Market Research Report : Coffee Market in China 2012

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Coffee Market in China
February 2012

Executive Summary
 Coffee is one of the fastest growing segments of the beverage sector in China projected to
grow with a CAGR of x% to y tons by 20‐‐ from z tons in 20‐‐
Market  Low coffee consumption at only 5 cups per capita per year provides robust growth
opportunity for coffee in China

Drivers: Challenges:
 Rising Population and Urbanization  Rising Labour Costs
 Rising Disposable Income  High Taxes and Duties
Drivers &
 Changing Lifestyles  Health Hazards
Challenges
 Young Population Drive Coffee Demand
 Low Per Capita Consumption

 Retail Chain Expansion
Trends
 Rising Demand of Instant Coffee
 Investment Plans

Major Players

Competition
Company 1 Company 2 Company 3 Company 4 Company 5 Company 6

COFFEE MARKET IN CHINA 2012.PPT 2

•Market Overview
• Global
• China
•Supply Chain
•Exports and Imports
•Drivers & Challenges
•Trends
•Mergers & Acquisitions
•Competition
•Key Takeaway


Global coffee production with a greater emphasis on
‘Arabica’ variety is expected to witness a steep rise
Global Coffee Market ‐ Overview Growth in Coffee Production
• Global coffee production is expected to increase to x mn bags
X%
mn (y kg) bags by 20‐‐ 150 x2 x4
x1 x3
• South America accounted for z mn bags of the global
100
coffee production in 20‐‐
• Global coffee production is dominated by the Arabica 50
variety of coffee
0
• Arabica coffee accounted for x% of the coffee produced
20‐‐ 20‐‐ 20‐‐ 20‐‐e
in 20‐‐

Production by Variety Regional Production (20‐‐)
A B mn bags
mn bags
60 z4
100
x1 x3
80 x2 x4 z2
40
60 y1 y2 y3 y4
40 20 z3
z1
20
0
0
A B C D
20‐‐ 20‐‐ 20‐‐ 20‐‐

Source:


Despite a relatively low share of coffee sales Chinese coffee
market is expected to witness a robust growth
Domestic Coffee Market ‐ Overview Coffee Market Growth ‐ Production
• Coffee market in China is expected to grow from x
‘000 tons
thousand tons in 20‐‐ to y thousand tons by 20‐‐ x2
Coffee demand in China is increasing at a rate of z% to y% 300
Z%
per year compared to a a world average of mere x%
200
• X Province is the major coffee growing region in
China producing only Y variety of coffee 100
X accounts for y% of the coffee bean production in China x1
_ Z Province is the major producer of X coffee with an annual 0
production of y tons
20‐‐ 20‐‐e

Coffee Production Hubs in China Hot Drinks Market Share (20‐‐)

x1

x3 A
B
C

x2
X
Z
Source:


Chinese coffee market accounted for a trade surplus of over
USD y mn in 20‐‐
Coffee Market – Exports under HS Codes
USD mn Countrywise Segmentation
150 Y% Z% Country 1
x8 Country 2
Country 1 is the largest x4
Country 3
100 x4
importer of coffee
x3 x5 x6 x7 Country 4
accounting for x% of x2 x4 x1
x1 Country 5
China’s coffee exports 50
x3 Country 6
Country 7
0 x2 Country 8
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐

Coffee Market – Imports under HS Codes
Countrywise Segmentation
USD mn Y% Z% Country 1
80 y5 Country 2
y3 y8
Country 1 is the largest Country 3
exporter of coffee to 60 y4 y6
y2 Country 4
China accounting for x% y1 y5 y7
40 y4 y1 Country 5
of China’s coffee
Country 6
imports 20 y3
Country 7
0 y2 Country 8
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐
Source:


In volume terms, 20‐‐ witnessed a trade surplus of mere x
tons in China coffee market
Coffee Market – Exports under HS Codes
‘000 tons
40 Y%
Coffee export volumes x4 x5 x6
remained almost stagnant 30 Country 1
x3 x5
during 20‐‐ ‐20‐‐, however x1 x2 x4 Country 2
20
registered a growth of x% x3 x1 Country 3
value wise, indicating price 10 Country 4
increase Country 5
0 x2
Country 6
2006 2007 2008 2009 2010

Coffee Market – Imports under HS Codes
‘000 tons Y%
Z%
40
y5 y5 y6 Country 1
Coffee import volumes 30 y3 y4 Country 2
rose by x% between 20‐‐ y2 y3 y4 y2
y1 Country 3
and 2010 attributing to a 20
Country 4
rise in demand
10 Country 5

0 y1 Country 6

2006 2007 2008 2009 2010
Source: Note:


Drivers & Challenges – Summary

Drivers Challenges

Rising Population and Urbanization Rising Labour Costs

Rising Disposable Income Taxes and Duties

Changing Lifestyles
Health Hazards
Young Population Drive Coffee
Demand

Low Per Capita Consumption


Rising population and rapid urbanization to act as the major
growth driver for the coffee market in China
Rising Population and Urbanization Impact
• Finding 1
• Finding 2
• Finding 3
• Finding 4

Rise in Population Increase in urbanization
leads to growth of the
mn Z% coffee market
1,500 z1 z2 z3 z4

1,000 x1 x2 x3 x4
A B
500
y1 y2 y3 y4
0
20‐‐ 20‐‐ 20‐‐e 20‐‐e

Source:


Rising disposable income leading to greater spending
increase demand from branded retail outlets
Rise in Disposable Income Impact
•Finding 1
•Finding 2
•Finding 3
•Finding 4

Urban Disposable Income Urban Consumer Spending

USD bn USD bn
x3
20,000 5,000 y3
Z%
15,000 4,000 Z%
x2 3,000
10,000 y2
2,000
5,000 x1
1,000 y1
0 0
20‐‐ 20‐‐e 20‐‐e 20‐‐ 20‐‐e 20‐‐e
Source:


Rapidly changing lifestyle is a major contributor to the
growth of coffee market in China
Changing Lifestyles Impact
• Finding 1
• Finding 2
• Finding 3
• Finding 4

Share of Spending

% A B

100%
80% x1
x2
60%
40%
y1
20% y2
0%
20‐‐ 20‐‐e
Source:


Low level of per capita consumption provides a huge
opportunity for growth to the coffee market in China
Low Per Capita Consumption Impact
• Finding 1
• Finding 2
• Finding 3

Per Capita Coffee Consumption China’s per capita coffee
consumption is the lowest
offering substantial
No. of Cups
opportunity for growth
x1
1,500
x2 x3 x4 x5
1,000 x6
x7 x8

500 x9 x10
x11
x12
0
Finland Sweden Netherlands Norway Denmark Austria France Germany USA Japan Korea China

Source: Coffee Consumption = Per capita per year


Favorable demographics in China to lead to the growth of
the coffee market
Young Population Drive Coffee Demand Impact
• Finding 1
• Finding 2
• Finding 3

Demography ‐ Age Split (20‐‐) Major Attractions of Coffee Outlets
A B C

x1 A B C
Young
population is
x3 the primary
target of the Major Purposes Served
x2 coffee retail 99%
outlets in
China
X Y

Source: International Coffee Organisation


High cost of labour is one of the major challenges faced by
the coffee market in China
Rising Labour Costs Impact
• Finding 1
• Finding 2
• Finding 3

Labour Costs – Emerging Asia
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000
USD
Country 1 x1
Country 2 x2
Country 3 x3
Xxx
Country 4 x4
Country 5 x5
Country 6 x6
Country 7 x7
Country 8 x8
Country 9 x9

Source: Note: :Per capita Average Annual Salary has been considered


Trends – Summary

Retail Chain Expansion

Key
Trends

Rising Demand for
Investment Plans
Instant Coffee


High end retail chain expansion has emerged as a major
trend in the coffee market in China
Retail Chain Expansion
• Finding 1
• Finding 2 Major Coffee
outlets to expand
• Finding 3 their operations in
• Finding 4 the China market

Starbucks Expansion Plan Growth of Retail Segments (20‐‐)
Outlets % Retail food sales is one of
x2 the highest growing
1,500 40 x2 segment
Z%
30 x3 x4
1,000 x1 x5
20 x6
x1
500
10 x7

0 0
20‐‐ 20‐‐e Total Jewelry Clothes Food Electronics
BuildingFurniture
Retail
Source: Note:


Coffee market in China is witnessing a rapid rise in demand
for instant coffee
Rising Demand of Instant Coffee
• Finding 1
• Finding 2
Rising Popularity of
• Finding 3 Instant Coffee
• Finding 4

Product Innovation Instant Coffee Market (20‐‐)

x2
Company A Brand X

Company B Brand Y A
x1 B

Source:


Major Public Companies ‐ Summary
Net Profit
45,000
Size of the Bubble represents Market
40,000
Capitalization in USD bn
35,000

30,000

25,000

20,000

15,000

10,000

5,000

0 x1 x2

‐5,000

‐10,000 Total Income
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000

Company 1 Company 2

Source: Note:


Domestic Company – Company 1
Company Information Locations – China
Address Line
Corporate Address

Tel No. ‐‐‐‐
Fax No. ‐‐‐‐
Website ‐‐‐‐
Year of Incorporation 19‐‐
Ticker Symbol Xxx
Stock Exchange Yyy

Products and Services
Category Products/Services Headquarters

Beverages Product 1, Product 2, Product 3 Key People
Instant Noodles Product 1, Product 2, Product 3 Name Designation
Services Service 1, Service 2, Service 3 Person 1 Designation 1
Person 2 Designation 2

Source:


Financial Snapshot Key Ratios
y‐o‐y
Total Income Profit Particulars change 20‐‐ 20‐‐ 20‐‐ 20‐‐
A Y
(20‐‐ ‐‐‐)
USD mn USD mn
Profitability Ratios
3,000 150 Operating Margin ‐‐ ‐ ‐ ‐ ‐
x4 Net Margin ‐ ‐ ‐ ‐ ‐
2,000 x1 x2 x3 100
Profit Before Tax Margin ‐ ‐ ‐ ‐ ‐
1,000 50 Return on Equity ‐ ‐ ‐ ‐ ‐
Return on Capital Employed ‐ ‐ ‐ ‐ ‐
0 0 Return on Working Capital ‐ ‐ ‐ ‐ ‐
20‐‐ 20‐‐ 20‐‐ 20‐‐ Return on Assets ‐ ‐ ‐ ‐ ‐
Return on Fixed Assets ‐ ‐ ‐ ‐ ‐
Financial Summary
Cost Ratios
• The company incurred a net profit of USD  x  mn in FY 20‐‐, as Operating costs (% of Sales) ‐ ‐ ‐ ‐ ‐
compared to net profit of USD y mn in FY 20‐‐
Administration costs (% of Sales) ‐ ‐ ‐ ‐ ‐
• The company reported total Income of  USD  y  mn in FY 20‐‐,
Interest costs (% of Sales) ‐ ‐ ‐ ‐ ‐
registering an increase of x % per cent over FY 20‐‐
Liquidity Ratios
• The company earned an operating margin of y per cent in FY 20‐‐ a Current Ratio ‐ ‐ ‐ ‐ ‐
decrease of x percentage points over FY 20‐‐
Cash Ratio ‐ ‐ ‐ ‐ ‐
• The company reported debt to equity ratio of x in FY 20‐‐ an Leverage Ratios
increase of y  per cent over FY 20‐‐ Debt to Equity Ratio ‐ ‐ ‐ ‐ ‐
Financial Summary Debt to Capital Ratio
Interest Coverage Ratio
‐ ‐
‐
‐
‐
‐
‐
‐
‐
Indicators Value (dd/mm/yy) Efficiency Ratios
Market Capitalization (USD) Fixed Asset Turnover ‐ ‐ ‐ ‐ ‐
x1
Asset Turnover ‐ ‐ ‐ ‐ ‐
Total Enterprise Value (USD) x2 Current Asset Turnover ‐ ‐ ‐ ‐ ‐
EPS (USD) x3 Working Capital Turnover ‐ ‐ ‐ ‐ ‐
PE Ratio (Absolute) x4 Capital Employed Turnover ‐ ‐ ‐ ‐ ‐

Source: Improved Decline


Key Business Segments Key Geographic Segments

A B C
X%
100%
100% The company’s geographic
80% 50% reportable segment is ‘A’
60% x1 y1 z1 n1
40%
0%
20% x2 n2
y2 z2 20‐‐
0% x3 y3 z3 n3

20‐‐ 20‐‐ 20‐‐ 20‐‐ A

Key Recent Developments

Description News
• Company is primarily a manufacturer of beverage and instant food products. It operates
Overview
in x provinces of China through different channels of sales and distribution points.
• Company plans to raise its distribution channels in China from x1 to x2
New business • Due to increased production capacity and distribution channels capital spending of the
company is estimated to be around USD z mn

Share Holding pattern • Company 1 operates as a subsidiary of the Y

Source:


Growing popularity of instant coffee and rapid expansion of
retail outlets will lead to robust growth of coffee market
Coffee production is expected to grow with a CAGR of Z% from X tons in 20‐‐ to Y tons in 20‐‐

Opportunities in the Competitive
Market Size
Market Landscape
‘000 tons
Rising population and x2
urbanization coupled 300 Coffee market in
Z%
with a rise in disposable China is dominated
income are major growth 200 by foreign retail
drivers for the coffee coffee players
100
market in China x1

0
With retail coffee
Changing lifestyle and 20‐‐ 20‐‐e chains gaining rapid
rising demand among popularity, retail
young population are players dominate a
major contributors to the greater share of the
growth of the coffee coffee market in
market in China Challenges China
Low per capita coffee
consumption provides a • Rising Labour Costs Players are
scope for growth thus diversifying into
• High Taxes instant coffee with a
acting as a major growth
driver for the coffee • Health Hazards view to capture
market in China greater market share


Thank you for the attention
The Coffee Market – China report is a part of Netscribes’ Food and Beverage Industry Series.
For more detailed information or customized research requirements please contact:

Jitendra Punjabi
Phone: +91 33 4064 6215
E‐Mail: jitendra.punjabi@netscribes.com

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Market Research Report : Coffee Market in China 2012

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