffee”, by gender and age group, July 2012
                            • Figure 28: New product contribution, by subcategory for tea and coffee, China, 2011
                          • On-trade channel engages consumers with diverse and novel flavours
                            • Figure 29: Coffee drinks menu, Starbucks, China, 2012
                          • Maxwell House leads in launching new flavours
                              • Figure 30: New product development, by flavour, in coffee, China, 2008-12
                            • Seasonal flavours drive seasonal consumption in the on-trade channel
                              • Blended, fused flavours create opportunities to entice non-users
                                • What does it mean?
                                • Premiumisation Has Potential to Drive Growth

                                  • Issues at a glance
                                    • Coffee shops are outpacing retail coffee in Chinese market
                                      • Figure 31: Retail value sales of coffee shops versus retail value sales of packaged coffee, China, 2007-12
                                      • Figure 32: Venue of drinking coffee, July 2012
                                    • Emphasising quality appeals to premium-seeking consumers
                                      • Figure 33: Top three factors to consider when buying coffee, July 2012
                                      • Figure 34: Top three factors to consider when buying coffee “premium”, by gender, age group and household income, July 2012
                                    • Origin of coffee and brand are popular signs of quality
                                      • Figure 35: Agreement with the statements “It is worth paying more for better-quality coffee brands imported from Western countries” and “I feel better offering guests a premium international coffee brand than a cheaper local brand”, by gender and age group, July 2012
                                    • Domestic coffee enters the premium sector to beat coffee pricing increase and supply fluctuation
                                        • Figure 36: Yunnan coffee production and its share of the national total, in 000 tons, 2004-10
                                      • Instant still leads the coffee market
                                        • Figure 37: Retail value sales for non-liquid packaged coffee, 2007-12
                                        • Figure 38: Types of coffee bought in the past 12 months, July 2012
                                      • Nescafé a frontrunner in building premium positioning to engage upmarket consumers
                                        • Tier 1 cities represent the key targets for premium coffee
                                          • Figure 40: Frequency of drinking coffee, “any usage”, by city, July 2012
                                          • Figure 41: Top three factors to consider when buying coffee, by city, July 2012
                                        • Specialist channels can support premium image for coffee
                                          • Figure 42: Most popular place of buying coffee, July 2012
                                          • Figure 43: Attitudes towards coffee, July 2012
                                        • Gifting offers potential for premiumisation
                                          • What does it mean?
                                          • On-the-go Occasion Offers Further Usage Potential

                                            • Issues at a glance
                                              • RTD coffee caters to people on the go
                                                • Figure 44: Venue of drinking coffee, by gender and age group, July 2012
                                              • Packaging innovation to encourage on-the-go and out-of-home usage
                                                • Increased convenience to further encourage consumption
                                                  • Iced/warmed RTD looks to support seasonal demand
                                                    • Strengthening offering at convenience stores can engage young consumers and working professionals
                                                      • Figure 45: Venues for buying coffee, by gender and age group, July 2012
                                                    • Convenience helps sell coffee as a lifestyle product
                                                      • Figure 46: Agreement with the statements “I consider coffee a stylish drink that represents a Western lifestyle” and “Drinking tea is not as fashionable as drinking coffee”, by gender and age group, July 2012
                                                      • Figure 47: Agreement with the statements “I like to be seen drinking quality coffee from coffee shops such as Starbucks or Costa” and “I enjoy socialising with friends or family over a cup of coffee”, by gender and age group, July 2012
                                                    • What does it mean?
                                                    • The Future of the Market

                                                        • Figure 48: Forecast of retail sales of packaged coffee in China, at best-, worst-, and central-case scenarios, by value, 2007-17
                                                    • Appendix – Frequency of Drinking Coffee

                                                        • Figure 49: Most frequently drunk coffee, by type, July 2012
                                                        • Figure 50: Other frequently drunk coffee, by type, July 2012
                                                        • Figure 51: Most popular frequency of drinking chilled ready-to-drink coffee, by demographics, July 2012
                                                        • Figure 52: Next most popular frequency of drinking chilled ready-to-drink coffee, by demographics, July 2012
                                                        • Figure 53: Most popular frequency of drinking cappuccino, by demographics, July 2012
                                                        • Figure 54: Next most popular frequency of drinking cappuccino, by demographics, July 2012
                                                        • Figure 55: Most popular frequency of drinking mocha, by demographics, July 2012
                                                        • Figure 56: Next most popular frequency of drinking mocha, by demographics, July 2012
                                                        • Figure 57: Most popular frequency of drinking latte, by demographics, July 2012
                                                        • Figure 58: Next most popular frequency of drinking latte, by demographics, July 2012
                                                        • Figure 59: Most popular frequency of drinking black filter coffee, by demographics, July 2012
                                                        • Figure 60: Next most popular frequency of drinking black filter coffee, by demographics, July 2012
                                                        • Figure 61: Most popular frequency of drinking flavoured coffee such as caramel macchiato, hazelnut latte, etc., by demographics, July 2012
                                                        • Figure 62: Next most popular frequency of drinking flavoured coffee such as caramel macchiato, hazelnut latte, etc., by demographics, July 2012
                                                        • Figure 63: Most popular frequency of drinking mochaccino, by demographics, July 2012
                                                        • Figure 64: Next most popular frequency of drinking mochaccino, by demographics, July 2012
                                                        • Figure 65: Most popular frequency of drinking roasted coffee, by demographics, July 2012
                                                        • Figure 66: Next most popular frequency of drinking roasted coffee, by demographics, July 2012
                                                        • Figure 67: Most popular frequency of drinking white coffee, by demographics, July 2012
                                                        • Figure 68: Next most popular frequency of drinking white coffee, by demographics, July 2012
                                                        • Figure 69: Most popular frequency of drinking espresso, by demographics, July 2012
                                                        • Figure 70: Next most popular frequency of drinking espresso, by demographics, July 2012
                                                        • Figure 71: Most popular frequency of drinking flat white coffee, by demographics, July 2012
                                                        • Figure 72: Next most popular frequency of drinking flat white coffee, by demographics, July 2012
                                                        • Figure 73: Most popular frequency of drinking decaffeinated coffee, by demographics, July 2012
                                                        • Figure 74: Next most popular frequency of drinking decaffeinated coffee, by demographics, July 2012
                                                    • Appendix – Where Coffee is Drunk

                                                        • Figure 75: Where coffee is drunk, July 2012
                                                        • Figure 76: Most popular places to drink coffee, by demographics, July 2012
                                                        • Figure 77: Next most popular places to drink coffee, by demographics, July 2012
                                                    • Appendix – Types of Coffee Bought in the Past 12 Months

                                                        • Figure 78: Types of coffee bought in the past 12 months, July 2012
                                                        • Figure 79: Most popular types of coffee bought in the past 12 months, by demographics, July 2012
                                                        • Figure 80: Next most popular types of coffee bought in the past 12 months, by demographics, July 2012
                                                    • Appendix – Most Important Factors to Consider When Buying Coffee

                                                        • Figure 81: Top three factors to consider when buying coffee, July 2012
                                                        • Figure 82: Most popular top-ranked factors to consider when buying coffee, by demographics, July 2012
                                                        • Figure 83: Next most popular top-ranked factors to consider when buying coffee, by demographics, July 2012
                                                        • Figure 84: Most popular second-ranked factors to consider when buying coffee, by demographics, July 2012
                                                        • Figure 85: Next most popular second-ranked factors to consider when buying coffee, by demographics, July 2012
                                                        • Figure 86: Most popular third-ranked factors to consider when buying coffee, by demographics, July 2012
                                                        • Figure 87: Next most popular third-ranked factors to consider when buying coffee, by demographics, July 2012
                                                    • Appendix – Coffee Brands Bought in the Past 12 Months

                                                        • Figure 88: Coffee brands bought in the past 12 months, July 2012
                                                        • Figure 89: Most popular coffee brands bought in the past 12 months, by demographics, July 2012
                                                        • Figure 90: Next most popular coffee brands bought in the past 12 months, by demographics, July 2012
                                                        • Figure 91: Other coffee brands bought in the past 12 months, by demographics, July 2012
                                                    • Appendix – Number of Coffee Brands Bought

                                                        • Figure 92: Repertoire of coffee brands bought in the past 12 months, July 2012
                                                        • Figure 93: Repertoire of coffee brands bought in the past 12 months, by demographics, July 2012
                                                    • Appendix – Coffee Brands Bought Most Often in the Past 12 Months

                                                        • Figure 94: Coffee brand most often bought in the past 12 months, July 2012
                                                        • Figure 95: Coffee brand most often bought in the past 12 months, by demographics, July 2012
                                                    • Appendix – Where Coffee is Bought

                                                        • Figure 96: Where coffee is bought, July 2012
                                                        • Figure 97: Most popular places where coffee is bought, by demographics, July 2012
                                                        • Figure 98: Next most popular places where coffee is bought, by demographics, July 2012
                                                    • Appendix – Attitudes towards Coffee

                                                        • Figure 99: Attitudes towards coffee, July 2012
                                                        • Figure 100: Agreement with the statements “I wish retail stores had a similar variety of coffee flavours as offered in coffee shops” and “I enjoy socialising with friends or family over a cup of coffee”, by demographics, July 2012
                                                        • Figure 101: Agreement with the statements “Ground coffee bought from coffee shops is better quality than that available in retail stores” and “I am always interested to try a new type or flavour of coffee”, by demographics, July 2012
                                                        • Figure 102: Agreement with the statements “I consider coffee a stylish drink that represents a Western lifestyle” and “I feel better offering guests a premium international coffee brand than a cheaper local brand”, by demographics, July 2012
                                                        • Figure 103: Agreement with the statements “It is worth paying more for better-quality coffee brands imported from Western countries” and “Coffee provides a much-needed energy boost”, by demographics, July 2012
                                                        • Figure 104: Agreement with the statements “I prefer the stronger hit of coffee to tea” and “I like to be seen drinking quality coffee from coffee shops such as Starbucks or Costa”, by demographics, July 2012
                                                        • Figure 105: Agreement with the statements “Coffee is a less calorific drink” and “I prefer decaffeinated coffee over standard coffee”, by demographics, July 2012
                                                        • Figure 106: Agreement with the statements “I find the taste of coffee too powerful for everyday consumption” and “Drinking tea is not as fashionable as drinking coffee”, by demographics, July 2012
                                                        • Figure 107: Agreement with the statement “I try to avoid drinking high-caffeine beverages such as coffee or brown tea as they are not good for my health”, by demographics, July 2012
                                                        • Figure 108: Most popular attitudes towards coffee (any agree), by demographics, July 2012
                                                        • Figure 109: Next most popular attitudes towards coffee (any agree), by demographics, July 2012
                                                        • Figure 110: Other attitudes towards coffee (any agree), by demographics, July 2012

                                                    Companies Covered

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                                                    Coffee - China - September 2012

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