China has seen a significant rise in coffee consumption in recent years, with the country surpassing the United States in 2023 as the nation with the most branded coffee shops in the world. The number of coffee outlets in China grew by 58% to almost 50,000, compared to about 40,000 in the U.S. This growth is fueled by the emergence of Chinese coffee chains like Luckin, Cotti, and Manner, as well as local independent cafes in major cities such as Beijing. While tea remains a fundamental aspect of Chinese culture, the younger middle-class population is increasingly turning to coffee for its caffeine boost in the competitive job market.
Consumers like Li Yizhe, a 26-year-old government worker, have shifted from traditional milk tea to coffee to keep up with the demands of their high-pressure work environment. Coffee’s convenience, affordability, and addictive caffeine content have made it a popular choice among Chinese workers facing stress and long hours. China’s demand for coffee is expected to reach 5 million bags in the 2023-24 season, making it the seventh-largest consumer of coffee globally. This increase in coffee consumption is attributed to lifestyle changes, urbanization, globalization, and the rapid expansion of domestic and foreign coffee chains in China.
Luckin Coffee, a domestic chain, overtook Starbucks as the largest coffee chain in China last year, with over 13,000 stores compared to Starbucks’ 6,800 outlets. Despite facing initial skepticism and a major scandal involving inflated sales figures, Luckin has positioned itself successfully by expanding to new cities, offering competitive pricing, and leveraging technology for convenient ordering and delivery services. Domestic coffee chains like Luckin cater to Chinese consumer preferences by incorporating traditional ingredients and flavors into their menu items and providing a localized ambiance and service experience.
Starbucks, which has been in China for two decades, recognizes the evolving Chinese coffee market and the growing competition from mass-market competitors focused on rapid expansion and low prices. Foreign chains like Starbucks are adjusting their menu options and store designs to appeal to Chinese tastes and forming partnerships with local businesses. Starbucks recently introduced a limited-edition pork-flavored latte inspired by a classic Chinese dish for the Lunar New Year. While these product innovations aim to capture market share, Starbucks is focused on sustainable growth rather than entering price wars to maintain its position in the premium market.
Both domestic and foreign coffee chains in China can expect continued growth as coffee consumption becomes more ingrained in Chinese culture, even reaching smaller cities and rural areas. This growth is expected to make coffee a more inclusive and diverse national drink, appealing to a broader range of consumers. As the coffee industry in China develops, the increase in customers will lead to positive overall growth and development. While competition among coffee chains is intensifying, the market is poised for further expansion and innovation to meet the diverse preferences of Chinese consumers.
