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Tapping into freshly made beverage market opportunities

Charles Chen

Account Manager of Kantar Worldpanel China

Shoppers 11.04.2017 / 12:10

Take away tea and coffee 2 col

Convenient stores in China capitalize the trend by launching their branded coffee products.

In recent years, “premiumisation” has become the buzzword in China market, as consumers are willing to pay more for higher quality product. This has led to the rapid development of freshly made beverage market, especially coffee and tea. “HEEKCHA”, first started in Pearl River Delta, created a phenomenon tea craze as consumers can spend up to 7 hours queueing up for one cup of milk tea, since it entered Shanghai in February.

Winter is peak season for freshly made beverage

Kantar Worldpanel’s Out-of-Home Panel tracks consumers purchase across 27 major cities in China and it reveals that freshly made beverage contributes 45% value share of the out-of-home beverage and its penetration reached 66%. In other words, two thirds of the consumers have ever bought freshly made beverage at least once in 2016.

Moreover, the average price of freshly made drink is 15.20 yuan per unit, far higher than packaged beverage whose price is 3.80 yuan per unit on average. Under the wave of “premiumisation”, freshly made beverage is believed to continue its prosperity. It will create 1.8 billion yuan incremental sales if consumers add one more purchase incidence, while the current purchase frequency of freshly made beverage is 14.3 time in one year in 27 cities. 

In terms of seasonality, summer is undoubtedly peak season for beverage consumption, but it holds true only for packaged product. In contrast, freshly made drink usually peaks in winter time at the beginning of the year. Hot drink accounts for 52% of the volume of freshly made beverage, indicating its popularity in winter. Chinese New Year is often the most important festive occasion when families and friends gather to celebrate. This creates massive sales opportunities for freshly made beverage.



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Different consumption behaviours between café and tea shops

Freshly brewed coffee and tea, as the leading categories with increasing popularity, show totally different channel importance. Café takes up nearly half of freshly brewed coffee market share, while tea shops dominates freshly brewed tea market with over 70% volume share. Yet are there any difference in the consumption behaviour of those two?



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As for consumption occasion, afternoon is the peak time for consumption, especially for freshly made tea, which helps consumers relax during the leisure time, for afternoon break or weekend stroll.

Meanwhile, habitual purchase is the most important reason when choosing coffee, and drinking in the store is the key consumption place. Coffee is more and more treated as a culture and lifestyle. People enjoy the moment rather than the coffee itself, and instore atmosphere and cosy setting are more important to the core customers. Café should consider how to brand itself as a place with story to satisfy consumers’ pursuit of middleclass lifestyle.

Freshly made tea, on the other hand, shows a different consumption pattern. The main reason for choosing a typical freshly made tea brand is its flavour, and it is consumed either on the go or at shopping centres. Freshly brewed tea is treated as leisure drink during free time like shopping. Thus, tea shops should place a great emphasis on its location to attract traffic. Meanwhile, quality of tea drink is also of vitally important. “HEEKCHA” claims that its tea is extracted under high pressure by using 100C boiled water in 60 seconds. In addition, it rejected franchise model to ensure its quality.

CVS accelerates growth of coffee

In recent years, as consumers pursuit higher life quality, convenience stores (CVS) expanded rapidly while other big format modern trade players suffer more challenges in sales growth. In the meantime, backed by the successful experience in Japan and Taiwan, some multinational CVS banners launched their store brand coffee, such as “Daily Café” in 7-11, “Hi Coffee” in C-store and “Par café” in Family Mart.

Although the market is immense for CVS, we find that the consumption habit of CVS coffee is totally different with chained café. Thanks to competitive pricing, CVS mainly attracts Post 80s office workers. The peak of CVS coffee purchase is breakfast occasion well as in the morning. And they prefer to take the coffee to workplace or on the go rather than in the store.

Different from café, consumers mainly buy coffee from CVS to wake them up. With large number of stores and reasonable price, CVS coffee meets the need of their target consumers. They need to consider how to operate in the neighbourhood or office building to enhance its convenience feature and improve product quality to make them value for money.

At present, majority of the Chinese consumers has not yet developed the habit of drinking coffee. While Starbucks takes the lead to educate the consumers, CVS stores like Family Mart and 7-Eleven play a different role in their market expansion, creating new space for a bigger market.

Source: Kantar Worldpanel

Editor's notes

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