Brewing coffee success in the land of tea, with a range of products

Beijing-based brand marketing planner Huang Guangjie is 27 but sees himself as a veteran coffee connoisseur. He has graduated from instant brews to a range of innovative products of the beverage, which is growing by leaps and bounds in a market known for its varieties of teas since ancient times.

Huang fell in love with coffee when he was in middle school. He started with Nestle instant coffee. Every morning, he would drink a cup of coffee to refresh himself, a ritual he practised religiously to "help myself get ready for work quickly".

The routine used to cost him 200 yuan ($29.8) to 300 yuan a month. Now, consumption upgrade has ensured he spends 500 yuan to 800 yuan for the morning high, which he draws from capsule coffee (powder from ground beans preserved in a capsule to keep it fresh).

When fancy takes him, Huang experiments with drip bag coffee that allows the brew's aroma to permeate hot water or milk whenever he uses it. He even tries bulletproof coffee (which is made of black coffee, butter and coconut oil).

"My favorite is bulletproof coffee, which can help me lose weight," he said. "Besides, it's from Silicon Valley. It represents a kind of lifestyle that I'm looking forward to."

In the 1980s, global coffee brand Nestle entered the Chinese market. A symbol of Western lifestyle, the brew has steadily grown in popularity in China, industry insiders said.

Still, until 2015, China's coffee market sales at 70 billion yuan accounted for just 0.5 percent of the global total. By 2025, however, it is projected to hit 1 trillion yuan, with an annual growth rate of about 15 percent, according to a latest report by Shanghai-based research firm CBNData.

It may sound like a lot, but average coffee consumption in China is only 0.03 kilograms per person per year, much lower than the global average of 1.25 kg. This shows there is immense potential for growth in the future, the report said.

To realize that growth, the coffee industry is betting big on variety. For many Chinese, instant varieties－they account for 84 percent of market share－are still the go-to sources of stimulation. This facet contrasts with the global scene where instant coffee has a low 13 percent market share.

But the coffee market in China is evolving. Both the market share and growth rate of instant coffee in China have dropped in 2017. Consumers are increasingly prefering diverse coffee products.

Capsule coffee, for example, has become popular in the past three years. Category sales grew about 60 percent last year. Concentrated cold coffee brew, a novel variety, is expected to hit the market this summer, most probably via e-commerce channels, the CBNData report stated.

Cafes that offer home or office delivery have also proved to be a new growth point, the report said.

In this context, Luckin Coffee is a good example. The cafe chain startup's estimated valuation reached $1 billion after receiving $200 million in funding earlier this month. It has over 500 stores in 13 cities.

The company, which began operations this year, has promised to deliver coffee to customers within a 2-kilometer radius of any of its stores within 30 minutes.

"Luckin Coffee grew rapidly thanks to the ongoing consumption upgrade in China. The booming coffee industry in the domestic market and its experience in management also helped a great deal," Zhu Danpeng, an analyst with Chinese food industry, told Paper.com, a news website.

Media and industry reports say the coffee industry will turn fiercely competitive with the battle for market shares shifting to online sales, innovative products and diverse services.