Café outlets in China double over past five years as Chinese consumers develop a taste for coffee culture
With leading coffee retailers announcing massive expansion plans across China and a new generation of coffeeculture loving consumers, the market for cafés in China has never been better. Indeed, the boom in caféculture in China has been highlighted by new research from Mintel revealing numbers of cafes in China have doubled over the past five years - increasing from 15,898 in 2007 to 31,783 in 2012.
Furthermore, over one in ten (12%) urban Chinese consumers claim to have visited at least one coffee shop over the past year, a quarter (25%) two or more and nearly the same number (24%) three or more. One in five (20%) urban Chinese consumers claim to have visited five or more coffee shops over the past year and just 5% claim to not have purchased anything from one. The boom compares with just modest growth for teahouses which have risen just 4% over the same period from 48,842 in 2007 to 50,984 in 2012.
Matthew Crabbe, Director of Asia-Pacific Research at Mintel, said: “Café chains only really began to appear in China in the late 1990s, and have grown very rapidly in number since. Meanwhile, the teahouse sector has struggled to find a response in terms of a successfully organised, branded, franchised chain - remaining focused on either tourists or low-spending older people looking for traditional places to relax and becoming less relevant to younger Chinese consumers. In the meantime, cafés have combined outlet expansion with adding value through encouraging consumers to trade up to higher-value coffees, snacks and meals.”
The combined value of the café and teahouse market in China in 2012 stands at RMB 71,599 billion - up from RMB 31,785 billion in 2007. Though the rates of growth in the market are expected to slow from those seen over 2007-12, the total market value should continue to grow well and Mintel predicts this to rise by 70% between 2012 and 2017 to reach RMB 121,690 billion.
With rising costs of operation, teahouses have had to aim at higher-end consumers, who will pay more for more expensive teas, food and service, in order to develop as businesses. Indeed, nearly half (43%) of teahouse visitors use them as venues for a business meeting, the second most popular reason for visiting after meeting up with friends or colleagues (59%).
“The lack of strongly branded chains among the traditional teahouses means the sector has so far failed to meet the challenge posed by the rise of the café chains, while the few existing chains have focused on a very narrow, higher-end, generally older consumer segment. Meanwhile, café chains have begun to sell Chinese tea, as well as coffee, posing a threat to the traditional teahouses, particularly winning custom from younger and lower-income consumers who might have responded well to a middle-market teahouse chain. Given that the café chains continue to successfully sell tea to their core younger consumer market, there is evidence that there could be potential still in developing branded, franchised chains of teahouses with a broader consumer appeal.” Matthew continues.
Differentiation is becoming increasingly important for café chains to stand out from the crowd and Mintel’s research highlights what factors influence Chinese consumers to visit them. Quality of food is the top priority for Chinese consumers in cafés, with 28% claiming this is an important factor, swiftly followed by quality of beverages at 22%. But it is not just food and drink luring consumers to café culture - 15% of consumers claim to be influenced by ambience and atmosphere and 8% by hygiene standards. All of these aspects factor above price - ranked as an important factor by 7% of consumers. Brand name is also cited by the same number (7%).
In line with recent moves from international coffee retailers into the Chinese market, coffee is the top drink consumed by consumers at cafés - with 69% of consumers who visit cafés claiming to drink this while there. This is followed by Fruit Juice (39%), Iced Coffee (35%), Tea Drinks (23%) and Chocolate Drinks (19%).