China’s coffee-drinking population has grown 74% since 2013

A slew of insights on China’s coffee sector

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China’s coffee-drinking population has grown 74% since 2013

There are now more than 330 million coffee-drinkers in China—or roughly 24% of the country’s population. This is up nearly 74% from 190 million people in 2013, with a compound annual growth rate of 11%, and double-digit growth in second-tier cities and below.

These estimates were shared by Cai Shijie, an analyst at research and consulting firm Frost & Sullivan, at the Luckin Coffee Partners Conference in Xiamen, according to QQ Tech, a Tencent news service.

Meanwhile, Frost & Sullivan pegs China’s coffee market at RMB 50 billion (USD 7.24 billion) currently and estimates more than 8.7 billion cups were sold in 2018. In comparison, China’s tea economy is valued at RMB 63 billion, while Luckin said it sold 90 million cups in 2018.

And though instant coffee still dominates the market, accounting for 75% of sales, the trend is reportedly swinging towards ground coffee sales.

Only 26% of consumers said they were willing to pay more than RMB 30 (US 4.3) for a cup of ground coffee. This compares with the average coffee prices in boutique coffee shops of RMB 40 (USD 5.8), RMB 30 in traditional coffee chains. New retail stores, such as Luckin Coffee, charge about RMB 15. Convenience stores typically price at RMB 13.

Another statistic that bodes well for Luckin Coffee is the proportion of coffee purchases happening through mobiles: in-app ordering accounted for 70% of all coffee shop orders in 2018, according to Frost & Sullivan.

Luckin Coffee has focused on small stores, mobile ordering, and pick-up and fast delivery services, with an average delivery time of 16 minutes. This strategy has enabled the company to expand at a blistering pace. It hit 2,370 locations across 22 Chinese cities at the end of March 2019 and is planning 10,00 stores by the end of 2021.

China’s current leading coffee franchise, Starbucks,  had 3,700 stores in February 2019 and is aiming for 6,000 locations by 2022.