BEIJING - Since its introduction in the
late 19th century, all the coffee in China hasn't
amounted to a hill of beans. The Middle Kingdom
has long been a land of tea, and love of the leaf
runs deep. Now, however, with white collar Chinese
looking for a taste of Western life, change is
brewing. From the arabica plantations of Yunnan to
the proliferating coffee shops of the big cities,
China's cappuccino craze has an ever-growing
number of companies frothing at the mouth.
Beijing-based coffee roaster Stuart Eunson
recalls a time when coffee was an unknown quantity
for many of the Chinese capital's residents. "Back
in 1994 I was traveling in a taxi here and told
the driver I was involved in the coffee business,"
he says with a smile. "The guy didn't have the
faintest idea what I was talking about. He thought
coffee was a kind of vegetable."
Fifteen
years later and Eunson's business is booming, with
China's demand for coffee
growing at an estimated 15 to 20% a year (the
world average is around 2%), driving up sales of
beans to hotels, cafes and shops. China's coffee
consumption was estimated to be approximately
45,000 tonnes in 2006, but some analysts predict
this number could jump five-fold or even six-fold
to reach 300,000 tonnes annually by 2020. Coffee
sales currently account for a little over 20% of
the hot drinks market in China, compared to around
70% for tea.
"The potential for growth in
the Chinese coffee market is enormous," explains
Adrian Ho, Head of Coffee and Beverages for Nestle
in the Greater China region. "Per capita coffee
consumption currently stands at a mere 5 cups per
year. In Hong Kong the figure rises to 60 cups,
and in Japan 300 cups per year." Analysts cite
the 20 years of promotional activities that coffee
companies undertook in Japan before demand reached
present levels. They believe China could soon
leapfrog Japan and Germany to become the world's
second largest coffee consumer after the US, where
average consumption is now over 3 cups per day.
"Japan was at the current Chinese
consumption level in the mid 1960s but now
consumes over 7 million bags," says Nestor Osorio,
executive director of the International Coffee
Organization (ICO). "It's likely that China will
follow a similar growth path."
Like wine,
coffee is a Western concept to most Chinese
consumers, and coffee drinking is perceived as a
sign of cosmopolitan sophistication. "For many
Chinese, especially in big cities, coffee is part
of a lifestyle aspiration," explains Adrian Ho.
"More and more young professionals are choosing to
start the day with a cup or two at home."
China's coffee market can essentially be
divided into instant coffee, which is drunk at
home, and roast and ground coffee, which is
consumed outside in coffee shops such as
Starbucks, Blenz and Costa Coffee. Very few
Chinese make "real coffee" from beans or ground
coffee at home. Instant coffee, the market for
which is overwhelmingly dominated by Nestle, still
accounts for the lion's share of China's
consumption figures - the Swiss company opened a
large, state-of-the-art instant coffee factory in
Dongguan in southern China in 1992 to meet demand.
China's predilection for instant coffee
can be attributed to both convenience and price;
US$5 for a Starbucks cappuccino is a lot to pay
when you consider a native Beijinger's average
annual income is still less than US$6,000. A box
of 10 Nestle instant coffee sachets can sell for
as little as US$1.50.
"The growth in
China's instant coffee market owes a great deal to
Nestle's extensive marketing and a promotional
campaign by the ICO in the late 1990s," explains
Nestor Osorio. Promotional displays of Nestle
instant coffee are a common sight in Chinese
supermarkets, as are attractive "Nestle girls"
handing out free tasters and advising consumers on
purchasing options. "We are currently running the
world's biggest coffee sampling project in China,"
says Adrian Ho proudly.
As well as
ordinary instant coffee in sachets and jars,
Nestle offers Chinese consumers sachets and cans
of "1 + 2" coffee and ice coffee with creamer and
sugar, and attractive gift boxes. At less than
US$1 Nestle cans are far easier on the wallet than
the US$3 bottles of Starbucks frappuccino with
which they share supermarket shelves.
Nestle is hoping to piggyback on its
popularity in China's instant market with the more
upmarket Nespresso brand, a range of specialized
home use machines which brew a variety of
espresso-based drinks from ground coffee
"capsules". The company opened a boutique in
Beijing's exclusive Shin Kong Place in 2007 where
Chinese can buy both machines (starting at US$570)
and boxes of 10 capsules (US$8).
At the
moment, the market for Nespresso in China is
small, but the company is optimistic about sales.
"At the moment our target group is discerning,
coffee-loving Chinese PMEBs [professionals
managers, executives and business people] over the
age of 30," says Ernest Yong, Marketing Manager
for Nespresso Asia. "Trends are very favorable.
Roast and ground coffee is getting more popular
every day, and we view Nespresso as a mass luxury
product which a growing number of Chinese will
learn, want and be able to enjoy."
While
coffee shops are clearly a pricey option for those
Chinese jonesing for java, they are figuring more
and more in the routines of young and affluent
urbanites. With traditional espresso considered
too bitter, lattes, cappuccinos and frappuccinos
are generally the order of the day, along with
non-coffee options such as smoothies and hot
chocolate.
"I usually visit Starbucks or
Costa Coffee three or four times a week," says
30-something Beijing lawyer Chen Xi. "Apart from
the good coffee it's a relaxing place to meet
friends, and with free wireless Internet it's also
convenient for working. For me life without coffee
would be like life without tea or rice."
Sentiments like these are the stuff of
coffee promoters' dreams, and highlight the
underlying reason why coffee shops are becoming so
popular in China. Over and above the simple
consumption of a beverage, drinking coffee outside
the home is an emotional and cultural experience
for most Chinese, who value the coffee-drinking
space as much as what's in the cup.
"In
addition to a good quality product, coffee shops
that want to do well in China need to offer
patrons a stylish and comfortable environment,"
says Paul Smith, Asia-Pacific president for Costa
Coffee. "At Costa we focus on the whole
bean-to-cup experience and try to localize shops
as much as possible. Starbucks has a more rigid
format whereas we try to be a little more creative
in our decoration and products."
After a
late start in China, Costa is rapidly making up
lost ground on rivals such as Starbucks, which now
has around 200 outlets dotted around the country.
The UK chain opened its first stores in Beijing
ahead of last year's Olympics, and now has seven
in the Chinese capital and a further 30 in
Shanghai.
"We have very progressive growth
plans for China," explains Paul Smith. "By the end
of this year Costa will have a total of around 60
shops in Beijing and Shanghai, and we're also
planning to open stores in southern China soon."
Costa is just one of a wide array of
companies competing for a slice of China's coffee
pie. These include large-scale international
outfits such as Starbucks and Canadian chain
Blenz, local offerings UBC Coffee and SPR Coffee,
and a host of smaller chains and individual shops.
Even McDonald's is getting in on the action,
rolling out its cheap arabica-based McCafe range
of coffees in Beijing and six other Chinese cities
in June to the accompaniment of some aggressive
advertising.
The fact that so many
companies are falling over themselves to open
coffee shops in China means that retail space is
often at a premium. "If there were enough suitable
locations to rent at a reasonable price I could
easily run 10 shops in Beijing," says Frank
Siegel, owner of the city's popular Sequoia cafe.
"Because chains like Costa are coming into the
market it means finding good spots is really tough
right now."
China is not only developing
into a major coffee consumer, but also a producer.
Coffee cultivation in China dates back a little
over 100 years to when a French priest
successfully raised the plants in a valley in
Yunnan, a Japan-sized mountainous province
bordering Vietnam, Laos and Myanmar. Serious
production didn't begin, however, until 1988, when
a joint effort by the Chinese government, the
United Nations and World Bank saw coverage reach
4,000 hectares.
"Yunnan arabica now
accounts for 95% of China's coffee production, and
plantation coverage has more than quintupled to
around 23,000 hectares," explains Stuart Eunson,
whose Beijing and Shanghai-based company, Arabica
Coffee Roasters, now sources 20% of its beans from
Yunnan. With a further 20,000 hectares of land
considered suitable for coffee cultivation,
there's certainly room for further growth.
"Yunnan's climate, elevation and general
geography make growing conditions comparable to
those in Colombia and Indonesia, currently the
world's third- and fifth-largest coffee
producers," Eunson continues. "There's no reason
why China cannot produce some very fine, high
quality coffee."
Despite recent growth,
China's coffee production remains small in global
terms - according to official figures production
will be 30,000 to 35,000 tonnes this year. This is
a mere bean in the bag compared to neighboring
Vietnam, the world's second largest coffee growing
nation behind Brazil, where production is now over
1 million tonnes and almost all beans are
exported.
Although dwarfed by its
competitors, Yunnan's coffee industry is still a
major foreign currency generator - an estimated
60% of Yunnan's coffee production is exported
overseas, mainly to Japan and Germany. "Coffee now
brings in more foreign currency for Yunnan than
tea," says Li Gui Ping of the Baoshan Agriculture
Center. "Last year it generated around US$47
million, compared to only US$18 million in 2004."
Multinationals such as Starbucks and
Nestle have directly and indirectly helped boost
the Yunnan coffee industry. Much of the coffee
processed at Nestle's instant coffee factory in
Dongguan comes from Yunnan, and the company has
been instrumental in training coffee farmers in
best practice techniques, opening an experimental
and demonstration farm in 1997.
Starbucks,
which launched Yunnan bean-based coffee drinks in
its Chinese shops during the 2009 Chinese New
Year, has been operating in Yunnan for more than
three years. "We decided to use Yunnan beans
simply because they are now good enough," says
Caren Li, Starbucks' Communications Manager for
Greater China. "We are committed to building and
strengthening relationships with Yunnan farmers
and suppliers that will help them stabilize, build
and sustain their businesses, and also promote the
sustainable production of high quality coffee."
Yunnan's arabica has yet to attain the
refinement of Indonesia's Mandheling coffee,
regarded by many as Asia's finest, but with
continued investment and growing domestic and
overseas demand the future looks promising. As the
country's craving for caffeine deepens, so China
will become an ever greater net importer of coffee
and coffee shops will continue to increase in
number. Coffee may never usurp tea as China's
national beverage, but its days as a vegetable are
surely long gone.
Daniel Allen
is a freelance writer and photographer currently
living in Beijing.
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