China may have tea-drinking roots, yet coffee consumption is on the rise in what is, by purchasing-power-parity, the world’s largest economy.

And while the Chinese coffee industry might be young, it would be a mistake to think that it is behind Western and Australasian markets. From record-breaking auction prices to consumer-facing apps, China is transforming the idea of café culture.

Why is the Chinese Coffee Market Growing So Fast?

Coffee has long been valued in China as a status symbol. During the 1980s, it functioned as a rare, imported, and highly prized gift.

It was in the late ‘90s, when the first Chinese Starbucks store opened in Beijing, that coffee consumption slowly started to become mainstream. Coffee imports began to increase, with whole bean and ground coffee imports growing faster than soluble. Chinese consumers were looking for a way to create the café experience, rather than just a caffeine buzz.

Consumption is still relatively low compared to the US and Europe: in urban areas, consumers drink five cups of coffee per capita on average. However, this rate is increasing annually by 30%.

Second-wave chains have a strong presence. In 2019, there were 3,300 Starbucks stores across the country, with plans to double this amount over the next five years. The Chinese-owned Luckin Coffee competes heavily with Starbucks, opening 525 outlets throughout China in the first nine months after its launch. And KFC, which is China’s largest restaurant chain, serves up 100% Arabica coffee.

Third wave coffee also has a small but passionate following, while Chinese coffee farmers in Yunnan are increasingly targeting the specialty market.

The student demographic is at the forefront of the coffee-drinking movement. Consumption rates have increased faster in larger cities, such as Shanghai and Guangzhou, as young professionals return from Western universities with a new café-visiting habit.

Today, 75% of Chinese coffee consumers are the younger middle class. They are typically affluent, career-driven millennials with higher disposable incomes to spend on premium products such as coffee.

How the Chinese Coffee Industry Influences Prices

Coffee may have become more commonplace in China compared to in the ‘80s, yet its association with high value remains.

In green coffee auctions, Chinese roasters are consistently willing to pay more per pound for exceptional lots. In the 2017 Best of Panama and Cup of Excellence auctions, 37 of the 51 lots up for sale were purchased by East Asian roasters.

And at the 2018 Best of Panama show, a Geisha from Elida Estate went for $803, which was a record-breaking price at the time. Most of these beans were purchased by Chinese, Japanese and Taiwanese roasters.

Yet Klatch Coffee in the US also got 10lbs of the coffee, which they then sold at $75 a cup – something that likely could never have happened without the East Asia-led drive for exceptional, status-symbol coffees bought at record-breaking prices.

Coffee Apps and the Changing Consumer Experience

The world has turned away from cash payments during the COVID-19 pandemic, yet app-based transactions have been the norm in China for years.

70% of Starbucks customers in China order via their app, whilst Luckin Coffee only allows consumers to order and pay through WeChat, China’s biggest social networking application, or Luckin’s own ‘coffee wallet’ – no cash allowed.

Food and beverage delivery services are commonly used in China: in Beijing, around 1.8 million deliveries are ordered every day. Most transactions at Luckin Coffee are for pick-up and delivery, with the brand sending the customer a text once their coffee is ready.

We are only just beginning to see how COVID-19 will affect the coffee sector. Yet China is well-prepared for low-contact and efficient customer service, thanks to its early adoption of technology.

And while the Chinese specialty sector may only just be emerging, it is clear that it has immense potential to influence the international coffee industry.

Text author: Perfect Daily Grind Editorial Team

Pictures: Designed by pressfoto / Freepik