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The International Coffee Organization details how China has the potential to have a bright and formative future in coffee. It explains where growth opportunities lie, and why it’s time for the lingering superpower to enter coffee diplomacy and become more firmly integrated in the coffee value chain.
China is often described as the land of opportunity, a country of potential, and driver of growth. Yet, no matter which way it’s framed, China is an economic superpower and populous country that’s in the process of carving its own unique place within the global coffee industry. But, how do we quantify it?
Since coffee year 2010/11, China’s coffee consumption has grown by an average annual growth rate of 21 per cent. The average annual growth rate for the world was 1.8 per cent, while it was 5 per cent for South Korea, 0.6 per cent for Canada, and 1.6 per cent for India, a country comparable to China in terms of population size, and also shares the tradition of being tea drinkers.
There are numerous reasons for the relatively low consumption of coffee in China, but the primary reason is that it was, and still is, a tea drinking country. However, we can clearly see it is changing.
Despite the huge growth rate, China’s actual volume of coffee consumption was still low at 3.7 million 60-kilogram bags in coffee year 2022/23, 2.1 per cent of the world’s consumption. It’s low compared to leading consumption giants Brazil, which consumed 22.7 million 60-kilogram bags, and the United States at 25.9 million 60-kilogram bags. However, China’s consumption volume is only slightly above the 2.9 million 60-kilogram bags consumed in South Korea, comparable to the 3.8 million 60-kilogram bags of Canada, and more than double that of India, which stood at 1.6 million 60-kilogram bags.
The potential for growth is enormous. China’s current population is over 1.4 billion people, with current potential coffee drinkers representing just over 10 per cent of the population. The consumption of coffee per capita, however, is only 0.15 kilograms. Compare that to the world’s 1.36 kilogram per capita. Simple mathematics suggest China’s demand for coffee will increase to 31.7 million 60-kilogram bags if it drank the average volume of world consumption. At the same time, it would make China the single largest market for coffee in the world.
Ratios of China’s import of green coffee. Graphs: International Coffee Organization.
Young and urban
The change and growth of China’s coffee market is centred around first and second-tier cities, the divide of provinces and large cities around coastal provinces by economic ranking. Typically, they are driven by white-collar workers with a higher level of education and a high income. According to the National Bureau of Statistics of China, an estimated 4.7 million people per year graduate with a bachelor’s degree, while there are more than 127.9 million people in total who are graduates of institution of higher education or above in the past 20 years. In 2023, 10.5 million graduates of institution of higher education or above were released into the workforce, adding to the rank of ‘potential coffee drinkers’. Between 2004 to 2023, the average was 6.4 million graduates.
The age profile of Chinese coffee drinkers is narrow, centred around 20 to 40 years old. According to Daxue Consulting, 25 to 34 year olds accounted for 36 per cent of China’s coffee consumption in 2021, followed by 35 to 44 year olds at 30 per cent, 45 to 54 year olds at 17 per cent, 18 to 24 year olds at 12 per cent, and 55 to 64 at 5 per cent.
At the end of 2023, there were 202 million 25 to 34 year olds in China, 208 million 35 to 44 year olds, and 232 million 45 to 54 years old. More importantly, the future generation of coffee drinkers, those under 24, account for 153 million, split between 79 million 15 to 19 year olds, and 74 million 20 to 24 year olds.
Share of total imports of coffee.
Where shall we head to?
Looking at both home and out-of-home consumption and related forms of coffee, at the end of 2020, there were 21,163 shops in first-tier cities (such as Shanghai, Beijing, Guangzhou, and Shenzhen), 31,699 in new first-tier cities (Chengdu, Hangzhou, Chongqing, and Wuhan, for example), 28,358 in second-tier cities (such as Xiamen, Fuzhou, Shijiazhuang, and Nanning) and 27,247 in third-tier and below cities (typically with small economies and populations, and are based further away from the coastline). Of these, 94,401 were independent shops according to an April 2021 Deloitte China white paper on China’s freshly brewed coffee industry.
Of all the coffee consumed, ready-to-drink coffee and instant coffee made up the majority. At the end of 2021, these two categories represented 50.3 per cent of the market, followed by fresh brewed coffee at 37.7 per cent, according to China Briefing’s 2022 report ‘China’s Coffee Market: Production, Consumption, and Investor Prospects’.
Where’s my coffee?
In 2010, China was importing all forms of coffee from 72 countries. That figure has risen to 75 countries as of 2023. Fourteen years ago, the number of origins of green beans imports were very limited, with just three countries accounting for 95 per cent of the total in 2010, and the remaining 5 per cent shared with 35 other origins. However, since then, China has diversified its source of green beans imports to include Brazil, Ethiopia, Colombia, Vietnam, Indonesia, Guatemala, and Uganda. These countries accounts for 96 per cent of China’s total imported coffees in 2023, with the remaining 4 per cent accounted for by 28 other countries.
In 2020, the bulk of China’s imported coffee was green beans, accounting for 80.7 per cent of total imports, followed by soluble coffee at 10.5 per cent and roasted at 8.8 per cent in 2010. It has not changed much, with the respective share at 73 per cent, 18.3 per cent, and 8.7 per cent in 2023. The volume of imports, on the other hand, has increased more than five-fold, rising from 0.57 million 60-kilogram bags in 2010 to 3.2 million 60-kilogram bags in 2023. The volume of green beans specifically has jumped from 0.46 million 60-kilogram bags in 2010 to 2.33 million 60-kilogram bags in 2023.
The import unit value of green beans, however, is relatively low compared to China’s Northeast Asian neighbours of Japan, Republic of Korea, and Taiwan. In 2010, China’s unit value was an average 54 per cent of the three neighbouring countries. However, by 2023, it had increased to an average 97 per cent. Since 2019, China has been spending more per pound on green beans compared with Japan.
Of course, China is a coffee producing country, and as such, coffee is also sourced internally. Yunnan is the main source of domestic supply, with more than 80,000 hectares, producing more than 2.3 million bags. The province accounts for approximately 95 per cent annual output of China. The remaining 5 per cent is farmed in Fujian, Hainan, and Sichuan.
Arabica makes up the bulk of China’s coffee production, around 90 per cent, mainly Catimor (specifically CIFC 7963), which were planted from the late 1980s onwards, along with S288. In addition, there are 26 varietals of coffee farmed commercially in China, 20 Arabicas and six Robustas, with fully washed processing the main method.
Export of green beans to China by groups.
Goodbye Robustas, hello Arabica
China was a Robusta country, with it accounting for 86 per cent of the total green beans imports in 2010, followed by Brazilian Naturals, which accounted for 10 per cent. In 2023, the picture altered dramatically, with Brazilian Naturals accounting for 59 per cent of the total green beans imports, with Robustas relegated to third place with 12 per cent share. Colombian Milds now occupies second place, holding 20 per cent share.
Green bean exports into China
Brazil, naturally, was the biggest origin supplying Brazilian Naturals to China in 2010, and by 2023, the origin’s grip on the market only solidified, increasing its share to 89.8 per cent. Moreover, the Brazilian Naturals market is highly concentrated, with the top three origins accounting almost 100 per cent in 2023.
Vietnam was almost the only origin from which Robustas were imported, accounting for 98.2 per cent in 2010. By 2023, Vietnam was set to lose a significant market share to Indonesia and Uganda, with its portion of Robustas falling to 63 per cent.
Unsurprisingly, Colombia was, and still remains, the dominant origin for production of Colombian Milds. Between 2010 and 2023, the absolute volume of the Colombian Milds increased to 0.55 million 60-kilogram bags from below 10,000 60-kilogram bags.
The landscape of Other Milds is more competitive as compared to the other groups without an origin with a majority market share. In 2023, Ethiopia was the single largest exporter of the Other Milds to China, accounting for 38 per cent share of 0.23 million 60-kilogram bags market, followed by Guatemala and Papua New Guinea with 27 per cent and 15 per cent share, respectively. It is a significant market change versus 2010, when Honduras was the biggest source of the Other Milds for China with 34 per cent of the market and Costa Rica holding 8 per cent share. In 2023, these two origins held 1 per cent and 3 per cent share of the market respectively.
The magic number
The global coffee industry is vibrant and universally linked, growing commercially in 77 origins, and shipped beans travelling to more than 230 countries. Over three billion cups are consumed every day, and it earns more than US$25 billion per year for the exporting origins, engages 12.5 million farms and 25 million family farmers, and directly employs around 125 million in its farming.
China’s size, wealth, and lack of penetration by coffee in regards to relative consumption at just 0.15 kilograms per person, makes it a country all eyes are on. China will potentially become integral to the brighter future for the industry, and as such, must look to become more firmly integrated into the global coffee market and its value chain. It is noticeable China is not yet a member of any international forums on coffee, so now could be a good time to change that status and join the ICO coffee family and enter into coffee diplomacy.
There isn’t a magic number to explain what’s happening in China, just numbers, lots of numbers, and a lot of potential to use them for good. CR
For more information, visit icocoffee.org
This article was prepared by Dock No, International Coffee Organization (ICO) Statistics Section, the Statistical Coordinator of the Statistics Section of the ICO.
This article was first published in the July/August 2024 edition of Global Coffee Report. Read more HERE.
The post The future of the Chinese coffee market appeared first on Global Coffee Report.
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