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Coffee - China - September 2017

“Strong growth momentum of China’s coffee market is likely to continue with blossoming innovations and rising interest from younger consumers. Consumers, on one hand attach great importance to safety and authenticity and try to limit sugar intake for health reasons, while on the other hand, emotional triggers effectively drive greater consumption and strong flavour from additional ingredients are still favoured by those who seek to indulge. With rising competition from localisation of international brands and strong presence of local roasters and coffee start-ups, brands are on the verge of up or down amid ever-changing competition landscape.”

– Cici Wu, Research Analyst

This report looks at the following areas:

  • How can instant and RTD address health needs
  • How to build connections with young consumers
  • Leverage the power of food

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
        • Excluded
        • Executive Summary

            • The market
              • Growth momentum projected to continue
                • Figure 1: Best- and worst-case retail value sales forecast of coffee, China, 2012-22
              • Instant coffee is poised for shrinking share
                • Figure 2: Coffee retail value market share, by segmentation, China, 2012-17
              • Key players
                • Leading brands challenged by smaller players
                  • Figure 3: Company share of non-liquid coffee market in China, 2015 and 2016
                  • Figure 4: Company share of RTD coffee market in China, 2015 and 2016
                • Target zoomed in on young consumers
                  • Minus claims and additional nutrients to address health needs
                    • The consumer
                      • Rise of coffee on premise underpinned by young females
                        • Figure 5: Penetration of different types of coffee, July 2017
                      • Shift from instant and RTD to fresh coffee
                        • Figure 6: Percentage of people drinking the following types of coffee once a day or more, July 2017
                      • Adopting coffee drinking culture as a whole
                        • Figure 7: Choice of food paring with coffee, July 2017
                      • Manual brewing arsenal upgrade in quality as well as in quantity
                        • Figure 8: Average types of brewing tools used, July 2017
                      • Success formula of most consumed RTD coffee brands
                        • Figure 9: Correlation between brand attributes and penetration, July 2017
                      • Milk yes, sugar maybe
                        • Figure 10: Interested flavour innovations, July 2017
                      • What we think
                      • Issues and Insights

                        • How can instant and RTD address health needs
                          • The facts
                            • The implications
                              • How to build connections with young consumers
                                • The facts
                                  • The implications
                                    • Leverage the power of food
                                      • The facts
                                        • The implications
                                            • Figure 11: Dessert flavoured coffee launched globally, 2016-17.
                                            • Figure 12: Coffee launches with food paring suggestions or recipes, global, 2016.
                                        • The Market – What You Need to Know

                                          • Growth momentum projected to continue
                                            • Premiumisation with more chilled space
                                              • Emergence of small roasters
                                              • Market Size and Forecast

                                                • Robust growth projected to continue
                                                  • Figure 13: Retail market value of China’s coffee market, 2012-17
                                                  • Figure 14: Best- and worst-case retail value sales forecast of coffee, China, 2012-22
                                              • Market Drivers

                                                • Dynamic market embrace innovations
                                                  • Figure 15: Percentage of coffee launched in China, 2014-17 (till July)
                                                • Chongqing becomes the next major coffee distribution hub
                                                  • Consumption further fuelled by rising coffee machine ownership
                                                    • Premiumisation with more chilled space
                                                      • Figure 16: Average price of drinks launched in 2016, by sub-category, by storage
                                                      • Figure 17: RTD coffee launched, by storage type, China 2014-17
                                                  • Market Segmentation

                                                    • Instant coffee is poised for shrinking share
                                                      • Figure 18: Coffee retail value market share, by segmentation, China, 2012-17
                                                    • Favour for milky note fuels demand for flavoured instant coffee
                                                      • Figure 19: Instant coffee retail value market share, by sub-category, China, 2012-17
                                                    • RTD thriving yet competitive
                                                      • Figure 20: RTD coffee drinks launched by new entrants, China, 2017
                                                      • Figure 21: Percentage of cold brew among global RTD coffee launches, 2014-17
                                                    • Burgeoning small roasters tapping into fresh coffee retail
                                                      • Figure 22: Uncle Bean Coffee Roasters’ products on Tmall
                                                      • Figure 23: Lutianjia’s products sold on selective e-commerce platforms
                                                  • Key Players – What You Need to Know

                                                    • Leading brands challenged by smaller players
                                                      • Target focused on young consumers
                                                        • Minus claims and additional nutrients to address health needs
                                                        • Market Share

                                                          • Dominant leading players are losing share of non-liquid coffee market
                                                            • Figure 24: Company share of non-liquid coffee market in China, 2015 and 2016
                                                          • Leading RTD coffee brands challenged by smaller players
                                                            • Figure 25: Company share of RTD coffee market in China, 2015 and 2016
                                                          • Nestlé sets eye on Chinese online shoppers
                                                            • JDE restructuring business in Asia
                                                            • Competitive Strategies

                                                              • Local brands aim to win young consumers
                                                                • Figure 26: Local brands strategies to target young consumers. China 2015-17
                                                              • RTD price meeting half way
                                                                • Figure 27: RTD coffee products launched in China, 2017
                                                              • Engage with coffee lovers through community building
                                                                • Figure 28: David Choice’s community management
                                                            • Who’s Innovating?

                                                              • Coffee hybrid drinks
                                                                • Figure 29: Examples of newly launched coffee hybrid drinks, China and global, 2016-17
                                                              • Plant based solution
                                                                • Figure 30: New launches of plant based coffee, Global, 2016-17.
                                                              • Natural claims to address health concern
                                                                • Figure 31: Product claims* of RTD coffee launched 2014-17, China
                                                                • Figure 32: New launches of coffee with minus claims, Global, 2016-17
                                                              • Temperature assigned
                                                                • Figure 33: Launches of coffee products can both be served hot and cold, China, 2017.
                                                              • Communication thorough packaging
                                                                • Figure 34: Examples of innovative packaging with plain quotes, China, 2017
                                                              • Craft instant coffee through subscriptions
                                                                • Figure 35: Sudden Coffee as an example of craft instant coffee through subscription, US, 2017
                                                            • The Consumer – What You Need to Know

                                                              • Rise of coffee on premise driven by young females
                                                                • Shift from instant and RTD to fresh coffee
                                                                  • Adopting coffee drinking culture as a whole
                                                                    • Success formula of most consumed RTD coffee brands
                                                                      • Cold brew has yet to take off
                                                                      • Segment Penetration

                                                                        • Rise of coffee on premise
                                                                          • Figure 36: Penetration of different types of coffee, July 2017 & May 2016
                                                                        • Cross consumption increases with fresh coffee drinker
                                                                          • Figure 37: Penetration of different types of coffee, by coffee user types, July 2017
                                                                        • Young females’ outstanding appetite for coffee
                                                                          • Figure 38: Penetration of different types of coffee by gender and age, July 2017
                                                                      • Consumption Frequency

                                                                        • Convenient in-home usage drive volume consumption
                                                                          • Figure 39: Coffee consumption frequency by type, July 2017
                                                                        • More fresh, less instant and RTD
                                                                          • Figure 40: Percentage of people drinking the following types of coffee once a day or more, July 2017
                                                                        • Drip bag coffee better fit consumers in their 30s
                                                                          • Figure 41: Percentage of consumers who drink the following types of coffee once a week or more, by age groups, July 2017
                                                                      • Food Pairing with Coffee

                                                                        • Adopting coffee drinking culture as a whole
                                                                          • Figure 42: Choice of food paring with coffee, July 2017
                                                                        • High earners more open to coffee-pairing food choices
                                                                          • Figure 43: Choice of food paring with coffee (selected), by monthly personal income, July 2017
                                                                        • Consumers drinking homemade coffee seldom drink alone
                                                                          • Figure 44: Choice of food paring with coffee, by users of different types of coffee, July 2017
                                                                      • Brewing Method

                                                                        • Automation rules
                                                                          • Figure 45: Penetration of coffee brewing methods, July 2017
                                                                        • Manual brewing arsenal upgrade in quality as well as in quantity
                                                                          • Figure 46: Average types of brewing tools used, July 2017
                                                                          • Figure 47: Cross penetration of coffee brewing methods, July 2017
                                                                      • RTD Coffee Brands Perception

                                                                        • Building awareness does not translate to purchase
                                                                          • Figure 48: RTD coffee brand awareness and penetration, July 2017
                                                                          • Figure 49: RTD coffee brand penetration, by age group, July 2017
                                                                        • Safety and authenticity drives usage
                                                                          • Figure 50: Correlation between brand attributes and penetration, July 2017
                                                                          • Figure 51: Examples of RTD coffee drinks claiming additional health benefits, Global, 2016-17
                                                                        • Opportunities with building emotional attributes
                                                                        • Interested Flavour Innovations

                                                                          • Milk yes, sugar maybe
                                                                            • Figure 52: Interested flavour innovations, July 2017
                                                                            • Figure 53: Interested flavour innovations among milk flavour advocates vs total, July 2017
                                                                            • Figure 54: Examples of salty coffee, China and Global, 2015-17
                                                                          • Performance enhancement remains priority
                                                                            • Figure 55: Café Pele’s OOH campaign, Brazil, 2015
                                                                          • Healthy formula can draw crowds
                                                                            • Figure 56: Examples of fresh coffee gaining extra health benefits from herbal ingredients, Global, 2016
                                                                          • Cold brew has yet to take off
                                                                            • Figure 57: Cold brew innovations, US, 2016-17
                                                                            • Figure 58: Interest in cold brew, by demographics, July 2017
                                                                            • Figure 59: Cold brew coffee products with education message on their packages, global, 2016-17
                                                                        • Meet the Mintropolitans

                                                                          • Advocates for fresh coffee
                                                                            • Figure 60: Penetration of different types of coffee, by consumer classification, July 2017
                                                                          • Extra desire for ingredient upgrade
                                                                            • Figure 61: Interested flavour innovations, by consumer classification, July 2017
                                                                            • Figure 62: Milan Gold’s selected single source coffee series, China
                                                                        • Appendix – Market Size and Forecast

                                                                            • Figure 63: Value sales of china’s coffee retail market, 2012-22
                                                                            • Figure 64: Volume sales of China’s non-liquid coffee retail market, 2012-22
                                                                            • Figure 65: Best- and worst-case retail volume sales forecast for non-liquid coffee in China, 2012-22
                                                                        • Appendix – Market Segmentation

                                                                            • Figure 66: Value sales of China’s coffee retail market, by segment, 2012-22
                                                                            • Figure 67: Volume sales of China’s coffee retail market, by segment, 2012-22
                                                                        • Appendix – Methodology and Abbreviations

                                                                          • Methodology
                                                                            • Fan chart forecast
                                                                              • Abbreviations

                                                                              Companies Covered

                                                                              To learn more about the companies covered in this report please contact us.

                                                                              Coffee - China - September 2017

                                                                              US $3,990.00 (Excl.Tax)