China is becoming a nation of coffee drinkers; Shanghai and Beijing are influencing the rest of China by shifting from drinking tea to coffee, in particular through coffee shops. Speciality beverage industry is growing at a very strong pace and sales are projected to grow at the rate of 40% per year for some categories. (Find our more market research upon coffee shops in China). In the last few years, coffee shop implantation in Shanghai have been booming. The city is ranked as the largest coffee market of China with the largest concentration of coffee shops in China.
A fierce competition over a high potential market
Starbucks, Nestle and Costa Coffee are particularly active at implanting themselves in the region, currently there are more than 300 stores in Shanghai, those represent nearly a quarter of all Starbuck in China, but this tremendous pace is far from stopping: in December 2014 Starbucks decided to accelerate it’s expansion, Costa Coffee planed to at least double its implantation in China by 2017 byincreasing the number of cafes by 400 in the next few years. (more about Costa Coffee’s strategy in China). Market reports are projecting that China’s per capita annual consumption of coffee is going to go from three to four cups, to seven cups. This amount can be considered as ridiculously low compared to the 400 cups consumed daily by Americans however, most investment are now turned towards the Chinese market since it’s upcoming increase with lead to fabulous performances. Caffe Bene, Zoo Coffee, Hong Kong’s Pacific Coffee, Britain’s Costa Coffee are also aspiring to expand at impressive speed in Shanghai but across the China too.
While those big chains fight for the largest market shares, many individual shops are trying the market out by implanting specific style and original marketing to experience Coffee. Coffee is considered as something new, for young dynamic people and relatively wealthy. Chinese people consider drinking coffee as a social activity consumed in coffee shops and the consumption in households remains quite low in Shanghai. For this reason, Nespresso has been putting efforts in trying to change those habits to boost their sales and performance.
Implanting a coffee shop in Shanghai environment
The strong pace for the foreseeable future of coffee shops is once again illustrated by DTS8 Coffee Company, Ltd. A joint venture was established in the Shanghai Tax free Zone for DTS8 to operate under the famous branded coffee shop of Café De La Don Manuel. This was formed before their first coffee shop situated in Shanghai in September 2014.
By analysing the distribution of Coffee shops implantation in Shanghai, Starbuck coverage is the largest with a leading amount of stores and fastest increase. 320 stores are currently implemented and 20 were established in the last months. DTS8 positioning is interesting since it is persisting in selling fresh, artisan roasted gourmet coffee in the growing.
The omnipresence of Starbucks in China could be creating an opportunity to offer to the Chinese getting bored of always drinking the same drink, with the same decoration and environment. Implanting coffee shops in the optic of expanding the horizons and experiences when drinking a coffee must be analysed. Despite the existence of many unique independently owned cafes in Shanghai, many niche markets are waiting to be exploited and created in Shanghai. For example, Hongkou district is populated by large amounts of foreigners that are interested by new experiences and adore Coffee.
New coffee experiences and taste will be successful in China. As well, since the Chinese enjoy coffees in coffee shops where they can have conversations, sign contracts, hold meetings or study, delivering spacious and comfortable environment is very important. The recent trend of searching for environmental friendliness on a daily basis in China could embody an ideal positioning for new ventures. In order to reach maximised implantation, bitter taste coffees must be avoided. Innovating concepts are favoured by the Chinese, clever localisations are also embarrassed and price competition must be well analysed. Daxue Consulting offer a wide range of services that could lead to more intensive reports upon a specific segment in Shanghai.
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