More and More Coffee Shops Are Opening in Small Cities! What Type of Coffee Shop Is Best for Small Town Entrepreneurship?

The three pandemic years kept many people from traveling home, and hometowns that once bustled with New Year energy had grown quieter.

This past Spring Festival, though, homes came alive again — and I noticed that coffee shops had suddenly sprung up all over the high-traffic areas of my hometown: trendy cafes, independent specialty shops, and chains like Luckin Coffee and Starbucks.

So why are coffee shops expanding into smaller counties? Data shows that coffee shops in most third-tier cities are opening faster than in first- and second-tier cities. According to the "2022 China Fresh Coffee Category Development Report" jointly released by Meituan and Ka Men, as of May 1, 2022, mainland China had 117,300 coffee shops — an increase of 15,000 over the previous year.

Industry analysts point to office workers as the primary coffee consumers in third-tier cities. Many of them returned from bigger cities where they'd already formed a coffee habit, making them the key demographic driving county-level coffee consumption.

They came home for employment or entrepreneurship for all sorts of reasons, bringing their coffee demand with them. Under their influence, other county residents have developed a taste for coffee too.

That emerging demand naturally attracted a wave of local entrepreneurs who, drawing on their knowledge of the local market and business landscape, built their own coffee brands.

Major Coffee Brands Target County Markets

Beyond local entrepreneurs, the big chains have also spotted the potential. Luckin Coffee and Starbucks are both planning expansion into smaller counties.

On the 5th of last month, Luckin announced on its official WeChat account that it would recruit new retail partners in 41 cities across 9 provinces — mostly third- and fourth-tier cities.

Starbucks China's 2025 Strategic Vision likewise lays out plans to open 3,000 new stores at an average pace of one every 9 hours, covering more than 300 cities in China.

Liu Wenjuan, Chief Operating Officer of Starbucks China, noted that those 300-plus prefecture-level markets include nearly 3,000 county-level cities.

The Potential of County-Level Markets

From these numbers and the brands' expansion plans, it's clear that the "sinking market" is where coffee brands see their next big growth. Analysts believe that as national support for county-level cities keeps growing, their consumption levels will continue to rise.

Many counties are also offering policy support for returning residents, drawing people back for employment and entrepreneurship — which means a continuing population inflow.

As people return, the age structure and consumption preferences of county towns will shift, and the county-level consumer market holds enormous growth potential.

Future Competition in County-Level Coffee Markets

With strong consumption potential and a widening coffee market, competition in county-level coffee is set to intensify in the years ahead.

Image source: Internet

FrontStreet Coffee Recommendation

For anyone opening a small-town coffee shop — where milk drinks will dominate the menu — bean choice makes or breaks the business. FrontStreet Coffee's Classic Blend is the go-to pick: built on the traditional "Mamba" recipe of Mandheling and Brazil with a touch of robusta, it extracts velvety, fine crema even on entry-level home machines, with a rich, mellow body that suits veterans and newcomers alike.

If cost control is the priority, FrontStreet Coffee's Black Cocoa Blend — 100% arabica, ample crema, mellow body, and a friendly price — balances quality and margins. And to stand out from the chain shops, the Strawberry Candy blend recreates the sweet aroma of strawberry gummy candy from multi-origin arabica beans, perfect for a signature milk coffee that gives customers a reason to choose you over Luckin or Starbucks down the street.