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On-premise Coffee - China - December 2018

OVERVIEW
What you need to know
Covered in this report
Excluded
Definition
Figure 1: Definition of heavy/light/non-users of coffee houses
EXECUTIVE SUMMARY
The market
Upward value trend of the overall coffee market
Figure 2: Best- and worst-case forecast for on-premise coffee, by value, 2013-23
Volume keeps growing but will encounter a fall afterwards
Figure 3: Best- and worst-case forecast for on-premise coffee, by volume, 2013-23
Affordable price promotes the popularity of coffee among Chinese consumers
Companies and brands
Intense competition caused by growing number of new entrants
Providing delivery service to compete with other players
Differentiating through combining tea shop drink elements
Robot barista turns up
The consumer
High competitiveness of affordable on-premise coffee vendors
Figure 4: Consumption channels and frequency, China, September 2018
Importance of physical stores
Figure 5: Reasons for sitting in, China, September 2018
Increasing requirements on quality ingredients and processes
Figure 6: Drink selections, China, September 2018
Trend of pairing healthy food with coffee
Figure 7: Food pairing with coffee, China, September 2018
Challenges on new retail coffee development
Figure 8: Purchase reasons, China, September 2018
High satisfaction and expectation on mix-and-match meal deal
Figure 9: Satisfaction and expectation, China. September 2018
What we think
ISSUES AND INSIGHTS
Compete in associating with work-related occasions
The facts
The implications
Opportunity to develop healthy snacks with coffee
The facts
The implications
Attract the 20-24s from other categories
The facts
The implications
THE MARKET – WHAT YOU NEED TO KNOW
Value will keep increasing
Volume will grow but be followed by a slight decrease
Intense competition among both drink categories and coffee vendors
MARKET SIZE AND FORECAST
A steady growth in value
Figure 10: Best- and worst-case forecast for on-premise coffee, by value, 2013-23
An increase followed by a downward trend in volume
Figure 11: Best- and worst-case forecast for on-premise coffee, by volume, 2013-23
MARKET FACTORS
Coffee as a casual soft drink competes with other sub-categories
Freshly made coffee fights with other coffee categories
New retail coffee contributes the most growth in coffee consumption
Absence of leading brands in specialty coffee market
KEY PLAYERS – WHAT YOU NEED TO KNOW
Traditional brands and new retail coffee are increasing availability
C-stores and fast food restaurants compete in lower and mid-level market
Big brands are improving consumption experience
MARKET SHARE
Steady growth of leading traditional coffee brands
Figure 12: Leading traditional chain coffee houses, by volume – number of outlets, China, 2016 and 2017
New retail coffee businesses and C-stores are catching up with the traditional big brands
Figure 13: Leading coffee brands, by volume – number of outlets, China, 2018
More international players enter Chinese market
COMPETITIVE STRATEGIES
Fast delivery is a strong point
Leading brands put effort into upgrading consumer experience
Using fission marketing to reach potential consumers
Borrowing ideas from tea shop drinks
Figure 14: Coffee drinks borrowing ideas from tea shop drinks, China, 2018
WHO’S INNOVATING?
Probiotics in freshly-made coffee
Figure 15: Probiotics in freshly-made coffee, by Seesaw, China, 2018
Espresso as a dipping sauce
Figure 16: Dipping waffle into espresso, by Knockbox Coffee Company, China, 2018
Technology brings opportunity to go premium
Figure 17: Ratio coffee and cocktail bar, China, 2018
The dream of owning a coffee house has come true
Figure 18: The Pocket Coffee House mini program, by Coffee Box, China
THE CONSUMER – WHAT YOU NEED TO KNOW
Associate with business-related occasions
New retail coffee houses need advantages other than discount and fast delivery
High expectation on healthy coffee set meals
CONSUMPTION CHANNEL AND FREQUENCY
Convenience stores have gained the highest penetration rate
Figure 19: Consumption channels and frequency, China, September 2018
New retail coffee houses have opportunity to surpass others
More eastern residents visit bakery houses for coffee
Figure 20: Heavy users buy coffee from bakery houses and fast casual dining, by region, China. September 2018
REASONS FOR SITTING IN
High competence of physical stores
Figure 21: Reasons for sitting in, China, September 2018
Coffee houses are competing with tea shops for consumers meeting friends
Figure 22: Reasons for sitting in, China. September 2018
Become the best choice for business-related occasions
Figure 23: Selected reason for sitting in, by personal monthly income, China. September 2018
Figure 24: Selected reasons for sitting in, by generation, China, September 2018
DRINK SELECTIONS
Quality latte and cappuccino bring opportunity for further purchasing
Figure 25: Drink selections, China, September 2018
A challenge on cold brew coffee
Opportunities for providing non-coffee drinks in late hours
FOOD PAIRING WITH COFFEE
Food paring selections target the 25-29s and 40-49s
Figure 26: Other choices for on-premise coffee consumers who pair nuts with coffee, by selected age groups, China, September 2018
Figure 27: Consumption channels of on-premise coffee heavy users who pair nuts with coffee, by selected age groups, China, September 2018
Popularity of savoury biscuits will catch up with that of sweet ones
Figure 28: Food pairing with coffee, China, September 2018
Upward trend of pairing salad with coffee
REASONS FOR ORDERING NEW RETAIL COFFEE
Good taste is the top reason followed by discount and fast delivery
Figure 29: Purchase reasons, China, September 2018
Drive sales by marketing on friend’s recommendation
Best place for promoting new trials
Figure 30: Selected purchase reason, by tier one cities, China. September 2018
EXPECTATIONS FOR NEW RETAIL COFFEE AND SERVICES
Consumers are more interested in set meals
Figure 31: Satisfaction and expectation, China. September 2018
Get to know consumers through offline new product tasting events
Non-food rewards to attract 20-24s
Figure 32: Satisfaction and expectation for redeeming non-food rewards, by age, China, September 2018
MEET THE MINTROPOLITANS
Pay more attention to indoor design and space
Figure 33: Consumption channel and frequency, by consumer classification – Mintropolitans, China, September 2018
Figure 34: Reasons for sitting in, by consumer classifications, China. September 2018
Opportunities to widen coffee choices especially cold brew coffee
Figure 35: Drink selections, by consumer classification, China, September 2018
Figure 36: Number of consumed drink types, by consumer classification, China, September 2018
Subscription service for Mintropolitans
Figure 37: Expectations for new retail coffee and services - subscription service, by consumer classifications, China, September 2018
APPENDIX – MARKET SIZE AND FORECAST
Figure 38: Sales value of on-premise coffee, China, 2013-23
Figure 39: Sales volume of on-premise coffee, China, 2013-23
APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
Fan chart forecast
Abbreviations

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