Coffee - China - September 2017


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Mintel

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Strong growth momentum of Chinas coffee market is likely to continue with blossoming innovations and rising interest from younger consumers. Consumers, on one hand attach great importance to safety and authenticity and try to limit sugar intake for health reasons, while on the other hand, emotional triggers effectively drive greater consumption and strong flavour from additional ingredients are still favoured by those who seek to indulge. With rising competition from localisation of international brands and strong presence of local roasters and coffee start-ups, brands are on the verge of up or down amid ever-changing competition landscape

Table of contents

OVERVIEW
What you need to know
Covered in this Report
Excluded

EXECUTIVE SUMMARY
The market
Growth momentum projected to continue
Figure 1: Best- and worst-case retail value sales forecast of coffee, China, 2012-22
Instant coffee is poised for shrinking share
Figure 2: Coffee retail value market share, by segmentation, China, 2012-17
Key players
Leading brands challenged by smaller players
Figure 3: Company share of non-liquid coffee market in China, 2015 and 2016
Figure 4: Company share of RTD coffee market in China, 2015 and 2016
Target zoomed in on young consumers
Minus claims and additional nutrients to address health needs
The consumer
Rise of coffee on premise underpinned by young females
Figure 5: Penetration of different types of coffee, July 2017
Shift from instant and RTD to fresh coffee
Figure 6: Percentage of people drinking the following types of coffee once a day or more, July 2017
Adopting coffee drinking culture as a whole
Figure 7: Choice of food paring with coffee, July 2017
Manual brewing arsenal upgrade in quality as well as in quantity
Figure 8: Average types of brewing tools used, July 2017
Success formula of most consumed RTD coffee brands
Figure 9: Correlation between brand attributes and penetration, July 2017
Milk yes, sugar maybe
Figure 10: Interested flavour innovations, July 2017
What we think

ISSUES AND INSIGHTS
How can instant and RTD address health needs
The facts
The implications
How to build connections with young consumers
The facts
The implications
Leverage the power of food
The facts
The implications
Figure 11: Dessert flavoured coffee launched globally, 2016-17.
Figure 12: Coffee launches with food paring suggestions or recipes, global, 2016.

THE MARKET – WHAT YOU NEED TO KNOW
Growth momentum projected to continue
Premiumisation with more chilled space
Emergence of small roasters

MARKET SIZE AND FORECAST
Robust growth projected to continue
Figure 13: Retail market value of China’s coffee market, 2012-17
Figure 14: Best- and worst-case retail value sales forecast of coffee, China, 2012-22

MARKET DRIVERS
Dynamic market embrace innovations
Figure 15: Percentage of coffee launched in China, 2014-17 (till July)
Chongqing becomes the next major coffee distribution hub
Consumption further fuelled by rising coffee machine ownership
Premiumisation with more chilled space
Figure 16: Average price of drinks launched in 2016, by sub-category, by storage
Figure 17: RTD coffee launched, by storage type, China 2014-17

MARKET SEGMENTATION
Instant coffee is poised for shrinking share
Figure 18: Coffee retail value market share, by segmentation, China, 2012-17
Favour for milky note fuels demand for flavoured instant coffee
Figure 19: Instant coffee retail value market share, by sub-category, China, 2012-17
RTD thriving yet competitive
Figure 20: RTD coffee drinks launched by new entrants, China, 2017
Figure 21: Percentage of cold brew among global RTD coffee launches, 2014-17
Burgeoning small roasters tapping into fresh coffee retail
Figure 22: Uncle Bean Coffee Roasters’ products on Tmall
Figure 23: Lutianjia’s products sold on selective e-commerce platforms

KEY PLAYERS – WHAT YOU NEED TO KNOW
Leading brands challenged by smaller players
Target focused on young consumers
Minus claims and additional nutrients to address health needs

MARKET SHARE
Dominant leading players are losing share of non-liquid coffee market
Figure 24: Company share of non-liquid coffee market in China, 2015 and 2016
Leading RTD coffee brands challenged by smaller players
Figure 25: Company share of RTD coffee market in China, 2015 and 2016
Nestlé sets eye on Chinese online shoppers
JDE restructuring business in Asia

COMPETITIVE STRATEGIES
Local brands aim to win young consumers
Figure 26: Local brands strategies to target young consumers. China 2015-17
RTD price meeting half way
Figure 27: RTD coffee products launched in China, 2017
Engage with coffee lovers through community building
Figure 28: David Choice’s community management
WHO’S INNOVATING?
Coffee hybrid drinks
Figure 29: Examples of newly launched coffee hybrid drinks, China and global, 2016-17
Plant based solution
Figure 30: New launches of plant based coffee, Global, 2016-17.
Natural claims to address health concern
Figure 31: Product claims* of RTD coffee launched 2014-17, China
Figure 32: New launches of coffee with minus claims, Global, 2016-17
Temperature assigned
Figure 33: Launches of coffee products can both be served hot and cold, China, 2017.
Communication thorough packaging
Figure 34: Examples of innovative packaging with plain quotes, China, 2017
Craft instant coffee through subscriptions
Figure 35: Sudden Coffee as an example of craft instant coffee through subscription, US, 2017

THE CONSUMER – WHAT YOU NEED TO KNOW
Rise of coffee on premise driven by young females
Shift from instant and RTD to fresh coffee
Adopting coffee drinking culture as a whole
Success formula of most consumed RTD coffee brands
Cold brew has yet to take off

SEGMENT PENETRATION
Rise of coffee on premise
Figure 36: Penetration of different types of coffee, July 2017 & May 2016
Cross consumption increases with fresh coffee drinker
Figure 37: Penetration of different types of coffee, by coffee user types, July 2017
Young females’ outstanding appetite for coffee
Figure 38: Penetration of different types of coffee by gender and age, July 2017
CONSUMPTION FREQUENCY
Convenient in-home usage drive volume consumption
Figure 39: Coffee consumption frequency by type, July 2017
More fresh, less instant and RTD
Figure 40: Percentage of people drinking the following types of coffee once a day or more, July 2017
Drip bag coffee better fit consumers in their 30s
Figure 41: Percentage of consumers who drink the following types of coffee once a week or more, by age groups, July 2017
FOOD PAIRING WITH COFFEE
Adopting coffee drinking culture as a whole
Figure 42: Choice of food paring with coffee, July 2017
High earners more open to coffee-pairing food choices
Figure 43: Choice of food paring with coffee (selected), by monthly personal income, July 2017
Consumers drinking homemade coffee seldom drink alone
Figure 44: Choice of food paring with coffee, by users of different types of coffee, July 2017
BREWING METHOD
Automation rules
Figure 45: Penetration of coffee brewing methods, July 2017
Manual brewing arsenal upgrade in quality as well as in quantity
Figure 46: Average types of brewing tools used, July 2017
Figure 47: Cross penetration of coffee brewing methods, July 2017
RTD COFFEE BRANDS PERCEPTION
Building awareness does not translate to purchase
Figure 48: RTD coffee brand awareness and penetration, July 2017
Figure 49: RTD coffee brand penetration, by age group, July 2017
Safety and authenticity drives usage
Figure 50: Correlation between brand attributes and penetration, July 2017
Figure 51: Examples of RTD coffee drinks claiming additional health benefits, Global, 2016-17
Opportunities with building emotional attributes

INTERESTED FLAVOUR INNOVATIONS
Milk yes, sugar maybe
Figure 52: Interested flavour innovations, July 2017
Figure 53: Interested flavour innovations among milk flavour advocates vs total, July 2017
Figure 54: Examples of salty coffee, China and Global, 2015-17
Performance enhancement remains priority
Figure 55: Café Pele’s OOH campaign, Brazil, 2015
Healthy formula can draw crowds
Figure 56: Examples of fresh coffee gaining extra health benefits from herbal ingredients, Global, 2016
Cold brew has yet to take off
Figure 57: Cold brew innovations, US, 2016-17
Figure 58: Interest in cold brew, by demographics, July 2017
Figure 59: Cold brew coffee products with education message on their packages, global, 2016-17
MEET THE MINTROPOLITANS
Advocates for fresh coffee
Figure 60: Penetration of different types of coffee, by consumer classification, July 2017
Extra desire for ingredient upgrade
Figure 61: Interested flavour innovations, by consumer classification, July 2017
Figure 62: Milan Gold’s selected single source coffee series, China

APPENDIX – MARKET SIZE AND FORECAST
Figure 63: Value sales of china’s coffee retail market, 2012-22
Figure 64: Volume sales of China’s non-liquid coffee retail market, 2012-22
Figure 65: Best- and worst-case retail volume sales forecast for non-liquid coffee in China, 2012-22

APPENDIX – MARKET SEGMENTATION
Figure 66: Value sales of China’s coffee retail market, by segment, 2012-22
Figure 67: Volume sales of China’s coffee retail market, by segment, 2012-22

APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
Fan chart forecast
Abbreviations