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Coffee Imports Show Strong Growth Potential In China

By: Diana Delgado, Contractor

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Coffee Imports Show Strong Growth Potential In China
 
Diana Delgado
Latin American correspondent
diana.delgado@stonex.com

Coffee Imports Show Strong Growth Potential In China

Coffee Network (Bogota) - China’s coffee imports are forecast to reach 4 million 60-kilogram bags in marketing year 2021/2022 (MY21/22 Oct - Sept), a 5% increase over the preceding year as demand in second and third-tier cities for coffee drives growth and expansion of domestic coffee consumption, the US Department of Agriculture said.

In MY20/21, China’s total imports of coffee (roasted, green and soluble GBE) products reached over 3.8 million 60-KG bags GBE – exceeding MY19/20 import volume by nearly 30%. Between MY15/16 and MY20/21 imports of green coffee beans to China grown tremendously, USDA said.

Consumption in MY 21/22 are forecast to reach nearly $16 billion (100 billion RMB) a 5% increase over MY20/21. Analysts expect coffee demand in China to grow as disposable incomes rise, with China’s coffee demand growth to exceed that of more mature coffee markets. Industry reports indicate that coffee consumers in China could reach over 350 million in 2021, and female consumers are expected to account for nearly 65% of all purchases .

Industry sources note that the typical Chinese consumer consumes instant coffee 70% of the time, freshly ground 20% and ready-to-drink coffee 10% of the time. Compared with other coffee consuming countries such as the United States and Japan, coffee consumption in China is a relatively new phenomenon, with younger consumers willing and interested in trying new flavors and coffee products, USDA said.

 Consumers in first-tier and second-tier cities have shown the most sustained growth in coffee consumption. Industry sources note that more than 50% of white-collar workers in first and second-tier cities are expected to increase their coffee intake over the coming years. Additionally, trends set by first-tier cities may spur greater expansion of coffee consumption and coffee culture in second and third-tier cities. Coffee Development, Trends and Opportunities China’s coffee market has changed dramatically during the last five to ten years. Previously, China was a market dominated by instant coffee. Today, innovative coffee products (see Images 1, 2) represented by local brands (such as Yongpu and Saturnbrid) are expanding market sha

Domestic convenience store purchases of coffee have also expanded with such brands as Family Mart Coffee, 7/11 coffee, Convenience Bee Coffee, KFC Coffee (K-Coffee), etc. Other concept stores, such as the “Greener Store of Starbucks Coffee Lab” have opened recently in Shanghai. These stores incorporate sustainable building, products, and practices to build consumer support. Industry sources estimate that in the next few years coffee retail is expected to grow by 5 percent, reaching over 120,000 stores by 2023. In third-tier and lower-tier cities, independent cafes account for over 95 percent of coffee stores. Large brands should consider these smaller markets for greater expansion.

China Coffee Production

 In MY2021/2022 October to September (MY21/22) coffee production is forecast to decline to 1.75 million 60-kilogram (KG) bags GBE, USDA said. Yunnan Provincial Statistics Yearbook data indicates that coffee production has been declining in the recent years. Contacts have also indicated that many coffee farmers in Yunnan are finding coffee production less profitable and are switching to other crops. Initiatives to spur improvements in coffee production in Yunnan were most active between 2014 and 2019.  However, in the recent years programs to support coffee production expansion have not been publicized. In MY 21/22, coffee production is not expected to decline dramatically in Yunnan as both Nestlé and Starbucks have established production sites and purchase large quantities of local coffee beans for domestic consumption. For example, Starbucks markets “single origin” Yunnan coffee beans in China at retail cafes.

COVID – 19 Impacts on China’s Coffee Industry

 Since October 2021, China has faced the largest and most widespread COVID-19 outbreak. Local governments have placed increasing restrictions, including citywide testing and lockdowns, which have negatively impacted the HRI (hotel, restaurant and institutions) sector. These restrictions are expected to lead to increased closures of brick-and-mortar coffee stores (see Food Service-Hotel Restaurant Institutional Shanghai ATO China - People's Republic of_12-28-2021 for more information on China’s HRI sector.

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