This report looks at the following areas:
- Future market outlook and growth prospects of China’s instant coffee market
- Changes in the market landscape of China’s instant coffee market
- Trends to watch and marketing activities in on-the-go coffee
- On-the-go coffee consumption trends and drinking habits
- Purchase journey for on-the-go coffee (including purchase channels and choice factors)
- Consumer perceptions of on-the-go coffee formats
- Consumption barriers for pod coffee
Amid the growing trend for specialty coffee, on-the-go coffee must strike a balance between convenience, quality and cost-effectiveness. Brands should leverage a wider range of products and sales channels to satisfy increasingly diverse consumer demands.
Bernie Gao, Analyst, China Insights
Market Definitions
This Report covers packaged coffee, including instant, drip bag and pod coffee:
- pod coffee refers to coffee produced by a capsule coffee machine
- the Report excludes packaged ground coffee, coffee beans and RTD liquid formats
- The Report collectively refers to instant coffee, drip bag, pod coffee and coffee concentrate as ‘on-the-go coffee’.
The market size of the Report covers instant (including forecast), drip bag and pod coffee (excluding capsule coffee machines).
- Market size is based on sales through all retail channels (off-trade), including direct to consumer.
- Although liquid coffee/coffee concentrate is not covered in the market size, it is included in the consumer research and discussed in the consumer sections.
Subgroup definitions (by consumption frequency):
- ‘Heavy drinkers’ refers to people who consume a certain type of coffee once a day or more.
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Executive summary
- Key issues covered in this Report
- Definition
- What you need to know
- The market
- Instant coffee sees steady expansion, while pod coffee maintains double-digit growth
- Market factors
- Companies and brands
- Global coffee giants consolidate their leading position with a full-category rollout, while Luckin’s instant coffee excels online
- Key trends in marketing activities
- New product trends
- Graph 1: top three claim categories for coffee launches, 2019-2024
- Graph 2: coffee* launches, by format type, 2021-24
- Examples of products that reflect these trends
- The consumer
- Intentional spending and the pursuit of quality drive the increasing penetration of instant and drip bag coffee
- Graph 3: penetration by coffee sub-category, 2022-2024
- Integrate online and offline channels to improve the accessibility of on-the-go coffee
- Graph 4: purchase channels, 2024
- Coffee quality has become the leading choice factor, while brand building beyond the product is equally worthy of attention
- Graph 5: choice factors, 2024
- Freeze-dried instant coffee stands apart from traditional formats in freshness and taste, while pod and drip bag coffee better meet demands for trading up
- Graph 6: perceptions of coffee product formats, 2024
- Ambient and chilled milk appeal to different audiences, while coconut drinks emerge as a pairing option
- Graph 7: interest in pairings, 2024
- Strengthening market education around capsule coffee machines can increase the penetration of pod coffee
- Graph 8: consumption barriers for pod coffee, 2024
- Issues and insights
- What we think
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The market
- Market size and forecast
- Instant coffee stands out for its convenience, while its market position can be strengthened through improving quality
- As growth slows in drip bag coffee, strengthen messaging around its characteristics to establish occasions where it can excel
- Graph 9: retail value sales* of drip bag coffee, 2022-2024
- Pod coffee continues to grow and still has the potential to spread further
- Graph 10: retail value sales* of pod coffee, 2022-2024
- Market factors
- Finances are recovering, but spending on non-alcoholic drinks remains restrained
- Graph 11: trading up and down – non-alcoholic drinks, 2021-24
- Graph 12: financial situation (net), 2022-2024
- Coffee is prioritised in beverage spending, with instant lagging behind freshly made
- Graph 13: beverage spending priorities, 2024
- Graph 14: spending priorities, by coffee sub-category, 2024
- The development of ecommerce channels supports the increased penetration of on-the-go coffee
- Integrating online and offline resources helps improve sales and distribution efficiency
- Expand offline stores to showcase brand features in multiple ways
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Companies and brands
- Market share
- Leading brands maintain their position with a multi-category portfolio
- Luckin Coffee shines in the instant coffee category
- Graph 15: value sales and growth rate on Tmall and Taobao, by top 10 instant coffee brands, 2023-2024
- Marketing activities
- Sustainable development – both on an environmental and human level – can support brand building
- Root product upgrades and brand strategy in sustainability
- Introduce on-the-go coffee into active lifestyles
- Increase the transparency of product information to enhance the consumer’s sense of security
- New product trends
- The share of new instant coffee launches returns to growth, while drip bag coffee and coffee concentrate continue to decline
- Example of innovative formats/packaging
- Plain flavours continue to dominate new launches while trending flavours increase in the freshly made channel
- Examples of trending flavours
- Minus and ethical/environmental claims receive sustained attention in new launches, second only to convenience
- Graph 16: top three claim categories for pod coffee, 2019-2024
- Graph 17: top 10 claim categories for new coffee launches, 2019-2024
- Examples of coffee with ethical and environmental claims
- The share of new private label coffee has grown significantly over the past five years
- Graph 18: new coffee* launches, by private label, 2019-2024
- Example of private label coffee
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The consumer
- Consumption trends
- The market for on-the-go coffee is relatively stable; 30-39s choose a wider range of coffee products
- Graph 19: penetration rates in select coffee sub-category, by age, 2024
- Graph 20: penetration by coffee sub-category, 2022-2024
- Audiences for mainstream coffee segments increasingly overlap
- Graph 21: penetration rates in select coffee sub-categories, by penetration rates in select coffee sub-categories, 2024
- The share of heavy drinkers of pod coffee surpasses that of freshly made coffee
- Graph 22: consumption frequency in select coffee segments–once a day or more, 2023-24
- Graph 23: consumption frequency in coffee segments, 2024
- Highlight the cost-effectiveness of pod coffee through communication around a broader range of occasions and bolster the strengths of coffee concentrate in breakfast and exercise scenarios
- Graph 24: select coffee categories, by consumption occasion, 2024
- Purchase channels
- On-the-go coffee should focus on both online and offline channels
- Graph 25: purchase channels, 2024
- Expand sales channels and complement with specific marketing activities and product combinations to boost performance
- Respondents from Tier 2 cities prefer offline channels, and short video platforms can reach a broader audience
- Graph 26: purchase channels, by city tier, 2024
- Ecommerce channels are more effective in reaching consumers with different household income levels
- Graph 27: purchase channels, by monthly household income, 2024
- Choice factors
- The quality of on-the-go coffee needs to be improved to meet the demands of increasingly discerning coffee drinkers
- Graph 28: choice factors, 2024
- Product upgrades and leveraging brand equity are key to attracting high-income groups
- Graph 29: select choice factors, by monthly household income, 2024
- Graph 30: choice factors, by respondents who listed ‘brand’ as a choice factor, 2024
- Upgrade processing technology to help instant coffee capture the RTD and freshly made coffee markets
- Drip bag coffee can enhance messaging around quality, while pod coffee should further implement eco-friendly measures
- Graph 31: top five choice factors, by coffee formats, 2024
- Perceptions of coffee formats
- Pod coffee is considered a premium sub-category within on-the-go coffee
- Graph 32: perceptions of coffee product formats, 2024
- Freeze-dried coffee brands can consolidate their customer base and create added value by building a community
- Beyond premiumisation, pod coffee needs to further address differences in perception among different demographics
- Graph 33: top five perceptions of pod coffee products, by monthly household income, 2024
- Graph 34: top five perceptions of pod coffee products, by generation, 2024
- Pairing interest
- Milk remains the primary pairing for coffee, while coconut drinks surpass oat milk
- Graph 35: interest in pairings, 2024
- Align with current trends and push sparkling water, tea and juice as coffee pairings
- Graph 36: pairing interest, by monthly household income, 2024
- Hybrid products can serve as cross-category items to attract consumers seeking more diverse experiences
- Graph 37: pairing interest, by respondents pairing with tea, 2024
- Consumption barriers for pod coffee
- The main consumption barrier for pod coffee is the machine rather than the capsule itself
- Graph 38: consumption barriers for pod coffee, 2024
- Balancing the drinking needs of different family members can help win over multi-generational households
- Graph 39: top five consumption barriers for pod coffee, by living situation, 2024
- Brands need to strengthen market education regarding pod coffee machines
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Issues and insights
- Instant coffee: turn a crisis into an opportunity as Robusta and Brazilian beans become new highlights
- Leverage specialised products and terminology to cater to more sophisticated drinkers
- Reverse stereotypes around bean varieties and origins to create a new selling point highlighting cost-effectiveness
- Dispel doubts with offline experiences
- Pod coffee: break down consumption barriers and drive conversions
- Leverage effective communication to break down misconceptions about coffee machines
- Convert high net worth consumers through commercial channels
- Expand the pod coffee product line to meet demands of existing customers for diverse experiences
- Drip bag coffee: clearly position this format as a ‘slow brew’ and link to cultural and creative elements
- Make drip bag coffee an ‘advanced option’ in on-the-go coffee…
- … and the ‘first step’ on consumers’ pour-over coffee journey
- Collaborations have led to ‘aesthetic fatigue’ among consumers
- Use drip bag coffee to tell cultural and creative stories, rather than just entering into collaborations
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Appendix – market size and forecast, research methodology and abbreviations
- Market size and forecast
- Methodology
- Abbreviations
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