Smaller cities becoming coffee gold mines

China's caffeinated consumption looks to grow further as more companies start to expand their presence

It is no secret that coffee consumption has been rising exponentially in China over the past few years, and industry players have forecasted that this growth will continue for years to come as more coffee companies and startup cafes are poised to make their entry into smaller cities.

According to Daxue Consulting, Chinese coffee consumption saw a staggering 500 percent increase between 2006 and 2018.Business intelligence service provider China Briefing also reported that China's coffee market surged by 31 percent over the previous year in 2021, and is likely to have a compound annual growth rate of 9.63 percent between 2022 and 2025.

Though the number of coffee drinkers in China has ballooned in recent years, most coffee consumers are from well-developed tier-1 and tier-2 cities like Shanghai, Beijing, and Shenzhen of Guangdong province, and this explains why top domestic coffee brands like Manner Coffee and M Stand have just a few stores in lower-tier cities.

But as an increasing number of people across the country develop a taste for coffee, smaller cities and towns are being viewed as gold mines.

Furthermore, statistics from Meituan, a major online food and beverage delivery platform, show that the growth of cafes in lower-tier markets, including small cities, towns and even rural areas, was much higher than that in major cities last year.

According to National Business Daily, Starbucks' expansion plan for the Chinese market involves opening new stores in nearly 3,000 counties, county-level cities and city districts. It has also been reported that local coffee giant Luckin will be opening new stores in small cities like Xinxiang in Henan, Daqing in Heilongjiang and Dezhou in Shandong province.