China’s Coffee Market: Waiting for the Tipping Point or Pushing for it

(Paul Wang, hwang35388@gmail.com)


Average Chinese drinks 2 cups of coffee per year, which means majority of Chinese almost never drink coffee since over 3 million of foreigners in China is the major clientele of coffee consumption.

In 2009, China’s per capita coffee consumption is less than 0.02 kg, and less than 0.035 kg for its metropolitan demography, in contrast with the US’s 4 kg, Japan’s 3.5 kg, Korea’s 1.5 kg, and Russia’s 1.5 kg.  Any medium size roaster in the US would roast more coffee than the entire consumption of China today.  The tipping point for China’s coffee popularization has yet to be reached due to its economic and political factors and also due to the lack of unconventional thinking in coffee promotion and strategies by most of players.

Coffee Popularization Pattern in Asia

The evolving pattern of China’s coffee market is, by and large, following the footsteps of its Asian predecessors, Japan, Korea and Taiwan.  Historically, for the US and most of western countries, coffee popularization was always a grass-root movement, evolved side-by-side with political changes and economic development. For many occasions, coffee houses were the birth place to business invention, political movement and new science.

On the contrary to their western counterparts, the maturing process of Asian countries’ coffee-market is always couple steps beyond their economic development. In the time before the tipping point, the coffee consumption was led by foreigners, and coffee house was served as leisure cafe by the local elites, the rich and the foreigners.  The most notable characteristic of this type of coffee market is that it has very high coffee price in their coffee house, which happened to Japan half century ago, and is happening in China now.  For a medium size black coffee (12oz), the average price in China is sold 2.2 dollars, which is more than the average in the US, when per capita GDP in China is only one tenth in the US.

A Phenomenon: Always a Tipping Point for Coffee Consumption Growth in Asia

In Asian countries, at least in the past 100 years, the coffee consumption growth would be standstill for decades, and then in a sudden, the coffee consumption starts to fly.

The tipping point of Japan’s coffee consumption happened in the late 1960’s.    Between 1965 and 1980, Japan’s annual coffee import jumped by 6 folds[1]; soluble coffee led the consumption growth. Korea’s per capita coffee consumption increased 6 folds between 1982 and 1992[2].  Taiwan was more gradual, but its annual coffee import also increased 3 times between 1988 and 2008[3].

The similarity among these three countries is that their coffee consumption growth was very much stalled before the tipping point, somewhere below 0.1 kg per capita for decades.  Then, at a tipping point, coffee consumption suddenly picked the steam, shooting up exponentially.

If this phenomenon would also be the case to China as it appears already to be, it means China needs decades for any meaningful coffee consumption growth.

International Coffee Giants in China – Waiting for the Tipping Point or Pushing for It

Nestlé is the first international giant to experience China’s coffee market.  After 30 years in China, it had met merely a little success.  It became the biggest fish in a small pond.  As said of a Nestles’ manager in Beijing, for Nestle coffee, China’s total market size is not even compatible with Russia’s, another non-traditional coffee drinking country. 

Another example is Starbucks.  With 200 stores in China, Starbucks Coffee has already saturated China’s obvious market clientele, especially the foreigners and the elite group.  For its continuous growth, it is necessary for Starbucks to look deep into the heart of China’s market, identifying niche positions, targeting specific market group, leveraging its brand power and management depth, and utilizing its vast variety of sales vehicles.

Without the comprehension of market reality and subsequently taking unconventional initiatives, China’s coffee market could spend another ten years or more in standstill. It is a wishful thinking that China’s coffee consumption would suddenly increase just because of its high flying GDP.  The grass root of coffee popularization has been the soul of coffee promotion for hundreds of years.  For any business has an interest in China’s coffee market, it needs to decide if it wants to wait for the tipping point as everybody else, or lead the tide to push toward it, which will set the future market leader in China.

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[1] Graph was cited from the presentation “History of Japan’s coffee market and Outline of the 3 neighboring countries market situations”, All Japan Coffee Association , 2010

[2] Analysis derived from the data by World Resource Institute, “http://earthtrends.wri.org/text/energy-resources/variable-294.html”

[3] Analysis derived from the data by International Coffee Organization, “http://www.ico.org/new_historical.asp”