Coffee industry market analysis: freshly ground coffee further dominates the market

China has been dominated by tea since ancient times, and coffee culture was formed relatively late. The coffee market has gone through four stages, from a single instant coffee market to a diversified consumer market such as freshly ground coffee and ready-to-drink coffee. The entry of new retailers has promoted the rapid growth of the coffee consumption market. In 2018, the scale of China's coffee consumption market was 56.9 billion yuan, a year-on-year increase of 31.1%, of which the scale of freshly ground coffee consumption market reached 39 billion yuan, accounting for 68.5%.

China's coffee market has evolved from a single market to a diversified coffee consumption market

China has been mainly drinking tea since ancient times, and coffee culture was formed relatively late. The coffee market has gone through four stages, from a single instant coffee market to a diversified consumer market such as freshly ground coffee and ready-to-drink coffee: "Instant coffee - boutique coffee - freshly ground coffee, ready-to-drink coffee - coexistence of diversified consumer markets such as ready-to-drink, freshly ground, and new tea drinks."

In 1989, Nestlé Coffee launched "1+2" ​​instant coffee in China and quickly occupied the domestic instant coffee market; in 1999, Starbucks opened its first store in China, bringing boutique coffee to the Chinese market; in 2005, Nestlé Coffee teamed up with Coca-Cola to enter the ready-to-drink coffee market, integrating ready-to-drink coffee with cold drink culture, giving coffee a new fashion concept; in 2010, Hi-Drink began selling freshly ground coffee, which was cheaper than boutique coffee, greatly expanding the audience; in 2014, the new retail coffee representative Lian Coffee was established, and in 2017 Luckin Coffee was established. Coffee marketing channels expanded online, and coffee culture quickly became popular. At the same time, tea brands such as Heytea and Nayuki Tea launched coffee products that were combined with existing specialty teas to meet the needs of a diverse consumer group.

Expanding coffee consumption online to expand the audience

With the rapid popularization of the Internet and the rapid development of food delivery business, coffee marketing methods have shifted from traditional offline stores to online marketing. New coffee retailers represented by Lian Coffee and Luckin Coffee have begun to seize China's mid-range coffee market by taking advantage of the Internet marketing effect, effectively lowering the threshold of coffee culture, improving the coffee publicity effect, and further expanding the audience.

According to data from the U.S. Department of Agriculture, China's consumption of raw coffee increased from 116,900 bags (60 kg) in 2003 to 304,500 bags in 2018, with a compound annual growth rate of 24.28%. During the same period, the compound annual growth rate of global coffee consumption was only 2.58%. The growth rate of China's coffee market is almost 10 times that of the world.

At the same time, the frequency of coffee consumption in China is also increasing. According to Frost & Sullivan data, in 2018, the average annual coffee consumption per capita in China was 6.2 cups, nearly double the amount in 2013.

China's coffee market is growing rapidly

Internet marketing of coffee has brought about rapid growth in the coffee consumption market. According to Frost & Sullivan data, in 2018, the scale of China's coffee consumption market was 56.9 billion yuan, a year-on-year increase of 31.1%, of which the scale of freshly ground coffee consumption market reached 39 billion yuan, accounting for 68.5%. From 2013 to 2018, the compound annual growth rate of China's coffee market was 29.5%.

Freshly ground coffee continues to dominate the market

In the history of coffee consumption in China, instant coffee and ready-to-drink coffee have always been the main types of coffee consumed. The penetration rate of freshly ground coffee is low, mainly due to unstable quality and high prices. With these pain points resolved, the domestic consumption of freshly ground coffee has achieved rapid growth. The market size of freshly ground coffee consumption has increased from 5.7 billion yuan in 2013 to 39 billion yuan in 2018, and the proportion of freshly ground coffee in the market size has also increased from 36.5% in 2013 to 68.5% in 2018.

The above data source refers to the " China Coffee Industry Market Demand and Investment Planning Analysis Report " released by the Forward-looking Industry Research Institute .