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Exploring The Chinese Coffee Industry, From Roasters To Consumers

Jan 11, 2020

'' Made in China" it's not a hard phrase to come across. But “Roasted in China”? That's different story.

China’s coffee market has been drawing global attention. Starbucks' recent plan to open 3,000 new shops over the next five years is just one of many developments highlighting China as a rising coffee-consuming country. Yet even so, not much is known internationally about the country’s coffee roasting and consumption industry.

So, I spoke to Peter Radosevich, International Sales Team Leader at Royal coffee about selling and roasting coffee in China – and what impact that could have globally.

Coffee Consumption in China

Let’s first understand the country’s coffee consumers.

The US Department of Agriculture’s 2018 report on the coffee market shows that the Chinese domestic consumption of coffee has almost doubled over the past four years. While the number hovers at around just 10% and 15% of the current consumption in the European Union and the US respectively, the potential for the Chinese market is huge.

In fact, many multinational companies have recently made large investments. Peter tells me that Luckin Coffee raised over 1 Billion RMB (roughly US $144 million/€126 million) early this year in order to compete with Starbucks in the retail coffee space. A significant amount of that funding is coming from Singapore. Canada’s Tim Hortons also plans to open more than 1,500 stores, while British chain Costa Coffee plans to roughly triple its number of Chinese stores by 2022. Peter tells me that Chinese coffee consumption has been rapidly evolving, with a growing awareness of quality. However, the local coffee culture is still different from what you’ll find in countries such as the US. For instance, people rarely grind and brew coffee at home.

According to Peter, instant coffee still makes up the vast majority of consumption” – something that is common in many traditional tea cultures,including the UK.

A Taste For Sweeter Roasts

But as the Chinese thirst for coffee grows, what kinds of drinks are people opting for?

Peter explains that there is a generational difference. Older consumers tend to prefer low-acid coffees

 with bigger bodies such as a Sumatra Mandheling. Younger consumers with exposure to third wave roasters on the other hand, may enjoy lighter roasts with their generally more acific profile

He also mentions that Chinese consumers often prefer sweet and clean coffees, for now. “Current preferences will certainly shift as domestic specialty coffee shops or commercial chains open and consumers’ knowledge continues to grow.”

Moreover, he tells me that Taiwanese, Korean, and Japanese specialty coffee cultures also influence the Chinese coffee industry.  “Top USA brands like Blue Bottle, Intelligencia, etc. still carry weight and cachet,” he says. “However, more of the companies and professionals from places like Taiwan and Korea come to do trainings and open businesses.”

As a result of this, for example, “many specialty roasters still pick out most or all post-roast defects by hand to ensure cleaner cups (unheard of when contrasted with many USA roasters).”

Who Roasts The Coffee?

While China’s coffee market is growing, most of what people are brewing and drinking is actually roasted abroad.

According to the USDA report, China is forecast to import 48 million kilograms of roasted and ground coffee in 2018/19. This is a huge increase from around just 5.6 million kilograms in 2013/14.

However, China is also forecast to import 120 million kilograms of soluble coffee in 2018/19. This is another significant increase from 41 million kilograms in 2013/14.

And China’s green bean imports are negligible, not even listed in the report. In contrast, in the same report, the United States is forecast to import 1.6 billion kilograms of green bean coffee, and only about 12 million kilograms of roasted and ground coffee, in 2018/19.

In other words, in the US, only 2% of the coffee that comes into the country does so as roasted, ground, or soluble coffee, while almost 66% of the total Chinese coffee demand is met by imported roasted, ground, or soluble coffee.

Peter’s experiences support this data. “While there are stories every day about the rise of specialty coffee in China, the reality is that the majority of consumption is still instant and lower-grade coffee. Much of China’s imported coffee is lower-grade Vietnam Robusta.”

What About Chinese Roasters?

There are few roasters in China compared to in Western coffee-consuming countries. However, their number is growing.

Peter divides China’s roasteries into two types: large commercial-scale roasters and single-shop roasters. The large commercial-scale roasters are those that focus on providing roasted beans for instant coffee or big wholesale businesses. Single-shop roasters, on the other hand, are those that often aim for higher quality and roast on a small scale, normally for their own shops but occasionally also for a limited number of wholesale consumers. These roasteries will typically use a 500 g or 1 kg roaster.

The home roasting market is also showing a gradual growth in mainland China. Peter believes that it could have large potential, given similar trends in Taiwan.

An expansive online retail marketplace is also a unique feature of the Chinese roasting industry. Peter tells me that there are many roasting companies with little to no retail presence who focus solely on building their online following.