A man wearing a face mask walks past a delivery man while waiting outside a Starbucks store while the country is hit by a new coronavirus outbreak on February 7, 2020 in Beijing, China.
Jason Lee | Reuters
BEIJING – Investors in China are increasingly betting that locals will buy more drinks that are not from them Starbucks.
The American coffee giant ranks China as its fastest growing market and the largest outside of the United States quarterly results report Tuesday showed steady expansion. Starbucks said that same store sales growth of 91% in China – after falling last year – fell short of expectations.
The company attributed the failure to unexpected pandemic-related travel restrictions.
The market is heating up, however, as investors have their eyes on another trend: home-grown beverages.
Less than four months into 2021, Beijing-based business data company Qimingpian has 14 fundraising campaigns in the Chinese tea and coffee market. That’s the same number the country saw for all of 2019, and just below 19 last year, the data showed.
These deals include investments in Hey Tea and Nayuki, tea-based beverage makers that are reported to have reached at least $ 2 billion each in recent months. The foreign brands illycaffe and Tim Hortons are also raising money for their local ventures.
Exact investment numbers for the industry were difficult to come by due to the private nature of many businesses, but various data sources all indicated significant growth.
The Chinese business news website 36kr reported it in December Manner Coffee from Shanghai received another round of investment that estimated it at more than $ 1 billion. The boutique coffee brand focuses on selling beverages from small takeaways in business districts.
“New competitors entering the specialty coffee market in China” was one of Starbucks’ business risks listed in its annual report filed in November. The company owns full ownership of its branches in China, giving it a greater share of the gains – and risks – of the massive market.
Thousands of cafes each have popped up in Guangzhou and Shenzhen in the past five years. This comes from data from Meituan, who runs a grocery shipping company and runs Dianping, China’s version of Yelp.
According to Meituan, Shanghai remains the largest coffee market, with nearly 3 stores per 10,000 residents compared to a ratio of around 2 in Guangzhou, Shenzhen and Beijing.
Source: Meituan, designed by the Shanghai Observer
According to Euromonitor 2020 figures, Starbucks continues to lead the Chinese market for coffee and tea specialties with a market share of 36.4%.
However, the tea beverage market was twice that of China’s coffee and that gap is likely to widen this year, Meituan said, citing industry data. The company said the number of milk tea and fruit juice stores is about four times that of coffee shops.
According to Euromonitor, Hey Tea is the second largest market for coffee and tea shops in China after Starbucks with a share of 8.8%. The Shenzhen-based company is best known for tea, which has a cheese-like, frothy cream layer on top.
According to Euromonitor, Hey Tea is also entering the global market with a worldwide share of 1.1%.