China’s Coffee Revolution: A Market Brewing with Opportunity and Competition
- Induqin
- 2 days ago
- 3 min read
China's coffee industry is booming, driven by rapid expansion, evolving consumer habits, and price competition. With 66,920 new coffee shops in the past year and President Xi Jinping's endorsement of domestic Yunnan coffee, the market is expanding beyond major cities to rising urban hubs like Chengdu and Hangzhou. Local chains like Nowwa Coffee thrive with small, cost-efficient stores, while global brands like Starbucks struggle, losing market share. As competition intensifies, brands diversify offerings, innovate, and localize to remain competitive in this dynamic market.

China’s coffee industry is undergoing a remarkable transformation, driven by rapid expansion, pricing battles, and evolving consumer preferences. Once perceived as a luxury, coffee is now becoming a staple for a broader audience, aided by innovative business models and even a nod from the country’s leadership.
A Market on the Rise
According to data from Canyan.com, China witnessed the opening of 66,920 coffee shops in the past year, resulting in a net gain of nearly 12,000 new outlets after accounting for closures. This growth dovetails with efforts to promote homegrown coffee beans, which gained significant attention when President Xi Jinping highlighted Yunnan province’s coffee as a symbol of national pride earlier this year.
The burgeoning coffee culture is particularly evident in second-tier and “new first-tier” cities, such as Chengdu and Hangzhou. Chengdu, the capital of Sichuan province, ranked third nationwide with 1,995 new stores launched last year, while Hangzhou followed in sixth place with 1,725 openings. These cities, while not as globally recognized as Beijing or Shanghai, are rapidly growing hubs of economic and demographic expansion.
Changing Consumer Habits and Intensifying Competition
The shift in coffee consumption patterns is a driving force behind this expansion. What was once a symbol of affluence has become an everyday pick-me-up for a diverse demographic. Guo Xingjun, CEO of Nowwa Coffee, noted that coffee’s appeal now extends beyond white-collar professionals to include younger consumers in service roles, such as retail workers and delivery drivers.
“Many of these individuals used to rely on energy drinks,” Guo explained. “Now, they’re opting for coffee as a quick and affordable energy boost.” This trend has fueled Nowwa Coffee’s aggressive expansion strategy, with hundreds of new locations added in March alone, doubling the company’s monthly revenue.
Nowwa’s success lies in its small, efficient store model, which leverages partnerships with existing retail venues like convenience stores and internet cafes. With an average store size of just 30 to 40 square meters, compared to Starbucks’ 200-square-meter locations, Nowwa minimizes operational costs and maximizes scalability.
Foreign Brands Feel the Pressure
For international players like Starbucks, the rise of local competitors has been challenging. Once a dominant force, Starbucks’ market share fell from 34% in 2019 to 14% in 2024, according to Euromonitor International. The company also reported an 8% drop in same-store sales in China during its fiscal year 2024.
Meanwhile, domestic brands such as Manner and K Coffee are gaining traction with their affordable pricing and innovative approaches. However, the increased competition has created a price-sensitive market. Research by canyin88.com revealed that the average price of a cup of coffee in China fell by 14% in 2024, landing at 28 yuan. This price war has strained smaller coffee shops, leading to closures and profit losses.
Adapting to Stay Competitive
As the market matures, coffee chains are diversifying their offerings to stay relevant. Many are branching into tea, baked goods, and themed beverages, while others are setting up shop in scenic or culturally significant locations to attract foot traffic and social media attention. Nathanael Lim, Euromonitor’s research lead for Asia-Pacific beverages, emphasized that foreign brands must focus on localization and partnerships to maintain a competitive edge.
China’s coffee industry, valued at 624 billion yuan (US$86 billion) in 2024, is expected to surpass 1 trillion yuan this year, according to iiMedia Research. While the market’s expansion presents enormous opportunities, it also demands constant innovation and adaptation from both domestic and international players.
China’s coffee market is brewing a dynamic mix of opportunity and rivalry. With rapidly expanding chains, shifting consumer habits, and increasing competition, the industry is redefining itself in a country where coffee was once a niche choice. As the market continues to evolve, it promises to be a fascinating space to watch for years to come.
Source: Adapted from a report originally published in SCMP.
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