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Coffee Houses - China - December 2016

“The out-of-home coffee market is expected to continue robust growth although coffee houses may face increasing competition from non-specialist coffee places. As brands target more locations and go premium, they must bear in mind that experience is what matters the most.”
–    Summer Chen, Research Analyst

This report will cover the following areas:

  • Experience matters
  • Three steps to going premium
  • Differentiate from non-specialist coffee places

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Table of contents

  1. Overview

    • What you need to know
      • Covered in this Report
        • Included
          • Exclusions
            • Definitions
              • Figure 1: Definition of low/mid/high MHI groups, by city tier
              • Figure 2: Definition of heavy/light/non-user categories, by usage of coffee houses
          • Executive Summary

              • The market
                • Rising demand and supply of fresh coffee drives up market
                  • Figure 3: Best- and worst-case forecast for sales value of coffee house market, China, 2011-21
                • Chains continue to see robust growth
                  • Key players
                    • Brands seeking premiumisation and more visiting occasions
                      • Figure 4: Leading chains in coffee house market, by market volume (number of outlets), China, 2014 and 2015
                    • The consumer
                      • Coffee house becoming ubiquitous in most Chinese consumers’ lives
                        • Figure 5: Frequency of visiting coffee houses, August 2016
                      • In-store ambience as important as taste of coffee
                        • Figure 6: Key points of attraction, August 2016
                      • Desserts and snacks purchased most often
                        • Figure 7: Products bought in coffee houses, August 2016
                      • Western-style food also very much favoured
                        • Customisation is what consumers desire most
                          • Figure 8: Coffee features/services worth paying more for, August 2016
                        • More education needed for premium brewing methods
                          • What we think
                          • Issues and Insights

                            • Experience matters
                              • The facts
                                • The implications
                                  • Three steps to going premium
                                    • The facts
                                      • The implications
                                        • Differentiate from non-specialist coffee places
                                          • The facts
                                            • The implications
                                            • The Market – What You Need to Know

                                              • Value growth estimated at 12% in 2016
                                                • Rising demand and supply of fresh roasted coffee drives future growth
                                                  • Chains scaling up while independents are losing significance
                                                  • Market Size and Forecast

                                                    • History of the coffee waves
                                                      • Double-digit growth since 2011
                                                        • Growth momentum expected to continue
                                                          • Figure 9: Best- and worst-case forecast for sales value of coffee house market, China, 2011-21
                                                          • Figure 10: Best- and worst-case forecast for market volume of coffee house market, China, 2011-21
                                                      • Market Drivers and Challenges

                                                        • Shift to fresh roasted coffee from instant coffee
                                                          • Trend of experiential consumption
                                                            • Rising production of coffee beans domestically
                                                              • Competition from non-specialist coffee venues
                                                              • Market Segmentation

                                                                • Chains scaling up
                                                                  • Figure 11: Market volume of coffee house market, by market segment, China, 2011-16
                                                                • Independents losing significance
                                                                • Key Players – What You Need to Know

                                                                  • American/European-style coffee houses growing rapidly while Korean brands facing problems
                                                                    • Brands introducing special ways of brewing, more food and interactive activities to attract consumers
                                                                    • Market Share

                                                                      • Three competing forces
                                                                        • Figure 12: Leading chains in coffee house market, by market volume (number of outlets), China, 2014 and 2015
                                                                      • Starbucks leads rapid expansion among fast-growing American/European-style coffee houses
                                                                        • Starbucks Corporation
                                                                          • Whitbread PLC (Costa Coffee)
                                                                            • China Resources (Pacific Coffee)
                                                                              • Korean coffee house brands facing operating problems
                                                                                • New players entering out-of-home coffee market
                                                                                  • China National Cereals, Oils and Foodstuffs Corporation
                                                                                    • CoCo Tea
                                                                                      • Figure 13: CoCo Café, Shanghai
                                                                                  • Competitive Strategies

                                                                                    • Going premium with special ways of brewing
                                                                                      • Creating more visiting occasions by taking on more food
                                                                                        • Interactive activities build consumer loyalty
                                                                                        • Who’s Innovating?

                                                                                          • Starbucks
                                                                                            • Secret menu
                                                                                              • Figure 14: Secret drink for Halloween, Starbucks, China, 2016
                                                                                            • ‘Winter White’ time-limited store in Japan
                                                                                              • Plant protein drink alternative for milk in US
                                                                                                • Costa Coffee
                                                                                                  • Flat White Day
                                                                                                    • Customise your Frostino
                                                                                                      • Wheelys – Bicycle café
                                                                                                      • The Consumer – What You Need to Know

                                                                                                        • The majority of Chinese consumers use coffee houses
                                                                                                          • Starbucks and UBC are coffee house brands visited most frequently
                                                                                                            • In-store ambience as important as taste of coffee
                                                                                                              • Customisation is what consumers desire most, special ways of brewing less worth paying more for
                                                                                                              • Frequency of Visiting Coffee Houses

                                                                                                                • The majority of Chinese consumers use coffee houses
                                                                                                                  • Figure 15: Frequency of visiting coffee houses, August 2016
                                                                                                                • Especially favoured by women aged 25-29, while men aged 20-24 can be potential consumers to target
                                                                                                                  • Figure 16: Frequency of visiting coffee houses (percentage difference as compared to total), heavy users and non-users, by age and gender, August 2016
                                                                                                                • Opportunity in lower tier cities
                                                                                                                  • Figure 17: Frequency of visiting coffee houses, by city tier, August 2016
                                                                                                              • Most Frequently Visited Coffee House

                                                                                                                • Starbucks retains an unassailable lead
                                                                                                                  • Figure 18: Most frequently visited coffee house, August 2016
                                                                                                                • UBC still in favour but mainly by older consumers
                                                                                                                  • Figure 19: Selected most frequently visited coffee house, by age, August 2016
                                                                                                                • Other brands need clearer brand images to stand out
                                                                                                                  • Figure 20: Word cloud of most frequently visited coffee house, August 2016
                                                                                                              • Key Points of Attraction

                                                                                                                • In-store ambience as important as taste of coffee
                                                                                                                  • Figure 21: Key points of attraction, August 2016
                                                                                                                • Delivery service yet to explore
                                                                                                                  • Sophisticated consumers looking for more
                                                                                                                    • Figure 22: Key points of attraction, by user category, August 2016
                                                                                                                • Products Bought in Coffee Houses

                                                                                                                  • Desserts and snacks more popular than coffee
                                                                                                                    • Figure 23: Products bought in coffee houses, August 2016
                                                                                                                    • Figure 24: Desserts of DNA Café – An independent coffee house in Shanghai, 2016
                                                                                                                  • Western-style food welcomed, Chinese-style food not
                                                                                                                    • Tea drinks also favoured
                                                                                                                      • Opportunity in coffee-making tools and packaged coffee beans
                                                                                                                        • Figure 25: Selected products bought in coffee houses in the last three months, by user category, August 2016
                                                                                                                    • Features/Services worth Paying More For

                                                                                                                      • Customisation is what consumers desire most
                                                                                                                        • Figure 26: Coffee features/services worth paying more for, August 2016
                                                                                                                      • Coffee beans more valued as age increases
                                                                                                                        • Figure 27: Selected coffee features/services worth paying more for, by age, August 2016
                                                                                                                      • Engagement in coffee-making process favoured by women aged 25-29
                                                                                                                        • Figure 28: Selected coffee features/services worth paying more for (percentage difference as compared to total), by age and gender, August 2016
                                                                                                                      • Coffee with intensified flavour favoured by men aged 30+
                                                                                                                        • Figure 29: Pret A Manger’s highlight of customisation in coffee drinks
                                                                                                                      • Special ways of brewing less worth paying more for
                                                                                                                      • Attitudes towards Coffee and Coffee Houses

                                                                                                                        • Coffee drinking becoming an indispensable part of life
                                                                                                                          • Figure 30: Attitudes towards coffee house visiting, August 2016
                                                                                                                        • Most consumers prefer flavoured coffee
                                                                                                                          • Figure 31: Attitudes towards coffee drinking, August 2016
                                                                                                                      • Meet the Mintropolitans

                                                                                                                        • More heavy users of coffee houses
                                                                                                                          • Figure 32: Frequency of visiting coffee houses, by consumer classification, August 2016
                                                                                                                        • Tea drinks as popular as packaged beverages
                                                                                                                          • Figure 33: Selected products bought in coffee houses, by consumer classification, August 2016
                                                                                                                        • Precious coffee beans is the top coffee feature worth paying more for
                                                                                                                          • Figure 34: Top coffee features/services worth paying more for, by consumer classification, August 2016
                                                                                                                      • Appendix – Market Size and Forecast

                                                                                                                          • Figure 35: Value sales of coffee house market, China, 2011-21
                                                                                                                          • Figure 36: Market volume of coffee house market, China, 2011-21
                                                                                                                      • Appendix – Market Segmentation

                                                                                                                          • Figure 37: Best- and worst-case forecast for market volume of coffee house market chains, China, 2011-21
                                                                                                                          • Figure 38: Best- and worst-case forecast for market volume of coffee house market independents, China, 2011-21
                                                                                                                          • Figure 39: Market volume of coffee house market, by market segments, China, 2011-21
                                                                                                                      • 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 Houses - China - December 2016

                                                                                                                            US $3,990.00 (Excl.Tax)