With leading coffee retailers announcing massive expansion plans across China and a new generation of cafe loving consumers, the market for cafes in China has never been better. Indeed, the boom in cafe culture 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 tea houses 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:
“The focus on higher-end consumers by tea houses means that although there has been virtually no growth in outlets, sales have grown strongly, as tea houses sell more expensive ‘connoisseur’ teas, accompanied by high-quality snacks and meals. However, the development of the market will not be sustained without volume growth of outlets. Cafes 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 cafe and tea houses 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, tea houses 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 Tea Shop consumers 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 tea houses means the sector has so far failed to meet the challenge posed by the rise of the cafe chains, while the few existing chains have focused on a very narrow, higher-end, generally older consumer segment. Meanwhile, cafe chains have begun to sell Chinese tea, as well as coffee, posing a threat to the traditional tea houses, particularly winning custom from younger and lower-income consumers who might have responded well to a middle-market tea house chain. Given that the cafe 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 tea houses with a broader consumer appeal,” Matthew continues.
Differentiation is becoming increasingly important for cafe chains to stand out from the crowd and Mintel’s research highlights what factors influence Chinese consumers to visit cafes. Quality of food is the top priority for Chinese consumers, 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 cafe culture – 15% of consumers claim to be influenced by ambience and atmosphere, and 8% by hygiene standards. All of these factors rank 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 cafes – with 69% of consumers who visit cafes claiming to drink this while there. This is followed by fruit juice (39%), iced coffee (35%), tea drinks (23%) and chocolate drinks (19%).