Table of Contents
Overview
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- What you need to know
- Covered in this Report
- Included
- Excluded
- Definitions
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- Figure 1: Definition of low/mid/high MHI groups, by city tier
- Figure 2: Definition of heavy/light/non-users of coffee houses
Executive Summary
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- The market
- A healthy value growth
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- Figure 3: Best- and worst-case forecast for sales value of coffee house market, China, 2012-22
- More frequent users, premium options and visiting occasions drive future growth
- However, competition from in-home coffee, non-specialised coffee venues and milk tea shops poses a threat
- Independents decline heavily due to poor management while expansion of chains also slows down
- Companies and brands
- Except for Starbucks, all leading brands are struggling with robust expansions
- Premium brewing method of cold brew, innovative social features and community stores are explored by brands to stay competitive
- Innovation highlights:
- The consumer
- Some sophisticated coffee users may be switching from coffee houses to high-quality yet convenient in-home coffee.
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- Figure 4: Visiting frequency, 2016 and 2017
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- Figure 5: Visiting frequency, heavy users, 2017 vs 2016 (as benchmark)
- Coffee houses are more of a casual third space than for coffee drinks
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- Figure 6: Visiting occasions, September 2017
- Coffee innovations: sparkling and cold-brewed coffee may need to localise towards the local palate
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- Figure 7: Interested innovations, coffee drinks, September 2017
- Food and alcohol are welcome in coffee houses
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- Figure 8: Attitudes towards coffee houses, September 2017
- Freshly brewed coffee is more of a treat and can be an alternative to milk tea drinks and juices
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- Figure 9: Attitudes towards coffee, September 2017
- Fast food restaurants are popular coffee venues, while consumers are unclear of what a specialty coffee house is.
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- Figure 10: Purchasing channel of freshly brewed coffee, September 2017
- What we think
Issues and Insights
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- Are non-specialised coffee venues winning consumers over?
- The facts
- The implications
- More casual consumption scenes to expand into
- The facts
- The implications
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- Figure 11: Affogato, Starbucks
- Status quo of specialty coffee houses in China
- The facts
- The implications
The Market – What You Need to Know
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- A healthy value growth
- More frequent users, premium options and visiting occasions drive future growth
- However, competition from in-home coffee, non-specialised coffee venues and milk tea shops poses a threat
- Independents decline heavily due to poor management while expansion of chains also slows down
Market Size and Forecast
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- A healthy value growth
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- Figure 12: Market size of coffee house market, China, 2012-17
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- Figure 13: Best- and worst-case forecast for sales value of coffee house market, China, 2012-22
- Figure 14: Best- and worst-case forecast for market volume of coffee house market, China, 2012-22
Market Factors
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- More frequent users
- Trading up for premium coffee
- Extended visiting occasions
- Competition from in-home coffee and other on-trade coffee venues
- Rise of milk tea shops and juice stands
Market Segmentation
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- Independents decline heavily due to poor management
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- Figure 15: Market volume of coffee house market, independents, China, 2012-17
- Figure 16: Best- and worst-case forecast for market volume of coffee house market, independents, China, 2012-22
- Expansion of chains slows down
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- Figure 17: Market size of coffee house market, chains, China, 2012-17
- Figure 18: Best- and worst-case forecast for market volume of coffee house market, chains, China, 2012-22
- Specialty coffee houses still niche at the moment
Companies and Brands – What You Need to Know
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- Except for Starbucks, all leading brands are either struggling or expanding slowly
- Premium brewing method of cold brew, innovative social features, and community stores are explored by brands to stay competitive
- Innovation highlights:
Market Share
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- Starbucks is the only leading brand seeing a robust growth
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- Figure 19: Leading chains in coffee house market, by market volume (number of outlets), China, 2015 and 2016
- Starbucks and Whitbread (Costa) take control of regional joint ventures
- Seesaw Coffee plans on an ambitious expansion
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- Figure 20: Seesaw Coffee, Shanghai
- New entrants in the market
- Peet’s Coffee
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- Figure 21: Peet’s Coffee, Shanghai
- illy
Competitive Strategies
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- Going premium with cold brew
- Innovative social features to engage with consumers
- WeChat gifting
- WeChat Moments sharing
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- Figure 22: Coupon from lucky bag on WeChat Moments, Coffee Box
- More casual coffee scenes empowered by community stores
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- Figure 23: Starbucks neighbourhood store, Guangzhou
- Figure 24: Manner Coffee at Tongren Road, Shanghai
- Targeting specific consumer groups defined by lifestyle
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- Figure 25: Challenged board, Costa Coffee
Who’s Innovating?
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- New coffee flavours
- Nitro coffee
- Barrel-aged coffee
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- Figure 26: Whiskey barrel-aged flavoured beverages, Starbucks
- Figure 27: Beer purchasing and drinking preference, by coffee house users, September 2017
- Adding a savoury taste: Starbucks’ Pepper Nitro with a Jerky Twist
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- Figure 28: Pepper Nitro with a Jerky Twist, Starbucks Seattle Roastery, 2017
- Figure 29: Examples of cheese-topped coffee
- A more transparent coffee-making process
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- Figure 30: Open coffee-making process
- Eye-catching presentation
- Starbucks’ Rainbow Drinks and Unicorn Frappuccino
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- Figure 31: Starbucks’ eye-catching drinks
- DNA Café’s Mermaid coffee
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- Figure 32: Sweetheart coffee, DNA Café, Shanghai
- Coffee in a cone
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- Figure 33: Coffee in a cone, 2017
The Consumer – What You Need to Know
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- Some sophisticated coffee users may be switching from coffee houses to high-quality yet convenient in-home coffee
- Coffee houses are more of a casual third space than for coffee drinks
- Food and alcohol are welcome in coffee houses
- Fast food restaurants are popular coffee venues, while consumers are unclear of what a specialty coffee house is
Visiting Frequency
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- Consumers are visiting coffee houses more frequently
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- Figure 34: Visiting frequency, 2016 and 2017
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- Figure 35: Visiting frequency, heavy and light users, by gender and age, 2017 vs 2016 (as benchmark)
- However, heavy users in tier one cities may be switching to quality yet more convenient in-home coffee options
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- Figure 36: Visiting frequency, by city tier, September 2017
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- Figure 37: Visiting frequency, heavy users, 2017 vs 2016 (as benchmark)
Visiting Occasions
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- Coffee houses are a place for relaxation more than just for coffee drinks
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- Figure 38: Visiting occasions, September 2017
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- Figure 39: Visiting occasions, for relaxation, by gender, September 2017
- Meals more popular among heavy users
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- Figure 40: Visiting occasions, meal occasions, by user classification, September 2017
- Favour for business purposes drops
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- Figure 41: Selected visiting occasions, 2017 vs 2016
Interested Innovations
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- Coffee innovations: sparkling and cold-brewed coffee may need to localise towards the local palate
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- Figure 42: Interested innovations, coffee drinks, September 2017
- Alcoholic drink offerings: traditional types widely acceptable
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- Figure 43: Interested innovations, alcoholic drinks, September 2017
- Services: lower penetration could indicate white spaces in the market
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- Figure 44: Interested innovations, services, September 2017
Purchasing Channel of Freshly Brewed Coffee
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- Fast food restaurants meet the demand of convenient coffee
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- Figure 45: Purchasing channel of freshly brewed coffee, September 2017
- Starbucks enjoys high brand loyalty
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- Figure 46: Purchasing channel of freshly brewed coffee, September 2017
- Consumers may not truly understand what specialty coffee is
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- Figure 47: Purchasing channel of freshly brewed coffee, specialty coffee houses, by city tier, September 2017
- Heavy users and high earners prefer leading coffee house chains
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- Figure 48: Selected purchasing channel of freshly brewed coffee, by user classification, September 2017
- Figure 49: Selected purchasing channel of freshly brewed coffee, by MHI, September 2017
- Young consumers prefer milk tea shops but not Costa
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- Figure 50: Selected purchasing channel of freshly brewed coffee, by age, September 2017
Factors of Choosing Coffee Venues
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- Starbucks beats Costa and Pacific Coffee especially at coffee taste
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- Figure 51: Factors of choosing coffee venues, by Starbucks, Costa and Pacific Coffee users, September 2017
- Independent coffee houses are not a premium option to chains
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- Figure 52: Factors of choosing coffee venues, by Starbucks, specialty and independent coffee houses users, September 2017
- C-stores need to improve on value for money
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- Figure 53: Factors of choosing coffee venues, fast food restaurants, C-stores and bakery houses, September 2017
Attitudes towards Coffee and Coffee Houses
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- Freshly brewed coffee is more of a treat and can be an alternative to milk tea drinks and juices
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- Figure 54: Attitudes towards coffee, September 2017
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- Figure 55: Attitudes towards coffee, by gender and age, September 2017
- Food and alcohol options are both welcome in coffee houses
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- Figure 56: Attitudes towards coffee houses, September 2017
- Internet-famous coffee houses: more than a one-time experience
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- Figure 57: Attitudes towards independent coffee houses, September 2017
Meet the Mintropolitans
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- See coffee as more unique
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- Figure 58: Attitudes towards coffee, by consumer classification, September 2017
- More interested in and accepting of innovative coffee drinks
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- Figure 59: Selected interested innovations, have tried and liked, by consumer classification, September 2017
Appendix – Market Size and Forecast
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- Figure 60: Value sales of coffee house market, China, 2012-22
- Figure 61: Market volume of coffee house market, China, 2012-22
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Appendix – Market Segmentation
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- Figure 62: Best- and worst-case forecast for market volume of coffee house market chains, China, 2012-22
- Figure 63: Best- and worst-case forecast for market volume of coffee house market independents, China, 2012-22
- Figure 64: Market volume of coffee house market, by market segments, China, 2012-22
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Appendix – Methodology and Abbreviations
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- Methodology
- Fan chart forecast
- Abbreviations
Appendix – Barista Training Classes by Little Bean
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- Figure 65: Details on barista training classes, Little Bean, Shanghai
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