From the perspective of consumer portraits, coffee consumers in China are mainly young white-collar workers in first-tier cities, most of whom have a bachelor’s degree or above with a high income. There are more than 83 million people aged 20 to 40 with a college degree and 36 million with a bachelor’s degree currently in China. Thus, coffee consumption will continue to expand in the future as potential customers are increasing with more disposable income.

Moreover, the purpose of Chinese consumers who intake freshly ground coffee has developed from the initial demand for social scenes to functional demands. Especially, the physiological demand for refreshment has become the main reason for coffee drinking among consumers in first-tier cities due to heavy work pressure. Therefore, consumers are increasingly pursuing the flavor and quality of coffee, and correspondingly, consumers’ preference for coffee categories is gradually changing from white coffee to black coffee. In detail, Chinese consumers’ drinking habit of freshly ground coffee has gone through two stages. Before 2017, Chinese consumers had not formed an in-depth consumption awareness of coffee, and usually prefer milk coffee with less coffee flavor. Therefore, when overseas coffee brands enter the Chinese market at the beginning, they usually focus on latte, cappuccino and other milk coffee drinks to cater to their consumption preferences. After 2017, due to Internet coffee brands’ cultivation of the common market, Chinese consumers have become diversified in their pursuit of coffee tastes. Coupled with the improvement of health awareness, the fusion of coffee and new ingredients is favored by consumers.

With the further penetration of coffee culture, Chinese consumers’ demands range from social scenes to product quality, and the maturity of the domestic coffee market is constantly improving. Diversified coffee consumption demands also lead to the emergence of various types of coffee stores in the Chinese market. In terms of the number of stores, there are nearly 110,000 cafés in China, mainly located in first-tier and second-tier cities. In the future, the number of cafés will grow steadily, but the chain rate will be further improved with the continuous expansion of the head brands and the improvement of consumers’ requirements for coffee products.

As for brand positioning, most of emerging freshly ground coffee brands focus on one or more dimensions such as coffee taste, cost control, store style and space experience to achieve differentiated positioning and compete against traditional large chain brands. After years of upgrading, traditional large chain brands such as Starbucks coffee are relatively mature and standardized in product mix and store style, which can meet the catering and space requirements of various coffee scenes and satisfy the demands of the public. Meanwhile, with sophisticated positioning, aiming at the specific value demands of freshly ground coffee, such as better coffee taste, the emerging brands have obtained a growing market share in niche coffee market, and successfully discovered the more diversified demands of consumers for freshly ground coffee.

With the rapid expansion of coffee chain brands such as Starbucks and Luckin, Chinese consumers have gradually formed the habit of drinking coffee, especially the ‘fast coffee’[1]. Convenience stores, office coffee machines and other channels have emerged, but coffee shops are still the most popular channel.

Although there are various consumption scenarios of freshly ground coffee, coffee taste is the main factor that consumers always pursue in different scenarios. The potential customers of ‘fast coffee’ pay more attention to access and price, while that of ‘slow coffee’[2] pay more attention to brand tonality and environment matching. The diversification trend of fresh ground coffee consumption scenarios is progressively prominent. Affected by factors such as time and intention, consumers have different considerations when choosing fresh ground coffee in different scenarios. However, no matter in the scenario of ‘fast coffee’ or ‘slow coffee’, taste is the most significant actor.

Concerning consumers’ preferences, nearly half of them will choose different brands of freshly ground coffee to adapt to various demands. Therefore, Chinese consumers do not have high brand loyalty to freshly ground coffee. With the development of premium brands and the change of customers’ own needs, they will switch and purchase new brands of coffee. In particular, consumers who drink coffee for a longer period of time will spontaneously look for high-quality freshly ground coffee brands.  The continuous emergence of freshly ground coffee brands with higher cost performance, better taste and greater convenience in the market would attract consumers to try new brands ignoring switch costs. At present, in the coffee market, in addition to the large chain brands, the development of coffee shops can be divided into three directions.

Café that are Internet celebrities with small storefront are different from those cafés which are famous for unique decoration but have problems with coffee quality. The online-celebrity cafés are shops that provide consumers with good experience from decoration, equipment, coffee drinks to service. Such stores are usually small in size and in older neighborhoods or special locations. With personalized decoration, better spatial planning proportion and ornamental product, the café is more about the persistence and philosophy of the owner, such as The Coffee Supply and Marketing Association in Shanghai.

In addition, specialty cafes in which all beverages contain coffee, but not pure coffee. Due to the fusion of different raw materials and coffee, a new drink concept emerges, and it becomes a new drink with more creative, diverse flavors and rich layers. This will help consumers taste coffee preliminary and make it more acceptable to Chinese residents. For example, O.P.S in Shanghai and Berry Beans in Beijing. Currently, specialty coffees are also becoming a regular feature of café menus.

What’s more, the self-roasting coffee shop features an owner who roasts his or her own coffee beans for daily business.  These cafés are more independent, with coffee varieties changing from time to time and a variety of different styles of beans to be chosen from. In terms of service, the manager himself or the trained shop assistants will recommend and explain the characteristics of each bean carefully and patiently to customers, helping customers understand the coffee and find the most suitable one. Because coffee beans are roasted at home, they have a deeper understanding of the raw material.

The coffee drinking habit of Chinese consumers is gradually forming. With the increasing number of consumers and the increasing and rich taste preferences, the freshly ground coffee market is also expanding accordingly. As for freshly ground coffee market in China, diversified coffee consumption demand also makes various types of cafés to use differentiated market strategies. No matter in the scenes of ‘fast coffee’ or ‘slow coffee’, taste is the factor that consumers always pursue. As for consumers’ brand loyalty to freshly ground coffee is relatively low, the transformation and change of coffee brands reflects that there is still fierce competition in the market. Thus, the development trend of coffee shops in the future is to adopt differentiated market competition strategies for different types of customer groups, so as to increase the market share in market segments.

By Xin Wang