In the 1980s, instant coffee entered China and initiated coffee drinking in the Chinese market. As the coffee consumption upgrades gradually, people are becoming more and more particular about drinking coffee. They not only frequently patronize chain coffee shops, café boutiques, new retail coffees etc., but also hope to taste specialty coffees easily in different scenarios such as at home or in the office. As a result, diverse packaged specialty coffees appeared, including ground coffee, roasted coffee beans, drip bag coffee, coffee capsule and liquid coffee concentrate. With the coming of the new wave of coffee consumption, these packaged specialty coffees have joined forces to grab the market share of instant coffee, posing a new threat to ordinary instant coffee.
ORDINARY INSTANT COFFEE STILL LEADS IN THE COFFEE CATEGORIES
Because of low prise and convenience, instant coffee, as the earliest coffee category of the Chinese market, still top the category sales with the proportion of 84% of total coffee consumption. Nestlé who declared that its products "taste great" is still the leader of instant coffee. According to Euromonitor International, the total sales of instant coffee in China last year was 6.855 billion yuan. Among this, Nestlé instant coffee accounted for 72.4% of market share, far ahead of the second place and the third place. The latter two together accounted for less than 10%.
At present, besides Nestlé and Maxwell, many imported brands of instant coffee, such as Vietnamese G7, Malaysian Old Town and Aik Cheong, Indonesian Kopiko, Japanese UCC, Germany’s Grandos, etc., are also competing in the Chinese market. Among them, the monthly sales of G7 threein-one instant coffee powder (16g x 100 sticks) exceeded 35,000 at its Tmall flagship store, as No.1 of the sales ranking, followed by two coffee brands, Aik Cheong and Old Town. The monthly sales of Aik Cheong three-in-one Espresso Instant Coffee powder (800g) is over 30,000 while that of Old Town’s three-inone instant white coffee powder is 25,000.
Although there is no exact data of offline sales for reference, it still can be seen that instant coffee leads in the coffee categories. The coffee products except ready-to-drink (RTD) coffees in the Guangzhou Lotus Market, are almost instant coffee which are occupied mostly by Nestlé with the proportion of over 90%. Moreover, 80% of the coffee products except RTD coffees are also instant coffee led by Nestlé as well in AEON supermarket. Apart from Nestlé, other instant coffees in AEON are mostly imported, such as UCC of Japan, Grandos of German, G7 of Vietnam, Kopiko of Indonesia, Buendia freeze-dried coffee of Colombia and a number of Malaysian brands which occupies a row of shelves, including Aik Cheong and Aik Cheong Old Street, Old Town, King Street and AhHuat. According to the supermarket staff, the products of Nestlé and several Malaysian brands are moving faster than the others. And one hazelnut-flavored white coffee is out of stock.
There is no doubt that instant coffees are so convenient that you can drink it wherever at anytime. It is easy to brew and the price is very competitive. Take Nestlé as an example, the price of instant coffee is 1-1.5 yuan per pack on Tmall, and the imported Nescafé Classic Cream and Nescafé White Coffee are only 2.5-3 yuan per pack. Besides, the non-promotion price of Malaysian white coffee is about 5-6 yuan per pack(net weight 20g-40g) in the supermarket. Although the price is a little higher, it still has the hard-to-match advantage when compared with the fresh ground coffee of café chains which costs tens of yuan.
“RISING STARS" ARE CATCHING UP
Although instant coffee still dominates the Chinese market, its market share is gradually declining with sales growth slowing down. Data shows that Nestlé instant coffee grew only 3.19% last year. Small hints appear offline that the situation of “instant coffee rules the world" has been changed little by little. In addition to instant coffee, some offline supermarkets also offer drip bag coffee and ground coffee as more options for consumers.
Aeon, for example, currently sells drip bag coffee and grond coffee besides instant coffee. The on-sale drip bag coffee is Maxwell imported from China Taiwan. And the options for ground coffee are more abundant, such as the Italian KIMBO espresso ground coffee, Lavazza Rossa and Dolce of vanilla flavor as well as illy ground coffees which provide various flavors according to different coffee roast levels and different coffee beans. These non-instant coffee categories account for about 20% of Aeon's coffee shelves. (Note: This 20% do not include ready-to-drink coffee which is placed with the beverages on other shelves.)
With the popularity of specialty coffee, ground coffee, coffee capsule, drip bag coffee and liquid coffee concentrate jointly occupy a place in coffee sales. This trend is more obvious online. According to the “Comprehensive Consumption Data” released by CBNData, the sales amount of instant coffee has gradually decreased in the past three years while that of ground coffee and coffee beans has stabilized at about 20%. The ground coffee and coffee beans have become the largest online consumption of specialty coffee. At Tmall Global Supermarket, the monthly sales of illy's Italian medium roast ground coffee and coffee beans (250g x 2 cans) have reached more than 10,000. Besides, the monthly sales amount of its dark roast ground coffee also exceeds 9,000.
The sales of coffee capsule and drip bag coffee continue to grow. The consumption of drip bag coffee is growing at a higher rate than coffee capsule. Drip bag coffee owns many advantages like portable, coffee bean grinding and easy for coffee brewing. It is considered to be one of the shortcuts for people to enjoy specialty coffee at home or in the office and to get rid of the restrictions of consuming scenarios. Thus, drip bag coffee is favored by many consumers. Among the imported drip bag coffees, Japanese and Italian brands take a leading role on mainstream e-commerce platforms. TASOGAREDE, UCC and illy have become the best-selling three brands.
However, in terms of repurchase rate, drip bag coffee performs not as good as coffee capsule which in fact, has the highest repurchase rate among all the online coffee categories with the highest brand concentration--the sales of Nestlé NESPRESSO flagship store dominates the market share on Taobao with the proportion of 85%. Besides, Switzerland and UK are still the leading origins of coffee capsule.
It is also worth mentioning that although the sales of liquid coffee concentrate only accounts for a very small proportion, liquid coffee concentrate grows fastest among the online coffee categories with the growth rate over 400% last year. At present, the competition between liquid coffee concentrates is most fierce online. The Japanese brand TASOGARE owns a big proportion of liquid coffee concentrate sales, while another Japanese brand, AGF and Colin Espresso which is made in Japan, both reach the monthly sales of over a thousand on Tmall.