Waft of Yunnan coffee draws Starbucks, Nestle

Coffee industry giants such as Nestle SA and Starbucks Corp have been increasing their purchases of Puer coffee, evidence of the rising popularity of the brew from Yunnan province.

Nestle ― the world's largest food company by revenue ― announced plans on Tuesday to introduce a coffee product made completely from Chinese coffee beans.

The new instant coffee was named after the place of its origin, Yunnan province's Puer, and will go into production later this year.

"The Puer coffee product we will introduce is evidence of the success Nestle has had in working with local farmers to develop coffee in this region," said Adrian Ho, senior vice-president of coffee and beverages at Nestle Greater China Region.

Nestle joined forces with the Yunnan provincial government and local coffee farmers to develop the local coffee industry in 1988, becoming the first foreign giant to provide technical assistance to cultivate the coffee industry in China.

Nestle bought more than 1,000 tons of premium Arabica coffee beans from farmers in Puer in the 2011-12 season, a year-on-year increase of 25 percent.

"Coffee has become one of the pillar industries of Puer city," said Peng Yuanguo, vice-mayor of Puer. The city produced 36,500 tons of coffee beans in 2012, and 43,300 hectares were planted last year. Puer produces most of China's coffee beans.

Nestle is not the only multinational company that has set its eyes on "the Chinese golden planting area" in response to an increasing demand for its products.

Starbucks said it has increased the quantity of coffee it buys from Yunnan by more than 20 times since 2007, when it first started purchasing the beans.

In pursuit of its plan to have 1,500 shops in China by 2015, the coffee store chain expects to continue increasing its purchases of Yunnan coffee in the coming years.

Starbucks has also introduced a product called "South of Clouds Blend", a type of coffee that comes in a package depicting a phoenix, a mythical bird representing virtue and prosperity.

"With Puer coffee's delicacy, richness and original flavor, the new products will surely catch the attention of consumers who have a preference for fashion and quality," said Ho.

According to the market research firm Euromonitor International, the value of coffee sales in China increased by 20 percent in 2011 from a year earlier, reaching 6.25 billion yuan ($995 million).

China is now the fifth-biggest global coffee market for Nestle measured by sales. The Switzerland-based company said it expects the tea-drinking country to become its biggest market by 2020.

"China will remain a tea-drinking country, but it definitely has time for a cup of coffee," said Carlos Oyanguren, head of marketing at Nestle China's coffee division.