China’s Coffee Market: Finding Investment Opportunities in a Booming Industry

The rise of coffee culture in China is more than just a trend. Once known as the land of tea, China is now a rapidly growing market for coffee consumption. In this article, we’ll analyze the current state of the coffee market in China and explore the opportunities and challenges these changes present for businesses. Finally, individuals also want to discuss where to invest.

three person holding beverage cups

The rapid growth of China’s coffee market

In recent years, there has been a noticeable increase in coffee consumption among Chinese people. According to the International Coffee Organization (ICO), China’s annual coffee consumption has reached 3.08 million sacks, a 15% increase over the previous cycle. This increase is largely attributed to the younger generation adopting a westernized lifestyle and accepting coffee as part of their daily routine.

When you think of China, you think of tea, but young people are different. A college student I met on a business trip in September told me he drinks coffee every day. “I started drinking coffee when I got to college,” he says, and he’s not alone in his habit change. This is confirmed by a number of sources.

Increased competition in the Chinese coffee market

The number of coffee shops in China has grown by 58% in the last 12 months to 49,691. This is according to research by the Alegra Group, which studies the coffee industry, and global brands like Starbucks and Tim Holton, as well as local brands like Luckin and Koti Coffee, are contributing significantly to the growth of this market.

These brands are opening thousands of new stores across China, expanding their presence not only in Beijing and Shanghai, but also in dozens of mid-sized cities. This shows the rapid growth of the coffee market in China and how thirsty people are for coffee. As a result, there is a lot of competition within the industry.

Matthew Barry, beverage analyst at Euromonitor, wrote in a related Reutersarticle late last yearthat there is fierce competition between local and international chains. Each said they are trying to capture as much share as possible in the growing market.
Allegra Group estimates that China’s Luckin (Luixing) Coffee (LC0Ay.MU) has added 5059 stores over the past 12 months, while another Chinese chain, Koti Coffee, has opened 6004 stores over the same period.
U.S.-based Starbucks (SBUX.O) opened 700 stores in China last year and said it plans to operate about 9,000 stores in the country by 2025, while Canada’s Tim Hortons said it plans to have 3,000 stores in China within four years.
Gaining market share is one of the key goals, said Luixing CEO Jin Yi Guo during the company’s Q3 earnings call.
Jason Yu said they’re also opening stores in smaller cities in China with populations in the millions. Basically, it’s saying that there’s still a lot of room for coffee chains to grow in these regions.

China’s coffee market is still 20% of the U.S., with huge potential

This development is good news for coffee producers, who are already benefiting from high prices due to adverse weather conditions in some growing regions. Arabica coffee futures are trading near eight-month highs, while robusta coffee hit a 15-year high last week.
China imports coffee mainly from Africa and South America.
As a result, Cecafe, a group of Brazilian coffee exporters, nearly tripled its exports to China in 2023.
The U.S. Department of Agriculture estimates that China will consume 5 million bags of coffee in the new season (2023/24). It will be the seventh largest consumer in the world.
China’s coffee consumption still pales in comparison to the largest consumers, the United States and Brazil, which consume more than 20 million bags annually. But the growing demand is a sign that China is undergoing a cultural shift similar to other tea-loving Asian countries like Japan and South Korea.

Competition between domestic and foreign brands has now become another key feature of the Chinese coffee market. Starbucks has announced plans to have 9,000 stores in China by 2025, and Tim Holton is aiming for 3000 stores in four years. On the other hand, local brands like Luixing and Koti are also expanding rapidly, and we expect fierce competition for market share.

Opportunities and challenges

This competition presents a huge opportunity for China’s coffee market. The opening of a new store, coupled with increased coffee consumption, represents an opportunity to serve more customers. Coffee farmers are also expected to benefit from higher coffee prices. Increased demand in the Chinese market is positive news for global coffee producers, especially as Arabica and Robusta coffee prices reach record highs.

Competing in a fast-growing market is both a challenge and a reward. Businesses need to stay on top of their customers’ changing tastes and preferences and offer differentiated services to stay ahead of the competition. This is especially important for brands entering a new market.

Where to invest

If you’re just looking at the U.S. market, it might be wise to add coffee stocks Starbucks (SBUX) and Restaurant Brands International (NYSE:QSR) to your portfolio, both of which have strong fundamentals. Lukin Coffee (OTC:LKNCY), the fastest-growing coffee company in China, is also a good bet. However, it is listed on the OTC (over-the-counter) market in the US, making it difficult to trade via mobile or internet. You will need to contact your brokerage firm over the phone to make a trade.

Coffee prices often spike, mainly due to an imbalance between supply and demand. Around 2021, extreme drought in Brazil, unexpected frosts, and shipping delays caused shortages. But investing in coffee beans doesn’t seem like a good option, at least not in 2024.

Global Coffee Market Forecast to 2024: An Era of Price Volatility

The global coffee market is expected to undergo significant changes in 2024, driven by increased supply from major producing countries and a variety of external factors. According to the World Bank’s latest Commodity Market Outlook, the outlook for Arabica and Robusta coffee prices, in particular, is significant for producers and consumers alike, providing deep insight into the upcoming year for the coffee industry.

Analyze coffee price trends

Decline in Arabica coffee prices

Arabica coffee prices fell 14% in Q3 2023, which is about 30% lower than the previous year. This price decline is due to increased production in Brazil and Colombia, which together account for about 60% of the world’s Arabica coffee production. With production expected to grow by about 14%, the downward price trend is expected to continue through 2024.

Conflicting trends in Robusta coffee prices

Robusta coffee prices, on the other hand, rose slightly by 2% during the September quarter and remain more than 17% higher year-to-date. Declining production in Indonesia and Uganda are the main drivers of these price increases, but increased production in Vietnam is expected to ease these tight market conditions somewhat.

The intensification of the El Niño phenomenon and the possibility of a global recession are two important factors that could have a significant impact on coffee prices. These factors can have a direct impact on coffee production and demand, further increasing price volatility.

Situation in the Indian market

In India, Arabica prices have also fallen by more than a third, following the global trend. Robusta prices have remained relatively robust, which is an important indicator not only for India but also for the global coffee market.

This price volatility has important implications for anyone involved in the coffee industry. Producers will need to develop various risk management strategies to prepare for price changes, and consumers may need to adjust their consumption patterns in response to price changes. The global coffee market in 2024 will be a year of uncertainty and opportunity. It’s time for a strategic approach to preparing for and overcoming price volatility. Both producers and consumers will need to be ready to adapt to changing market conditions and turn them into opportunities.


China’s coffee market is more dynamic than ever, and this presents many opportunities for domestic and international companies. At the same time, increased competition demands that these companies continue to innovate and take a customer-centric approach. The growth of coffee culture in China is not just a fad, but part of a social and economic transformation that will have a lasting impact on the coffee market in China and around the world.

Leave a Reply

Scroll to Top