China Tea Growers Shift to Coffee

As China’s tea farmers look to coffee for more profits, the Los Angeles Times reports the Yunnan provincial government plans to increase the production of coffee to 200,000 tons by 2020:

“My sole income depends on coffee now,” said Ma Jiaying, a farmer from a dab-sized hamlet in Pu’er called Tea Tree Village.

Few pairings denote upward mobility more than an iPhone in one hand and a white-and-green Starbucks cup in the other. In central Beijing, the company’s smallest cappuccino costs about $4.33, making a Chinese Starbucks habit one of the most expensive in the world.

“Starbucks in China for the young generation is almost like religion,” said Liu Minghui, head of Pu’er-based Ai Ni Coffee, China’s largest coffee production and exporting company. “They want to be seen drinking their coffee. A lot of these Chinese kids have come back from studying overseas where they’ve been introduced to this new lifestyle.”

At 120,000 tons last year, China’s coffee consumption was only 6% that of the U.S., the world’s top consumer of hot joe. Meanwhile, about 1 million tons of tea was consumed in China last year.

Amid the shift to more coffee consumption and production, the Financial Times reports China’s growing coffee culture is threatening tea houses:

According to a report published this week by Mintel, a retail consultancy, the number of coffee houses in China has nearly doubled in the last five years to over 31,000.

Over the same period, the number of Chinese tea houses rose by only 4 per cent to 50,000. Yes, there are still more tea houses than coffee shops. But the bad news is that their clientele are often elderly, which may not bode well for the future.

“Tea houses have targeted higher-end consumers with expensive teas, food and service, but lack differentiation, and there are few successful brands to meet the challenge posed by the rise of the café chains,” says Mintel, which predicts continuing slow growth of tea houses though also the emergence of tea house chains targeted at younger, lower-income consumers.
Nearly a quarter of Chinese consumers chose to buy tea drinks even in coffee shops, Mintel says. And a quick glance at the menu of any Starbucks in China will show that many of the other drinks have not much coffee in them either; they tend to be more like milkshakes than espressos.

With coffee’s growing popularity among the younger generation, Starbucks has seen continued success in China. Due to this success, the coffee-shop chain plans to double its staff in China to 30,000 by 2015, from Bloomberg:

“The Starbucks business here is in its infancy in terms of development and growth,” John Culver, head of Starbucks in China and Asia Pacific, said in an interview today in the southern Chinese city of Yunnan. Starbucks currently has 12,000 employees in the country.

The Seattle-based coffee chain is boosting headcount as it pushes to more than double local stores to 1,500 by 2015. The Asian nation is set to be its largest market outside the U.S. in two years as it expands to counter slower economic growth in developed markets.

In its China expansion, the cappuccino and latte maker will face pressure from rising costs and wages. The country’s consumer price index rose 2 percent from a year earlier in November.

Business in China is “very healthy” and the coffee chain operator will continue to maintain its margins in the world’s most populous nation, Culver said.

The company will also focus on growing the number of wholly-owned stores in the China and Asia Pacific region and sees new stores being the growth driver next year, Culver said. They will account for two-thirds of the region’s sales growth, an increase from less than a third three to five years ago, he said.

See also Growing Coffee in China’s Tea Country, via CDT.

December 30, 2012 8:13 AM
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Categories: Economy, Society