Blue Bottle Coffee Officially Enters China And What Is The Chinese Coffee Market Like?

Blue Bottle Coffee has officially entered the Chinese market! On February 25, Blue Bottle Coffee opened its first store in mainland China in Shanghai. According to media reports, on an opening day, consumers lined up for up to six hours to buy a cup of coffee at an average price of more than RMB 40 ($6.33).

According to public information, from the location selection to the official opening of the first store in Shanghai, Blue Bottle has gone through nearly 9 months of preparation time, and the information on its entry into the Chinese market is organized as follows:

Team Background. March 2021, Blue Bottle Coffee posted job information on LinkedIn for a brand director and senior product manager, which triggered the discussion that the first store on the mainland would be located in Shanghai because its workplace was in Shanghai. In August 2021, Blue Bottle established “Blue Bottle Coffee (China) Co., Ltd.”

• The Chairman of the Board is the chairman and CEO of Nestlé Greater China Region, Rashid
• One of the directors is Daniel Gilbert Aellen, CFO of Nestlé Greater China Region
• The supervisor is Martin Theo Herman Roemkens, Executive Vice President of Nestlé Greater China Technology Department
• The general manager of Greater China is Hu Jun, the former head of Starbucks China Siren Retail. She has managed various new retail businesses, including Starbucks Reserve Roastery Shanghai, and was responsible for store expansion
• Jie Min, Personnel Manager, has worked at Starbucks for 7+ years, including 4 years as an HR
• Ada Peng, Program Manager, worked at McKinsey&Company for over 6 years
• Alex Yang, the coffee shop director, has worked at Starbucks for more than 10 years and has served in several operation positions
• The Head of the e-commerce business comes from Herschel, a luggage brand

Site selection. In July 2021, “Blue Bottle (Taikoo Li Qiantan)” appeared on the Chinese third-party consumer review platform “Dazhong Dianping”, which was thought to be a sign of the location of the first store, but it was no longer searchable. On November 23, 2021, the media confirmed that the first Blue Bottle Coffee location in mainland China was Jing’an International Center, not the previously guessed Taikoo Li Qiantan.

Pricing

• The coffee pricing of Blue Bottle’s first store in mainland China is 35%-40% higher than the pricing of Japanese and Korean stores, similar to the pricing of other chain brands such as %Arabica and Starbucks Reserved Roastery Shanghai, and compared to local boutique coffee shops (local affordable boutique coffee is RMB 20–30/cup), the coffee is expensive: RMB 32 for American coffee, RMB 42 for a latte, and RMB 48 for SOE latte.
• The price of coffee beans: the cost of blended beans is RMB 138/200g, and the price of single beans is RMB 168–188 /200g, which is 2–3 times the average price of domestic self-roasting.

Localized online purchase channel. Blue Bottle’s official WeChat store and offline store are launched simultaneously in the Chinese market.

Shanghai Pengpu Roasting Factory. Its Shanghai roasting factory in Pengpu supplies the coffee beans for offline and online stores. According to Blue Bottle’s website, the brand roasts coffee beans in small batches (up to 70kg), while the Pengpu factory only uses up to 35kg.

Entered Chinese social media platforms. As of March 6, Blue Bottle has opened official accounts on WeChat, WeChat Channel, and Little Red Book. The average number of articles on the WeChat official account has exceeded 20,000, and the accumulated fans of Little Red Book have exceeded 11,000.

Confidential internal test activity. In mid-February, Blue Bottle invited suppliers and some KOLs to hold two internal tests and interviewed the media before its opening on February 24. Until the official opening, the Blue Bottle Shanghai store photos were only the exterior, and the public couldn’t find any information on social media.

The effect of the opening of the first store?

The Chinese food vertical account Penguin Eating and Drinking Guide has commented on %Arabica’s first store in Shanghai, “Although the brand still has its charm, the price-performance ratio is low, and the operation area is a bit messy.” Four weeks after opening, the queue at this store is still over 2 hours.

Blue Bottle’s next plan?

At the moment, Blue Bottle Coffee’s second store in Shanghai, located in the Kerry Center in Jing’an, is in the renovation stage.

There are rumors that Blue Bottle Coffee will open 10 stores in Shanghai in the future, and its sites include Wukang Road, Shangsheng Xinsuo, Raffles North Bund, and many other old and new Internet celebrity neighborhoods and shopping malls. According to Tianyancha, Blue Bottle Coffee registered its Beijing branch on January 29.

Why do international coffee brands enter the Chinese market one after another?

Many market players are cultivating the habit of drinking coffee in China. International brands such as Starbucks, Costa, and Pacific Coffee have nurtured the Chinese market for years, and “drinking a cup of coffee every day” has become part of the work habits of many Chinese businesspeople. China has become the second-largest market for Starbucks globally. In addition, the emergence of local Chinese brand Luckin, with its large-scale marketing campaign, has expanded the coffee category to become a beverage choice for a broader range of people in business and leisure scenarios.

In 2019, the revenue of Starbucks and Luckin accounted for more than 50% of the total market revenue. As an emerging coffee chain brand, Luckin has quickly captured the market through aggressive strategies, which also confirms the huge potential of the Chinese coffee market from the side.

The Chinese coffee market is an incremental market. According to the “2017–2021 China Coffee Industry Investment Analysis and Outlook Forecast Report”, China’s coffee consumption is growing at an annual rate of 15%-20%, while the average growth rate of coffee consumption in the global market is only 2%. According to iiMedia Research, the size of China’s coffee market will be about RMB 381.7 billion in 2021. Chinese consumers’ dietary concepts have changed, and coffee is gradually becoming popular in Chinese consumers’ lives. China’s coffee market has entered a phase of rapid development, with the industry expected to maintain a growth rate of 27.2%. In 2025, the size of China’s coffee market will reach RMB 1 trillion.

In addition to Starbucks, the performance of other international coffee brands that entered the Chinese market in the early years has not improved for many years. Luckin Coffee, founded in 2017, educated the market through crazy subsidies and coupons, operates the coffee brand through a “traffic mindset,” and has gained a large number of users. This market structure and the rise of latecomers have given new brands the incentive to enter the market.

The current market landscape of Chinese coffee brands

The total number of stores and city coverage data is quoted from the brand monitoring data of the Chinese geographic data company GeoHey

Exchange rate: USD/CNY=6.32

Coffee brand financing data in 2019–2021

According to IT Juzi, the number of financing projects for Chinese coffee brands in 2019, 2020, and 2021 will be 14, 16, and 27, respectively, and the transaction amount will be approximately RMB 5.8 billion, RMB 1.0 billion, and RMB 7.6 billion, respectively.

Coffee brand financing projects in the last 3 years

Data sources: IT Juzi, Yilan Business, Qichacha, Tianyancha, Ping An Securities, Qianzhan Industry Research Institute

Related Readings

• Rapid Blossoming Road of Tim Hortons (a Chain Brand in North America) in China
• Saturnbird, a Chinese DTC Brand of Instant Coffee, Surpassed Nestle and Starbucks to Achieve Large-scale Growth Since its Establishment 5 Years Ago
• Guidebook for FMCG Brands Entering China

Resource

• Exclusive丨Blue Bottle’s first store in mainland China will be opened, and the location selection is still in the game(CN)
• According to media reports, queuing for 6 hours and the average price of over RMB 40, is Blue Bottle’s first store in mainland China worth it?(CN)
• The location of the first Blue Bottle Coffee in mainland China has finally been decided! (CN)
• 8 hours in line for Blue Bottle Coffee, we want to be honest(CN)

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