Analysis: Coffee & Tea In China’s Changing Society

The irony of typing this piece whilst sitting in one of Shangai’s numerate Starbucks’ is not lost on me. The obvious growth of the coffee industry is plain to see. Yet despite it’s growth can coffee compete with the cultural strength of tea? How do the two match up?

Long term success requires localized taste innovation

Foreign brands such as Starbucks have played to their international strengths and found huge initial success riding on a welcome wave of ‘xiao zi’ sentiment. But how long can this last? The longer a product stays in a market the less foreign it becomes, the novelty is soon lost.

This is not to say Starbucks is only a flash in the pan foreign success. One only need look at the success of Nike, themselves first quantified a foreign luxury, yet through grassroots campaigns and clever well adjusted marketing they gave themselves an image of ‘Chinese cool’. For foreign coffee brands to achieve this they will require a good understanding of local tastes, which combined with innovation will lead to secured long term growth.

In observing or predicting the changing tastes and palates of the Chinese consumer, by and large, products are introduced from the east – not the west. Whereas foreign brands will tend to have a historical legacy appealing to stirring capitalist sentiment, it’s the product innovation of Taiwanese and Japanese coffee (& food) brands that will more deftly appeal to the taste requirements of the Chinese consumer.

Source Majiscup

Watch out for pan asian innovation

Chinese tastes are varied and Taiwan’s Café 85’s ‘salt coffee’ is a good example of this. The addition of sea salt provides the medicinal value so sorely missed in coffee and found in tea, whilst its unique taste provides an interesting talk point. This sort of product innovation coupled with the continued cravings of all things from Taiwanese pop culture, has seen a strong market entry from Café 85.

One shouldn’t be left aghast at this notion, the Taiwanese have set the trend for tea innovation across China and HK. Their famous bubble tea has gone on to spawn countless new taste inventions. Whilst these drinks may trend in and out of fashion in places like Hong Kong, in China these drinks and the chains that retail them, such as Happy Lemon, remain hugely popular. Yet, what of the more traditional Chinese teas?

Tea Dilemma

Tea is huge part of Chinese life and culture, to quote enoVate staff member Sunnie Qin, “tea is a crystallization of Chinese civilization”. If this is the case then why is it that British brand Lipton is the market leader in China? The answer certainly doesn’t lie in quality or foreignness, the simple answer is marketing and distribution.

In fact one might say it is the very cultural weight of tea in China which has held back it’s growth. The numerous strains, varying medicinal properties and regionalised differences mean that while many Chinese people have a deep understanding of tea – there are very few local brands to recall.

Lipton, as well as Twinnings, marketed themselves as plain FMCG’s – emphasising convenience and packaging. This matured and calculated business model, proves quite convincingly that branding and convenience can triumph over quality and history, if marketed correctly.

Source P.J.S.

Predictions

The coffee industry will continue to grow and as more young people start drinking it for different reasons or in its varying forms, we have already seen a move from a simple beverage choice to becoming a fan of coffee.

As we have already started to see in the garment industry, manufacturers are moving out of their supply chain shadow and looking to brand themselves. What will be interesting to see is the medium by which Chinese companies manage this branding. We already know the importance of the Starbucks social space over the qualities of it’s coffee in China, so how and to whom companies such as Dehong Hougu Coffee Co. market themselves will be of key importance. It is only in this way that they can avoid the foreign brand dominance, as in tea industry.

Although it won’t have the growth factor of coffee, tea can still be repackaged.  Once again the social space is of great importance and whilst coffee shops grow in number, a preference for tea houses still remains, particularly outside of tier one cities.

What we will see is a divergence in two social environments of the tea house and the coffee shop, perhaps reflecting wider changes in Chinese society. Places retailing coffee reflect the growing ‘xiao zi’ (upper-middle class) sentiments in tier one cities but more modern tea houses, like Wu Fu,  appeal to those of a ‘xiao kang‘ (middle class) lifestyle, which permeates much more thoroughly through the different tiers of the country.

For further enquiries or information about the tea or coffee market in China, please contact info@enovatechina.com.