This report covers those establishments where coffee is the primary sales item or the main selling point to attract consumers. They are based on the European and North American coffee shop models, offering a wide variety of coffee drinks, eg cappuccino, latte, mocha, etc. Other items are usually on sale, such as pastries, pasta, tea, coffee beans etc. However, the food offer may be restricted
2. 2
• This report covers those establishments where coffee is the primary sales item or the main selling point to
attract consumers. They are based on the European and North American coffee shop models, offering a
wide variety of coffee drinks, eg cappuccino, latte, mocha, etc. Other items are usually on sale, such as
pastries, pasta, tea, coffee beans etc. However, the food offer may be restricted.
• It covers coffee house chains as well as independent coffee houses. Coffee houses include venues such
as individual stores, kiosks and concessions. These may operate in a number of locations – shopping malls,
department stores as well as bookshops. However, they must be independent of the facility they are located
in.
• Mintel also divides consumers into three groups based on their monthly household income (MHI). The
table below shows the definitions of low MHI, mid-MHI and high MHI consumer groups.
• Fieldwork was conducted in September 2015, in Beijing, Shanghai, Guangzhou, Chengdu, Jinan, Handan,
Heifei, Xiamen, Guilin and Wuhan.
• A total of 3,000 internet users aged 20-49 years old were surveyed.
Definitions
Sample size Tier one cities Tier two and three cities
Low MHI 1,000 MHI = RMB4,000-9,999 MHI = RMB4,000-6,999
Mid-MHI 1,000 MHI = RMB10,000-15,999 MHI = RMB7,000-14,000
High MHI 1,000 MHI > RMB16,000 MHI > RMB14,000
4. 4
• The out-of-home coffee drinking culture is spreading rapidly in China. With the flow of premium
international coffee chains and a variety of stylish independent cafés, spending quality time socialising
and relaxing at coffee houses is no longer a niche activity. According to Mintel’s forecast, China’s coffee
houses market will increase from RMB 56.8 billion in 2015 to RMB 97.7 billion in 2020, at an estimated
CAGR of 11.5%
• In terms of number of stores, the figure is expected to grow from 41,500 in 2015 to 58,900 in 2020, at an
estimated CAGR of 7.3%
Consumers’ increasingly sophisticated tastes encourage the expansion of
coffee chains
Source: Mintel
FIGURE 1: TOTAL VALUE SALES OF COFFEE HOUSES IN CHINA, 2010-20
5. 5
Key market drivers and barriers
• There are two main reasons for the optimism in coffee houses market: potential to increase spend per
capita for coffee drinks and the ambitious expansion announced by several international coffee chains .
• However, Mintel discovers that coffee specialists are facing market volatility. Cheaper alternatives such as
bakery and fast food chains might potentially steal share from coffee specialists because of the recent
economic slowdown. In this report, a higher percentage of consumers indicate they have spent more on
bakery houses compared to international coffee chains (26% vs 24%).
• Coffee houses should then focus on the experiential aspect. As knowledge and awareness of premium
coffee houses gain momentum, sophisticated consumers are becoming more discerning and looking
beyond just tangible products to experience the pleasure of the entire consumption journey. 22% of
consumers strongly believe coffee-related events at coffee houses such as coffee making training are
worth participating in. Looking specifically into the special features that encourage respondents to visit a
coffee shop, 33% of them, in particular the Classic Affluent segment, are highly interested in coffee-related
experiential events, and this evolution to greater sensorial experience is a key strategic direction to target
more mature coffee lovers.
7. 7
The share of chains is getting more powerful
• When comparing the performance of independent and chain coffee shops, it is clear that the power of
chains is gathering strong pace. The share of coffee chains has risen from 21% in 2010 to 25% in
2014. Also the year-on-year growth has seen a sustained growth of 15-16% over the last five years.
• The key underlying reason for the growth in the chain segment is twofold. Firstly, the aggressive
expansion from chains such as Starbucks, Costa, CaffèBene, Maan Coffee and Pacific Coffee has
further increased their impact on more developed cities. Meanwhile domestic chains are suffering
difficulties due to their blurred position and the strength of international chains determined to increase
their presence.
Source: Mintel
FIGURE 2 : SEGMENT PERFORMANCE OF COFFEE HOUSES IN CHINA, 2010-14
8. 8
Market headwind for domestic coffee chains
• Coffee houses market is
becoming increasingly
consolidated towards
international chains.
• Domestic coffee chains have
struggled in the past two
years. Between 2013 and
2014, the shares of all the
major domestic chains have
declined. The market shares
of UBC Coffee and Dio
Coffee have dropped 2%
and 2.2% respectively.
FIGURE 3: SHARE OF VALUE IN BABY SUPPLEMENTARY FOOD RETAIL MARKET, BY COMPANY,
2013 AND 2014 (%)
Source: Mintel
9. 9
Who’s Innovating
Special afternoon tea set with fashion labels
• Innovative afternoon tea specially designed
under a certain theme or a crossover with different
brands is trending as well as bringing a more
luxury experience.
• Lion Rock partnered with the American skincare
brand Kiehl’s to create a New York-style afternoon
tea
Product crossover
• Strategic and novelty partnerships bring a new
twist to the creativity aspect.
• Starbucks teamed up with American fashion
label Anna Sui to launch a special coffee tumbler
Eco-friendly campaigns
• Ethical and moral brand qualities are fast
becoming expectations as affluent consumers
look for coffee brands to be charitable, ethical or
environmentally responsible.
• Pacific Coffee has teamed up with OOObject to
introduce a brand new idea of environmentally
friendly themed outlet
Greater consumer involvement
• Chinese consumers become more discerning and seek
add-on services to enhance the overall consumption
experience.
• Starbucks heavily promoted the experiential-driven
concept “Star Reserves” in China
Art and culture-related events to boost
sophistication
• More coffee houses operators are integrating art-
related activities to cater to the trend of sophistication, as
well as the perfect complement for the high-end lifestyle
proposition.
• Beijing’s Moka Bros held a temporary tattoo studio in
one of its outlets
Alcohol inspired innovation
• Alcohol-inspired flavours can add a premium touch to
appeal to affluent consumers, as well as creating more
drinking occasions, in particular the evening session
after work.
• Costa is inspired by the cocktail mixology process to
launch “Shake Coffee”, which used a mixer with ice and
coffee for creating a special drink
11. 11
FIGURE 4: TARGET GROUPS of ATTITUDE TOWARDS COFFEE HOUSES, SEPT 2015
Four distinct groups of coffee house consumers
Base: 2,551 internet users aged 20-49 who have visited coffee houses in the last 6 months
Source: QQSurvey/Mintel
• Mintel conducted a cluster analysis on the total sample of 3,000 internet users aged 20-49.
The data output reveals four unique consumer cluster groups that differ in their attitudes
towards coffee houses, due to their varying demographic features, lifestyles and economic
status. Based on their psychographic features, Mintel defines these groups as Disengaged,
Copying the Affluent, Non-Mainstream Aspirants and Classic Affluent.
12. 12
Coffee house consumers profile
• Disengaged – This segment has the largest ratio of
females aged 30-39. They are likely to be mid-
earners and live in tier two and three cities.
• They are likely to be practical coffee shop
consumers, which means these consumers tend to
visit coffee shops only when they are conveniently
located. They don’t show high interest in innovative
store design.
• Copying the Affluent – They are more likely to be
female in the 20s, with low monthly disposable
income and live in tier two and three cities.
• These consumers embrace the idea of unique
lifestyles associated with coffee houses as they are
very likely to imitate the behaviour of affluent
diners. They love the idea of coffee places
integrating with bookstores and designs that suit
working or studying purpose. They are also
interested in cultural and art-related events that
leverage niche and unique issues initiated by coffee
houses.
• Non-Mainstream Aspirants – This segment
has the highest percentage of male
consumers in the 20s. They have a relatively
high monthly personal income and likely to live
in tier one cities.
• They are fussy consumers, they like the
exclusiveness offered by special independent
cafés. They have a higher likelihood to visit
coffee shops for a quick meal or snack and
interested coffee places offer mini-market
selling coffee-related products or integrated
with a boutique.
• Classic Affluent– Consumers in this group
are high-earners located in tier one cities.
They have the highest percentage of
Mintropolitans.
• They have a high engagement with premium
coffee houses that can represent their social
status and sophisticated taste. Coffee places
featuring environmentally friendly designs or
integrate with fashion brands are appealing.
13. 13
FIGURE 5: CHANGES IN SPENDING ON FRESHLY MADE COFFEE AT DIFFERENT VENUES IN THE
LAST SIX MONTHS, SEPT 2015
“Compared to 6 months ago, would you say that you are spending more, spending less or about the same
per month on freshly made coffee at the following types of venues?”
Threat from bakery and fast food chains
• A slightly higher percentage (26% vs
24%) of consumers claim that they
have spent more on freshly made
coffee at bakery houses than
international coffee chains. Thus an
overpriced perception associated with
coffee chains could prove beneficial for
artisanal bakery houses.
• Female consumers in their 20s (32%),
potentially due to their interest in
healthy light lunches, they are more
attracted to freshly made coffee at
bakery houses.
• Young men in their 20s (27%) also
increase spending in fast food chains
for coffee products,
Base: 3,000 internet users aged 20-49
Source: QQSurvey/Mintel
14. 14
FIGURE 6:ATTITUDE TOWARDS COFFEE HOUSES, SEPT 2015
“Thinking about coffee houses, to what extent do you agree or disagree with the following statements?”
Key attitudinal indicators
• Aspirational behaviour mainly
involves attraction to coffee
brands that are trendsetting and
able to enhance the overall
consumption experience with a
new twist. This factor also ties
closely with an interest in
healthy menu and exotic
cuisines.
• Experiential-driven factors
related to the agreement of
valuing ambience above the
food and drinks menu.
• Since the key attitude towards
coffee houses has struggled
between the trade-off of
ambience and convenient
location, add-on services to
enhance the overall experience
as distinct differentiators have
become of paramount
importance.
Base: 2,551 internet users aged 20-49 who have visited coffee houses in the last 6 months
Source: QQSurvey/Mintel
15. 15
FIGURE 7: OCCASIONS OF VISITING SPECIALIST COFFEE HOUSES IN THE LAST SIX MONTHS,
SEPT 2015
“On which of the following occasions, if any, have you visited coffee houses (including both eating in the
shop and takeaway) in the last six months?”
The importance of afternoon tea innovation
Base: 2,551 internet users aged 20-49 who have visited coffee houses in the last 6 months
Source: QQSurvey/Mintel
• Overall afternoon tea is the most
popular occasion for visiting
specialist coffee houses, followed by
socialising and relaxing. Currently,
innovative afternoon tea specially
designed under a certain theme or
crossover with different brands is
trending as well as bringing a more
luxury experience to Chinese
consumers. Mintel predicts that
dedicated afternoon tea sets are a
win-win strategy to attract either
more established coffee shop
enthusiasts or less affluent diners.
16. 16
FIGURE 8: ELEMENTS ASSOCIATED WITH DIFFERENT SPECAILIST COFFEE HOSUES, SPET 2015
“Thinking about the following types of coffee houses, which of the following attributes, if any, do you
associate with each of them?”
Influential marketing channels for different luxury categories
Base: 2,551 internet users aged 20-49 who have visited coffee houses in the last 6 months
Source: QQSurvey/Mintel
17. 17
FIGURE 9: INTERESTS IN COFFEE HOUSE MENUS, SEPT 2015
“Thinking about eating at coffee houses, which of the following options, if any, are you interested in seeing
on the menu?”
Food and drink enticements
Base: 2,551 internet users aged 20-49 who have visited coffee houses in the last 6 months
Source: QQSurvey/Mintel
• Coffee shop lovers from the Copying
the Affluent and Classic Affluent
segments wish to see a wider range
of bakery products and snacks
available at coffee shops. A wider
range of savoury snacks is
particularly important for members of
the Copying the Affluent group. This
result reflects the popularity of the
afternoon tea occasion as dedicated
desserts and snacks are a natural fit
to complement coffee drinks.
• Copying the Affluent consumers are
interested in made-to-order fruit juice
and smoothies as they are
determined to adopt the healthy
eating habits introduced by coffee
houses.
18. 18
• Coffee shops designed for working
or studying purpose rank number
one as the most appealing feature.
As coffee culture is spreading to
less sophisticated consumers, they
are starting to see coffee shops as
an accessible way to experience a
higher-end lifestyle. Consumers
appreciate the concept for
relaxation purposes, but due to the
preference of multitasking
behaviour in China, the desire for
coffee shops to offer practical
spaces remains significant.
• Copying the Affluent group mainly
consists of members in their 20s
and relatively low spending power,
they prefer coffee shops designed
for working/studying purpose and
integrated with bookstores.
The scope for coffee shops designed for working and studying purpose
Base: 2,551 internet users aged 20-49 who have visited coffee houses in the last 6 months
Source: QQSurvey/Mintel
FIGURE 10:THE TOP THREE MOST APPEALING FEATURES AT COFFEE HOUSES , SEPT 2015
“Thinking about deciding which coffee shop to go to, which of the following features, if any, would
encourage you to choose one coffee shop over another?”
19. 19
Where are different chains standing currently?
Mintel estimates more than simply defining different coffee chains into fast casual, business-oriented and
homely setting models, different coffee chains are required to further distinguish themselves with unique
images for different types of coffee house users. More crucially, they need to know how to defend their
value propositions.
European and American coffee chains are standing firm in the premium position so they need to
continuously offer healthy menu and authentic international flavours. South Korean coffee chains, they have
leveraged a stylish and homely image with a unique interior design, therefore they can further embed
artistic design and organise art-related events to attract consumers.
Independent cafés have the ability to provide a wide range of food, thus they can promote the
changeability in menu selection to bring a surprise to customers. While domestic coffee chains are closely
related to the attribute of social responsibility, products that emphasise local sources can act as an unique
selling point.
How to attract new coffee houses adopters against bakery and fast food chains
The economic downturn that has weakened consumer confidence in conspicuous consumption, therefore
Mintel predicts more consumers are switching to better value-for-money alternatives for coffee drinks.
Less affluent consumers tend to pay less attention to socialising and relaxing compared to typical coffee
house lovers. Instead, they value more the practical usage such as working and studying occasions at
coffee shops and compare the actual food and drinks offered.
To expand into new customer base, coffee specialists could widen their snack and fresh juice menus,
meanwhile incorporate facilities cater for working and studying purpose to attract early coffee house
adopters.
Issues and Insights
20. 20
Adding experience, ethical and cultural elements for coffee house enthusiasts
Classic coffee house enthusiasts are interested in coffee places feature eco-friendly design. This will
encourage more coffee places leverage ethical initiatives and campaigns to promote the importance of
social welfare topics or through corporate social responsibility or the ethicality of the products they sell.
Moreover, these established rich consumers are the most discerning group as they are actively seeking
add-ons to enhance their overall experience at coffee shops, thus coffee houses that offer coffee-related
experiential (eg coffee culture talks) are highly appealing to them.
The trend calls for coffee houses to exploit their ability to cross over with a variety of events through
strategic partnerships to boost consumer engagement.
Issues and Insights
