China is waking up to the smell of coffee

Chinese consumers are ditching traditional tea drinks for coffee and market growth is higher than ever

By Sam Balf

China is rapidly becoming the fastest growing market in a world that is increasingly fuelled by the bean, a shift in taste that could cause reverberations across the world coffee markets. Credit: Flickr

When you think of a drink that is typically Chinese, you might imagine the scents and delicate notes of some carefully brewed Oolong or Pu’er tea, the lightly coloured teas that have for millennia been the national drink of the modern region of China. More recently, imported wines from Australia, South Africa and France have also become a favourite of the Chinese palette, though more likely to be enjoyed across urban rather than rural China. Yet for coffee, China is rapidly becoming the fastest growing market in a world that is increasingly fuelled by the bean, a shift in taste that could cause reverberations across the world coffee markets. Tea has been enjoyed in the today’s China for as long as there is recorded history, evidenced by emperors over two millennia ago drinking brewed tea leaves, but coffee has until now failed to become a staple. As the Chinese dragon awakens, and the country burns hot on the heels of America’s economic machine lifting living standards, Chinese consumers have begun to explore products, and tastes, beyond what has been traditionally their own, and coffee is at the forefront of this change. But this relationship goes further back than China’s recent economic revival. In the late 19th century, a French missionary brought coffee to the traditionally tea-growing province of Yunnan, in South Western China. Yet it took over a century for the stalks of coffee plants to expand their way across the neat hedges of Yunnan’s agricultural belt. The region has since retained its affiliation with coffee, and according to the International Coffee Organisation, still today Yunnan is responsible for 95% of the coffee grown in China, thanks in large part to the mountainous landscape and average altitude of around 2,000 metres above sea-level, making it fertile soil for coffee production. The fertility of the soil coupled with the intimate knowledge of the farmers in the region has helped to maintain a growth rate that has made China the 14th largest coffee producer in the world, up from 30th position ten years ago, and roughly doubling the quantity produced every five years. In recent years, China has overtaken traditional exporters of coffee and now produces more coffee than Kenya and Tanzania combined. Spurring this boom of coffee production in China is the returns farmers can obtain from planting coffee instead of tea, reportedly generating double the income for the same sized plot. “In Yunnan, farmers grow Arabica beans and in Hainan, they grow mostly Robusta,” says Zhang Jun, a member of the I Coffee Expo, where last year in 2018, 283 exhibitors from over 60 countries set up stalls to entice Chinese buyers. “Hainan is growing as a coffee hub because we have a free trade port and in recent years has become a prime focus province of the Chinese government.” With output from plantations ever-increasing, Chinese consumers are starting to become familiarised to the scent of roasted coffee on their high streets and markets. It’s clear to see Chinese consumers are drinking more of the caffeine-rich bean.

Chinese consumers are starting to become familiarised to the scent of roasted coffee on their high streets and markets. Credit: Flickr

Domestic coffee consumption has grown on average by 22 per cent between the period of 2006 and 2017, and today more coffee is consumed in China than Australia. As a result, foreign (and domestic) chains are fighting for a slice of the business. Li, a barista working at the bustling Cafe Zarah in Beijing, believes China still has some way to go before coffee is widely accepted: “The problem is the culture. Chinese people are not familiar with coffee. They do not know what a good coffee should taste like. Many people prefer to buy ready-made coffee in cans because it is easy and still has the taste they think coffee should have.” But a perceived lack of knowledge about coffee hasn’t been a barrier thwarting the wave of outside chains eager for a slice of the Chinese coffee market. Starbucks, arguably one of the most prolific names in consumer coffee, has energetically spread its way across China. In 2013, the chain had approximately 1,000 stores in the country, but by 2018 that number had risen to over 3,300 stores. According to Euromonitor, the share of the Chinese coffee shop market owned by Starbucks is as high as 80 per cent. But as urban Chinese develop a taste for the bitter brew, Starbucks has to fight to keep pace with the phenomenal growth in demand. So fast is the growth, that the American chain has plans to open another 3,000 stores by 2022, or one store every 15 hours for the next 4 years. China has managed to produce its own coffee chains too. Luckin Coffee, a chain started in late 2017, already has plans to steal a large chunk of Starbucks’ market share. They have already expanded to over 1,700 stores across 21 cities, and boast that their customers have a Luckin Coffee within a five-minute walk anywhere in downtown Beijing or Shanghai. According to the company’s website, its investors notably include Singapore’s Government Investment Corporate, China International Capital Corporation. With population forecasts for China predicting the size of their middle class to double to 600 million people by 2022, coffee traders, roasters, farmers, entrepreneurs and baristas will undoubtedly have their eyes on this booming new market. Is the potential for Chinese coffee a reality? These investors and large multi-nationals would certainly point to it being true. But it’s not just these coffee giants making their presence known. From the lively streets of Addis Ababa where the distinctive notes of Ethio-Jazz can be heard, a smaller coffee chain also has their eyes on the Chinese prize. “From the opening of our first roastery here in Addis, we have attracted a large Chinese guest base. They embraced in a deep way the quality and authenticity of the brand,” notes Bethlehem Tilahun, founder of Garden of Coffee. The young entrepreneur has become a female business icon in Ethiopia and is ready to take her beans to China’s market. “China is essentially where the US coffee market was 40 to 50 years ago. Per cup consumption in China is 5 cups per year, but it can go to 30 times this in the future. We always knew the Chinese market opportunity is huge, so it was logical for us to expand into China.”

Bethlehem Tilahun, founder of Garden of Coffee. Credit: Garden of Coffee

Having opened their first cafe roastery in China, Bethlehem sees the Garden of Coffee as being “poised to open over 100 cafe roastery’s by 2022” and China as the land of real opportunity. Yet, consumers in the UK should be keeping an eye on what happens in China’s frothy coffee market too. According to data from the Office for National Statistics, the price of coffee and other hot drinks in the UK spiked 7.7% in 2017. A poll we ran on Twitter saw 85% of respondents say ‘yes’ to the question of whether a cup of coffee in their city is becoming too expensive. This could spell bad news for UK consumers in the long run if the trend of rising prices continues. With new competing destinations for coffee beans, and the UK’s decision to leave the EU causing a sharp drop in the value of the pound, coffee is likely to become more increasingly more expensive on our high streets. Zhang Jun believes that China will instead provide a different reality for the price of coffee world wide: “China will increase its own production, and we will also continue to be one of the largest buyers of machinery and equipment, soon we will be a large exporter and this will help push price down for coffee.” For now it looks as if coffee in China is definitely on the ascendancy, but without finding its way from the rural farmland to the tables of every day Chinese, it is unlikely to have a major impact on the world of coffee. There are many however, who see China as the future for coffee. “Coffee in China maybe similar to how cola was in China in the 1990’s, it was not a popular drink even in big cities. But within 20 years you could find cola everywhere, and people were drinking every day.” remarks Zhang.

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