China surpasses the US to become the world's largest coffee chain market

Known as the "tea-drinking nation" But China has surpassed the US to become the world's largest branded coffee shop market.

New information published by coffee market information portal World Coffee Portal. The research firm said the number of branded coffee shops in the world's second-largest economy has increased 58% in the past 12 months, reaching 49,691. Meanwhile, the US currently has 40,062 stores.

Branded coffee shops are a concept that refers to stores carrying famous brands, owned by companies. Their common characteristics are that they operate in a chain, have uniform interior design, standard menus, and regularly provide brand-specific products.

Growth in China last year was led by the rapid expansion of the small-store and delivery-focused concepts of Luckin Coffee and Cotti Coffee, which added 5,059 and 6,004 new stores last year, respectively. Luckin, founded just 6 years ago, has 13,273 stores and is the largest coffee chain today.

Customers in front of a Luckin Coffee shop in Beijing, China, July 8, 2020. Photo: Reuters

Starbucks opened its first store in China in 1999, and is currently the second largest chain. The American chain opened an additional 785 stores this year, bringing the total number to 6,806. Cotti Coffee, founded by two former Luckin executives in August 2022, follows closely behind with 6,061 stores.

More than 90% of the 4,000 Chinese coffee shop consumers surveyed reported drinking hot coffee weekly, while 64% drank iced coffee at least once a week. 89% of customers come to the shop or order at least once a week and 20% do so every day. World Coffee Portal forecasts that chain coffee store growth in China will explode at 24% in 2024 and gradually slow down to 6% in 2028.

Earlier this year, Starbucks poured more than $200 million into a new facility in eastern China. At the time of its opening in September, the beverage giant said it was the largest investment it had ever made in a coffee production and distribution center outside the United States.

China has long been one of Starbucks' most important growth drivers, serving as its second-largest market worldwide and its top overseas market. However, CEO Laxman Narasimhan said the company is "still in its early days in China", implying that coffee consumption in the traditionally tea-drinking country is still relatively low. Therefore, Starbucks aims to have 9,000 stores here by 2025.

Coffee chain brands from Vietnam also began to enter this market. Accordingly, Trung Nguyen Legend has opened two stores in Shanghai, in September 2022 and July 2023, respectively. Trung Nguyen Legend Group said it is promoting the implementation of a plan to develop 1,000 stores following the Trung Nguyen Legend Coffee World model in all Chinese provinces through investment cooperation.

Zhongyuan Legend's store on West Nanjing Road, Shanghai. Photo supplied company

Founder and CEO of Allegra Group, owner of World Coffee Portal, Jeffrey Young assesses the East Asian coffee shop market is growing rapidly thanks to phenomenal store expansion in China, a country that has rapidly quickly becoming a powerhouse in the global coffee industry.

"It is encouraging to see the established Korean and Japanese markets continue to perform strongly alongside the growth of coffee culture in fast-growing markets such as Vietnam, Malaysia and Indonesia" , said Jeffrey Young.