How Is Shanghai Leading a Coffee Revolution?

Every 15 hours, a new Starbucks opens in China – but this country isn’t just an opportunity for the second wave. Specialty coffee shops also stand to gain from its newfound appreciation for café culture.

On the other hand, success isn’t guaranteed. This is still a country where, in 2016, the ICO reported that the average annual coffee consumption was 1 cup a year.

So, what’s the secret to coffee shop success in China? And how can café owners and investors monopolise on this opportunity? Let’s turn to Shanghai, one of the cities at the forefront of China’s coffee revolution, to find out.

You might also like The Rise of Hong Kong in The Specialty Coffee World

Third wave lattes ready for drinking in a Shanghai café. Credit: Chloe Chang

Who Is Drinking Coffee in China?

If you want to sell coffee, you need to understand your customers.

The Chinese coffee market is growing: according to the September 2017 Mintel Coffee China report, annual sales have risen by 10.3%.

But some segments of Chinese society are consuming more than others. Rural areas still don’t drink much coffee. And within the cities, three groups in particular are leading the trend:

• 90后, or the post-‘90s generation: 16% of China’s population was born after 1990. This generation, which has been labelled 90后 or “post-‘90s”, is more influenced by Western media. This has led to a higher acceptance of café culture. Successful coffee shops will have this younger audience in mind.

• White-Collar Workers: Much like in the US and Europe, office workers turn to coffee to get them through their workday. Cafés in the central business district will typically have greater success.

• Women: Women tend to be more likely to have café dates with friends or sip on a a coffee with their meal. This has made them an important consumer group for café owners to consider.

But knowing who to target is one thing. Knowing how to successfully do that while maintaining good profit margins can be harder.

The “Coffeegram” pose.  Credit: Chloe Chang

What Is The Secret to Shanghai’s Success?

In most Chinese cities, coffee shops are closing down at a rate of 14.1% – but not in Shanghai. In China’s financial and industrial capital, café culture is thriving. There were more than 5,600 cafés here by the end of 2016, including Starbucks’ biggest Chinese branch.

So, what makes Shanghai’s cafés so special?

1. A Post-’90s Aesthetic:

The post-‘90s generation wants a different kind of café experience, one where presentation is just as important as consumption. Ignore the traditional Chinese coffee shop decor; teenagers are looking something new. Instead, think creative decorations, open bars, and industrial styling.

Fish Eye Café, a specialty coffee shop chain and roaster in china. Credit: Fish Eye Café

2. The To-Go Window:

Manner Café in Shanghai’s Central Business District is just 2㎡. It has no seating and can only be found down a small alley. But since they save money on rent, they’re able to reduce the price of their coffee to just CN ￥15 a cup. This allows them to sells over 150 beverages a day, with a long line of thirsty customers outside their window most of the time.

A small to-go window, where customers can order CN ￥15 coffee. Credit: Chloe Chang

3. Specialty Coffee Shops

And finally, we have specialty coffee shops: places where the coffee is high-quality and the brewing done with care. Although they sell less drinks – no more than 50 cups a day, on average – they create a unique experience that  coffee consumers crave.

The 7th Manner coffee shop. Credit: Chloe Chang

China’s blooming coffee culture offers up great opportunities – if entrepreneurs are careful. They need to understand their market, know their profit margins, and select a winning strategy.

To-go windows, specialty coffee, post-‘90s marketing… there is no such thing as a guaranteed success, but this is the blend that’s leading many Shanghai coffee shops to profitability.

Enjoyed this? Check out The Rise of Hong Kong in The Specialty Coffee World

Written by Winnie Yeh.

Perfect Daily Grind is not affiliated with any of the individuals or bodies mentioned in this article and cannot directly endorse them.

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