Rapid Rise! Intense Competition Among Coffee Brands like Starbucks, Luckin, and Manner

The Growth of Coffee Culture in China

As coffee culture spreads and consumption levels rise, consumers' acceptance and awareness of coffee keep growing, and more people are developing a taste for it. Earlier statistics put China's coffee consumers at roughly 300 million. Against this backdrop, many well-known companies are actively entering the coffee industry.

Today's coffee market is hotter than ever. In 2021 China's coffee market was approximately 381.7 billion yuan. According to iMedia Consulting, by 2025 it will reach 1 trillion yuan, three times its current size. Notably, as early as 2020, the overall size of China's coffee market was only 86.1 billion yuan. Chain coffee has always held the largest share, and the market potential for chain coffee in China is far from saturated.

The Rise of Luckin Coffee

After financial scandals, internal team conflicts, and the departure of the founding team led by Lu Zhengyao, Luckin took two years to "come back from the dead" and return to profitability. Besides remarkable growth in performance, it has expanded its store count aggressively. In the last quarter of 2021 it surpassed Starbucks to become the largest coffee chain brand in China, with over 7,000 stores.

As of the third quarter of 2022, Luckin Coffee had 7,846 stores nationwide and revenue of 3.895 billion yuan, up 65.71% year on year. The monthly average number of transacting customers rose 70.5%, reaching 25.1 million. In the first three quarters of 2022, Luckin introduced 92 new products. Hits such as Thick Milk Latte, Raw Coconut Latte, and Coconut Cloud Latte kept drawing consumer attention. Even so, the battle for the coffee market throne is far from over.

Starbucks' China Strategy and Emerging Brands

Starbucks closed all its franchised stores in China in 2018 and now runs stores through a self-operated model for standardized, refined management. Adopting a fully self-operated model shows how highly Starbucks regards the Chinese market and lays a solid foundation for building a high-level "self-operated plus franchise" system in the future. By Starbucks' plan, its total stores in mainland China will exceed 9,000 by 2025.

In recent years, emerging domestic chains such as Manner, M Stand, and NOWWA Coffee have risen quickly. In June this year, NOWWA Coffee, which had more than 1,500 stores, announced the opening of 100 stores at once. In November it announced another 120. With capital backing, Manner Coffee has also gained prominence, completing four rounds of financing in just half a year, with a valuation now in the tens of billions.

In addition, international chains positioned between Starbucks and Luckin, such as Tims Tianhao Coffee and %Arabica, have entered the Chinese market one after another...

Investment and Future Prospects

Companies such as Sequoia Capital, Black Ant Capital, IDG, Tencent, Meituan, and ByteDance have seen the opportunity in the coffee market and invested heavily in China's coffee industry. A few years ago, many people thought coffee had little future in China. Today, just a few short years later, coffee has become a new trend in investors' eyes, and one could even say its prospects are boundless.

Even so, the chain operation rate of coffee shops in China is still under 13%, relatively low compared with the US market. If cross-industry giants like Li-Ning and China Post also enter the chain coffee business, they will undoubtedly become a formidable force in China's chain coffee sector.

Whether it is the professional players accelerating expansion, the emerging chains of recent years, or the cross-industry players disrupting the market, all are proving that China's coffee industry chain is rising rapidly and competition is growing fiercer.

Image source: Internet

FrontStreet Coffee Recommendation

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For a gentler, sweeter daily cup, FrontStreet's Cerrado Red Bourbon from Brazil offers the region's familiar cream, peanut, and cocoa flavors at an everyday price.