China’s Stressed and Overworked Youth Skip the Tea and Reach for Coffee

China has become the country with the most branded coffee shops in the world, with the number of outlets growing 58% in 2023 to almost 50,000. The Chinese coffee market used to be dominated by foreign brands such as Starbucks, Tim Hortons of Canada, and Costa Coffee from Britain. However, they face intensifying competition from Chinese coffee chains such as Luckin, Cotti, Manner, as well as local independent cafés in big cities like Beijing. For coffee drinkers, that means more choice than ever, whether it’s a plain Americano or a latte infused with pork flavors or Chinese liquor.

Though tea remains foundational to Chinese culture, some young, middle-class consumers are finding coffee’s caffeine kick to be more suited to the pressures of a competitive job market and workplace. Li Yizhe, a government worker, said in the past two years she had started drinking coffee every day as a way to boost her energy. Zhang Jian, a 33-year-old freelancer, said he has about a cup of coffee a day, often at Luckin. “It’s convenient to buy because the stores are everywhere, and the prices are also budget-friendly,” he said.

China’s demand for coffee will reach an estimated 5 million bags in the 2023-24 season, making it the seventh-biggest consumer in the world. That compares with more than 20 million bags for the two biggest coffee-consuming countries, the U.S. and Brazil. The rise in Western-style coffee consumption in China can be attributed to a shift in lifestyle preferences as more people have more disposable income. Urbanization, globalization, and the rapid expansion of both domestic and foreign coffee shops have also made international coffee culture “more accessible and familiar,” he said.

Last year, Luckin overtook Starbucks as the largest coffee chain in China, Starbucks’ biggest market after the U.S. Luckin opened more than 5,000 stores in China in 2023 for a total of more than 13,000, compared with more than 6,800 for Starbucks, which opened 785 stores in China last year. The U.S. company has said it aims to have 9,000 stores in the country by next year.

Domestic coffee chains often emphasize localization in their offerings, incorporating traditional Chinese ingredients and flavors into their menu items. They also tend to cater to the preferences of Chinese consumers in terms of ambience and service. This month, Luckin opened a store in the southern Chinese city of Shenzhen that is co-branded with Kweichow Moutai, a luxury brand of the popular Chinese spirit baijiu. The store aims to capitalize on the success of a baijiu-infused latte the two companies collaborated on last year, which according to Limbachia sold 5.42 million cups on its first day and generated more than 900 million yuan ($124 million) in total sales.

Starbucks, which has been in China since 1999, says the Chinese coffee market is still evolving and “has not yet fully tiered.” The competition has pushed foreign chains such as Starbucks to pay more attention to Chinese tastes, including “adjusting menu options, adapting store designs and forming partnerships with local businesses.” For the Lunar New Year in February, Starbucks offered a limited-edition pork-flavored latte at its 25 Reserve stores for 68 yuan ($9.45). While the company plans to “dial up” such product innovations, Wong said it is “not interested in entering the price war.”

Limbachia said both domestic and foreign chains could expect continued growth as coffee consumption becomes more ingrained in Chinese culture, for example through expansion into smaller cities and rural areas.

Read More @ NBC

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