New research from Mintel unveils an increase in café culture in the China market, which has provided an impetus for coffee retails to plan expansions there. The number of cafés in China has doubled throughout the past five years — from 15,898 in 2007 to 31,783 in 2012.
Also, according to Mintel's research, 12 percent of urban Chinese consumers have visited at least one coffeeshop within the past year, while 24 percent have patronized one three or more times. One in five (20 percent) urban Chinese consumers claim to have visited five or more coffee shops within the past year and just 5 percent claim to not have purchased anything from one.
This growth contrasts the modest increase in tea house locations in China, which have risen 4 percent throughout the same period, from 48,842 in 2007 to 50,984 in 2012.
"The focus on higher-end consumers by tea houses means that although there has been virtually no growth in outlets, sales have grown strongly, as tea houses sell more expensive 'connoisseur' teas, accompanied by high-quality snacks and meals. However, the development of the market will not be sustained without volume growth of outlets. Cafés have combined outlet expansion with adding value through encouraging consumers to trade up to higher-value coffees, snacks and meals," said Matthew Crabbe, director of Asia-Pacific research at Mintel.
The combined value of the café and tea houses market in China in 2012 stands at RMB 71,599 billion – up from RMB 31,785 billion in 2007. Though the rates of growth in the market are expected to slow from those seen over 2007 to 2012, the total market value should continue to grow well, and Mintel predicts this to rise by 70 percent between 2012 and 2017 to reach RMB 121,690 billion.
Café brands winning over younger consumers
Mintel's research also concludes that the rising costs of operation have caused tea houses to aim at higher-end consumers, who will pay more for more expensive teas, food and service, in order to develop as businesses. Nearly half (43 percent) of tea shop consumers use them as venues for a business meeting, the second most popular reason for visiting after meeting up with friends or colleagues (59 percent).
"The lack of strongly branded chains among the traditional tea houses means the sector has so far failed to meet the challenge posed by the rise of the café chains, while the few existing chains have focused on a very narrow, higher-end, generally older consumer segment. Meanwhile, café chains have begun to sell Chinese tea, as well as coffee, posing a threat to the traditional tea houses, particularly winning custom from younger and lower-income consumers who might have responded well to a middle-market tea house chain. Given that the cafe chains continue to successfully sell tea to their core younger consumer market, there is evidence that there could be potential still in developing branded, franchised chains of tea houses with a broader consumer appeal," Matthew added.
- Quality of food, with 28 percent claiming this is an important factor;
- Quality of beverages, at 22 percent;
- Ambience and atmosphere, 15 percent;
- Hygiene standards, 8 percent;
- Price, 7 percent; and
- Brand name, 7 percent.
In line with recent moves from international coffee retailers into the Chinese market, coffee is the top drink consumed by consumers at cafés, with 69 percent of consumers who visit cafés ordering the drink while there. This is followed by fruit juice (39 percent), iced coffee (35 percent), tea drinks (23 percent) and chocolate drinks (19 percent).
Starbucks is accelerating its growth in the China market, with plans to make the country its second home market. McDonald's — and its McCafé line — is also en route to doubling its footprint there.
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