China’s Coffee Industry
China's Coffee Consumption
China’s consumption of coffee grew from 6kt in 2009 to 15kt in 2013, with a CAGR of 25%. PIM expects the growth rate over the coming 5 years to be 20%, to a total coffee consumption reaching 37kt in 2018.
Figure 1: China Coffee Consumption (kt/a), 2009~2018
Source: Coffee Association of Yunnan, PIM interview and analysis, 2015
Although China harbors more traditional-Chinese-style tea drinkers than the new-western-style coffee drinkers, with a population base of over 1.3 billion, PIM believes that there is substantial market potential. With the rapidly spreading of coffee shops in China, it is obvious that changes are taking place in modern Chinese people’s drinking habits.According to Roland Decorvet, head of Nestlé China, “Contrary to what you might expect, the biggest instant coffee cultures in the world are all tea cultures” such as Japan and the UK. No showing up on China’s urban street corners, the American coffee chain, Starbucks, also holds high hopes for this rising market.
China’s Coffee Production
Currently most of China’s coffee production is from Yunnan province. According to the Coffee Branch of China’s Fruit Marketing Association, China’s coffee production in 2010 was over 42kt, of which 42.340kt was from Yunnan province, almost 0.5kt from Hainan province, 0.251kt from Sichuan province, and little from the Taiwan region.
China exports a large portion of its coffee production. According to Mr. LI Gongqin, secretary general of Coffee Association of Yunnan, in 2012~2013 coffee harvest season, the approximate total production of Yunnan coffee was 82kt, of which over 50kt was for export, and part of the balance was used in instant coffee production by domestic companies with coffee deep processing abilities. Domestic consumption of Yunnan coffee was less than 20kt.
China’s Instant Coffee Market
China’s coffee deep processing remains a niche market. There are very few instant coffee producers in China. According to PIM’s research, the main producers of spray-dried instant coffee in China include joint ventures like Nestle and Maxwell, private enterprises like Hogood and Lisun, and SOE Yunan Coffee Factory. While agglomerated instant coffee main producers are Nestle and Hogood, the latter being the sole main producer of freeze-dried coffee in China.
PIM expects to see more players in China’s instant coffee market, with China’s growing coffee consumption and a huge price gap between coffee before and after deep processing. For example, Hogood’s quotation of coffee beans is at about 3,543USD/ton, while the end selling price of Nestle spray-dried instant coffee is at 15,159USD/ton, agglomerated instant coffee at 69,139USD/ton and freeze-dried coffee at 163,360USD/ton. According to PIM’s projection, China’s output of instant coffee will reach 49kt/a in 2018.
Coffee Branch of China’s Fruit Marketing Association
Coffee Association of Yunnan