Coffee Houses - China - December 2016


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Mintel

$ 3990

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The out-of-home coffee market is expected to continue robust growth although coffee houses may face increasing competition from non-specialist coffee places. As brands target more locations and go premium, they must bear in mind that experience is what matters the most.

Table of Contents

OVERVIEW
What you need to know
Covered in this Report
Included
Exclusions
Definitions
Figure 1: Definition of low/mid/high MHI groups, by city tier
Figure 2: Definition of heavy/light/non-user categories, by usage of coffee houses

EXECUTIVE SUMMARY
The market
Rising demand and supply of fresh coffee drives up market
Figure 3: Best- and worst-case forecast for sales value of coffee house market, China, 2011-21
Chains continue to see robust growth
Key players
Brands seeking premiumisation and more visiting occasions
Figure 4: Leading chains in coffee house market, by market volume (number of outlets), China, 2014 and 2015
The consumer
Coffee house becoming ubiquitous in most Chinese consumers’ lives
Figure 5: Frequency of visiting coffee houses, August 2016
In-store ambience as important as taste of coffee
Figure 6: Key points of attraction, August 2016
Desserts and snacks purchased most often
Figure 7: Products bought in coffee houses, August 2016
Western-style food also very much favoured
Customisation is what consumers desire most
Figure 8: Coffee features/services worth paying more for, August 2016
More education needed for premium brewing methods
What we think

ISSUES AND INSIGHTS
Experience matters
The facts
The implications
Three steps to going premium
The facts
The implications
Differentiate from non-specialist coffee places
The facts
The implications

THE MARKET – WHAT YOU NEED TO KNOW
Value growth estimated at 12% in 2016
Rising demand and supply of fresh roasted coffee drives future growth
Chains scaling up while independents are losing significance

MARKET SIZE AND FORECAST
History of the coffee waves
Double-digit growth since 2011
Growth momentum expected to continue
Figure 9: Best- and worst-case forecast for sales value of coffee house market, China, 2011-21
Figure 10: Best- and worst-case forecast for market volume of coffee house market, China, 2011-21

MARKET DRIVERS AND CHALLENGES
Shift to fresh roasted coffee from instant coffee
Trend of experiential consumption
Rising production of coffee beans domestically
Competition from non-specialist coffee venues

MARKET SEGMENTATION
Chains scaling up
Figure 11: Market volume of coffee house market, by market segment, China, 2011-16
Independents losing significance

KEY PLAYERS – WHAT YOU NEED TO KNOW
American/European-style coffee houses growing rapidly while Korean brands facing problems
Brands introducing special ways of brewing, more food and interactive activities to attract consumers

MARKET SHARE
Three competing forces
Figure 12: Leading chains in coffee house market, by market volume (number of outlets), China, 2014 and 2015
Starbucks leads rapid expansion among fast-growing American/European-style coffee houses
Starbucks Corporation
Whitbread PLC (Costa Coffee)
China Resources (Pacific Coffee)
Korean coffee house brands facing operating problems
New players entering out-of-home coffee market
China National Cereals, Oils and Foodstuffs Corporation
CoCo Tea
Figure 13: CoCo Café, Shanghai

COMPETITIVE STRATEGIES
Going premium with special ways of brewing
Creating more visiting occasions by taking on more food
Interactive activities build consumer loyalty

WHO’S INNOVATING?
Starbucks
Secret menu
Figure 14: Secret drink for Halloween, Starbucks, China, 2016
‘Winter White’ time-limited store in Japan
Plant protein drink alternative for milk in US
Costa Coffee
Flat White Day
Customise your Frostino
Wheelys – Bicycle café

THE CONSUMER – WHAT YOU NEED TO KNOW
The majority of Chinese consumers use coffee houses
Starbucks and UBC are coffee house brands visited most frequently
In-store ambience as important as taste of coffee
Customisation is what consumers desire most, special ways of brewing less worth paying more for

FREQUENCY OF VISITING COFFEE HOUSES
The majority of Chinese consumers use coffee houses
Figure 15: Frequency of visiting coffee houses, August 2016
Especially favoured by women aged 25-29, while men aged 20-24 can be potential consumers to target
Figure 16: Frequency of visiting coffee houses (percentage difference as compared to total), heavy users and non-users, by age and gender, August 2016
Opportunity in lower tier cities
Figure 17: Frequency of visiting coffee houses, by city tier, August 2016

MOST FREQUENTLY VISITED COFFEE HOUSE
Starbucks retains an unassailable lead
Figure 18: Most frequently visited coffee house, August 2016
UBC still in favour but mainly by older consumers
Figure 19: Selected most frequently visited coffee house, by age, August 2016
Other brands need clearer brand images to stand out
Figure 20: Word cloud of most frequently visited coffee house, August 2016

KEY POINTS OF ATTRACTION
In-store ambience as important as taste of coffee
Figure 21: Key points of attraction, August 2016
Delivery service yet to explore
Sophisticated consumers looking for more
Figure 22: Key points of attraction, by user category, August 2016

PRODUCTS BOUGHT IN COFFEE HOUSES
Desserts and snacks more popular than coffee
Figure 23: Products bought in coffee houses, August 2016
Figure 24: Desserts of DNA Café – An independent coffee house in Shanghai, 2016
Western-style food welcomed, Chinese-style food not
Tea drinks also favoured
Opportunity in coffee-making tools and packaged coffee beans
Figure 25: Selected products bought in coffee houses in the last three months, by user category, August 2016

FEATURES/SERVICES WORTH PAYING MORE FOR
Customisation is what consumers desire most
Figure 26: Coffee features/services worth paying more for, August 2016
Coffee beans more valued as age increases
Figure 27: Selected coffee features/services worth paying more for, by age, August 2016
Engagement in coffee-making process favoured by women aged 25-29
Figure 28: Selected coffee features/services worth paying more for (percentage difference as compared to total), by age and gender, August 2016
Coffee with intensified flavour favoured by men aged 30+
Figure 29: Pret A Manger’s highlight of customisation in coffee drinks
Special ways of brewing less worth paying more for

ATTITUDES TOWARDS COFFEE AND COFFEE HOUSES
Coffee drinking becoming an indispensable part of life
Figure 30: Attitudes towards coffee house visiting, August 2016
Most consumers prefer flavoured coffee
Figure 31: Attitudes towards coffee drinking, August 2016

MEET THE MINTROPOLITANS
More heavy users of coffee houses
Figure 32: Frequency of visiting coffee houses, by consumer classification, August 2016
Tea drinks as popular as packaged beverages
Figure 33: Selected products bought in coffee houses, by consumer classification, August 2016
Precious coffee beans is the top coffee feature worth paying more for
Figure 34: Top coffee features/services worth paying more for, by consumer classification, August 2016

APPENDIX – MARKET SIZE AND FORECAST
Figure 35: Value sales of coffee house market, China, 2011-21
Figure 36: Market volume of coffee house market, China, 2011-21

APPENDIX – MARKET SEGMENTATION
Figure 37: Best- and worst-case forecast for market volume of coffee house market chains, China, 2011-21
Figure 38: Best- and worst-case forecast for market volume of coffee house market independents, China, 2011-21
Figure 39: Market volume of coffee house market, by market segments, China, 2011-21

APPENDIX – METHODOLOGY AND ABBREVIATIONS
Methodology
Fan chart forecast
Abbreviations

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