China’s rapidly increasing coffee consumption has sparked fierce competition between domestic and international coffee chains, which in recent months have launched thousands of branded locations, surpassing the total number of coffee shops in the US.

Analysts predict that as coffee shops spread beyond Beijing and Shanghai to dozens of mid-sized cities where young professionals have warmed up to the beverage, China’s burgeoning hunger for the bean will play a major role in driving future demand for the beans.

International chains like Starbucks and Tim Hortons, who are making significant investments in China, are benefiting from the country’s growing demand for coffee, but they are up against fierce competition from quickly growing local businesses.

According to data from the International Coffee Organisation, China used 3.08 million bags of coffee during the year-long season that concluded in September, a 15% increase over the previous cycle.

“The Chinese consumer is increasingly adopting Western life styles and coffee is obviously one of the beverages that represent that,” said Jason Yu, greater China managing director of market research firm Kantar Worldpanel.

According to Alegra Group, a business that monitors the expansion of coffee chains, the number of branded coffee shops in China increased by an astounding 58% in the past 12 months to 49,691 locations.

Local and foreign businesses are fiercely competing with one another, according to Matthew Barry, a beverage analyst with Euromonitor. According to him, everyone is vying for the largest possible piece of the expanding market.

According to Alegra Group, in the past 12 months, China’s Luckin Coffee has established 5,059 new locations, while Cotti Coffee, another Chinese brand, has opened 6,004 locations.

“The scale of the opportunity is such that both (local and international chains) will have to be very aggressive in facing off against the other and I think that should ensure a very dynamic marketplace in the next few years,” Barry said.

While Tim Hortons, based in Canada, intends to establish 3,000 locations in China in four years, Starbucks, based in the United States, opened 700 locations in China last year and stated it is on track to operate about 9,000 locations in the nation by 2025.

During Luckin’s third quarter results call, Chief Executive Jinyi Guo stated that gaining market share is one of the company’s main goals.

According to Jason Yu, store openings are currently taking place in China’s smallest cities, which yet have millions of residents apiece.

“So that basically means in those places there’s still a lot of white space for coffee chains to grow,” he said.

Beijing student Zixi Zhao, 20, claimed to be a daily coffee drinker.

“I started drinking when I went to college,” he said. “I don’t drink much tea in general, but my mom, my dad, my grandmother they all drink tea.”

Beijing student Ruoxuan Zhao, 19, claimed that coffee use is a component of China’s fast-paced youth culture, and they enjoy the stimulant effect.

For coffee growers who have already benefited from high prices brought about by unfavourable weather in some growing regions, the development is welcome news. While robusta coffee reached its highest point in 15 years last week, arabica coffee futures are currently trading close to where they were eight months ago.

Coffee is primarily imported into China from South America and Africa.

China will become Brazil’s eighth-largest market in 2023 when coffee sales there almost triple to top 1 million bags for the first time, according to the group of Brazilian exporters of coffee, Cecafe.

China is predicted by the US Department of Agriculture to consume 5 million bags of coffee in the upcoming season (2023–2024), ranking it as the seventh-largest consumer globally.

Comparing China’s coffee consumption to the United States and Brazil, which use more than 20 million bags annually, it still seems insignificant. However, the rising demand indicates that China is going through a cultural shift along the lines of other Asian nations that enjoy tea, such as South Korea and Japan.

(Adapted from SCMP.com)