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Coffee making inroads on China’s tea hegemony

By RJ Whitehead

- Last updated on GMT

Coffee making inroads on China’s tea hegemony

Related tags: Coffee

Tea has a long history in China and is still the country’s most popular drink, but coffee is catching up slowly but surely, a new report from Canadean has revealed.

In 2014, the Chinese consumed 1.28bn kg of hot drinks, with hot tea accounting for 82% of the total volume. 

While hot coffee holds a comparatively small share of the Chinese hot drinks market, at 5.7%, it is expected to register the highest growth in volume terms between 2014 and 2019 at 15.4%. 

At the same time, tea will only see 5.6% growth over the same period as coffee’s market share rises from 5.7% in 2014 to 8.4% in 2019.

According to Canadean, coffee is not only the fastest growing in volume, but also in value terms. The Chinese market, worth US$2.1bn last year, will reach US$4.5bn by 2019 following an annual rate of growth of 16.5%. 

Canadean’s Kirsty Nolan said that reasons for hot drink consumption have been changing in the country: “Although tea is the traditional drink of choice in China, Western coffee culture is taking hold. 

“More Chinese consumers are socialising in sophisticated coffee shops and are trying out the varying tastes and premium nature of coffee​.”

Instant coffee accounts for 84% of the coffee market in China, making it the coffee of choice for the average Chinese consumer, whereas roast and ground coffee, together with coffee beans, only account for 16% of the market. 

Overall, the Chinese coffee market is highly consolidated, with the top two brands—Nescafé and Maxwell House—holding a market share of over 80%. 

Despite consolidation in the Chinese coffee market, consumers are still looking for quality and variety. This means that in due course, the market will open up to smaller brands, offering consumers the quality and exclusivity they are seeking from coffee​,” added Nolan.

China needs accreditation system to tap into world halal growth

The fast-growing world halal market is ripe for the picking if China finds a way to develop its accreditation services, an Islamic certification expert has told an audience in Hong Kong.

Wang Guoliang, head of Muslim affairs at MCH Halal, said the world halal food market is presently worth US$500bn out of the overall US$3.2tn halal product trade, which is expected to double by 2018. 

As a result, China’s current share of the market—just 0.02%—could increase substantially if a unified accreditation system became more widespread in the country. 

There are thousands of halal food producers on the mainland​,” said Wang. “It’s just that they need accreditation to boost consumer confidence​.”

Rusli Mohd Nor, an Muslim affairs adviser to the Malaysian government, which operates one of the most widespread halal certification systems in the world, said Malaysia had been working with Chinese businesses to certify their halal products. 

Mainland China’s halal products could be exported to Muslim countries all over the world​,” said Rusli.

China must get more track and trace mobile apps to restore consumer confidence

An Australian app developer has said he believes that Chinese consumers are demanding mobile traceability systems in the face of a collapse in consumer confidence.

Gennady Volchek, founder and chief executive of a Melbourne-based track-and-trace solution, said apps like his own Authenticateit would be well received by China’s 527m mobile users.

"The future of the global food industry is the seamless integration of all links of the food supply chain from manufacturing right through to consumers, utilising exiting mobile infrastructure, new developments in cloud based IT technologies and consumer friendly mobile apps​," Volchek said.

He said Authenticateit has been revolutionising this idea, with a back-end platform that allows Australian businesses to manage their brand protection, regulatory compliance and supply chain integrity, while the front-end, a free smartphone app, allows consumers to check product authenticity, safety, recall status, warranty information and access further information.

"With huge profits at stake, increasingly sophisticated food criminals are exploiting both Chinese consumer demand and authority's supervisory capacity issues in China to great effect​," Volchek said.

"Although imported products are in high demand, the key concern of an Asian consumer is, is the product they wish to buy safe and genuine?​”

And while multinational companies have the financial capacity to develop systems to ward off this distrust, smaller SMEs have been at the mercy of food criminals and counterfeiters—until platforms come along to increase traceability.

"Both Chinese consumers and authorities look extremely favourably on products that can be verified through traceability systems as 100% genuine​," he added.

"In China, the rapid expansion of e-commerce, the implementation of a new recall system and AQSIQ blacklist and new legal provisions for traceability in China's pending new food laws, are just several of the compelling reasons to implement a traceability system sooner rather than later​."

Related topics: Tea and Coffee, Markets, Emerging Markets

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