2023 China Coffee Market Size Trends: Current Status and Development Prospects of the Domestic Coffee Industry

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In the past 21 years, the domestic coffee market has undergone tremendous changes. Coffee has evolved from unfamiliar to a daily necessity, and it took only 10 years for the Chinese coffee market to experience rapid growth in its overall scale.

According to statistics from multiple institutions, the compound annual growth rate (CAGR) between 2013-2018 reached 29.54%; by 2021, the Chinese coffee market grew by 31% year-on-year, and the compound annual growth rate (CAGR) from 2022 to 2025 will reach 9.63%.

Latest data from global coffee market analysis shows that in 2023, the Chinese coffee market will reach 180 billion yuan, and by 2025, it will reach 1 trillion yuan.

Such rapid development is mainly due to increased competition in the coffee industry and accelerated expansion of chain brands. Additionally, the rise of mini-programs and livestreaming, as well as the rapid increase in coffee consumption habits among young consumers, have contributed to this growth.

Accelerated Expansion of Chain Brands

Since the outbreak of the pandemic, people's work and life stress has increased. To stay alert and refreshed, people's demand for coffee has grown. Meanwhile, with the spread of specialty coffee culture, analysis predicts that by 2023, the share of freshly ground coffee in the Chinese coffee market will rise to over 51%, while instant coffee's share will drop to below 40%.

It's evident that China's freshly ground coffee market is a typical consumer upgrade market with considerable growth prospects. Judging by the industry's growth rate, freshly ground coffee is also a high-growth sector.

Market analysis suggests that in the next five years, the global compound growth rate for freshly ground coffee consumption will be 5.7%, while China's compound growth rate for freshly ground coffee consumption will reach as high as 24.6%. Such rapid growth provides chain companies in the coffee industry with high fault tolerance and opportunities for overtaking competitors.

In recent years, many people working in big cities have moved to smaller cities, driving coffee demand in third, fourth, and fifth-tier cities. Therefore, during this period, major chain coffee brands have focused on developing these lower-tier markets and accelerating store expansion to attract more new customers.

According to statistics from Narrow Door Restaurant Eye, in 2022, the top three brands with the most newly opened stores were Luckin Coffee (2,939 new stores), Luckin Coffee (1,521 new stores), and McCafé (763 new stores). To date, the brands with the most operating stores in China are Luckin Coffee (8,171 stores), Starbucks (6,882 stores), and McCafé (2,530 stores).

Rise of Mini-Programs and Livestreaming

Livestreaming and online shopping have developed rapidly in China, undoubtedly providing significant assistance to the coffee market. As the livestreaming market flourishes in China, more and more consumers choose to purchase products through these channels, further cultivating consumer habits of online ordering, demand for product discounts, and operational convenience.

Livestreaming has provided many coffee brands with a platform to demonstrate coffee equipment usage, showcase coffee bean characteristics, and share brewing experiences to a national audience. Through interactive livestreaming, consumer interest in and understanding of coffee have increased. Combined with the discounts and convenience of online ordering, coffee has gradually penetrated the home market (i.e., buying coffee to brew at home).

In terms of retail, mini-programs offer consumers an alternative to traditional markets and e-commerce. Currently, coffee consumers are mainly concentrated in the 23-40 age group, who prioritize speed and convenience, creating huge demand for mobile applications.

The emergence of mini-programs has served as a form of mini-commerce. Mini-programs combine social media and e-commerce platforms, providing consumers with options beyond traditional markets and e-commerce. Consumers can not only order the products they need in advance, reducing waiting time, but they can also help businesses serve customers faster and effectively reduce store operating costs, leaving more room for product price discounts.

Rapid Increase in Coffee Consumption Habits Among Young Consumers

The rapid expansion of chain coffee brands + e-commerce livestreaming + mini-program retail assistance have led to a rapid increase in coffee consumption habits among young consumers. Compared to countries with strong coffee cultures, the Chinese coffee market is still in its early stages, which means there is still significant room for expansion.

According to data, the main reasons why Chinese consumers drink coffee are: refreshment (53.1%), liking the taste of coffee (53.2%), and enjoying the atmosphere and service of coffee shops (31.3%). Chinese consumers' single spending in coffee shops is concentrated in the 10-40 yuan range, with the most common range being 15-25 yuan.

Given that the Chinese coffee market is still in its early stages, this means there is still significant room for expansion. Recent data shows that coffee consumers pursue product quality, with single purchase prices falling in the mid-range, indicating that consumers are more willing to buy cost-effective coffee products.

The aforementioned chain brands, livestreaming, and mini-program ordering are precisely the key factors providing cost-effective coffee products and are also crucial for helping more consumers develop coffee drinking habits.

Currently, millennials (post-2000s) and Generation Z (under 40) consumers dominate the market. The post-2000s generation needs innovation, novelty, and convenience; Generation Z needs experience, stability, and convenience.

Therefore, future coffee market development will focus more on the needs of millennials and Generation Z consumers, while enhancing the social attributes of coffee, launching more portable and ready-to-drink products, and increasing coffee bean imports.

Image source: Internet

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