For the complete report, get in touch with us at : info@netscribes.com The Chinese coffee market is poised to witness phenomenal growth owing to rapid retail coffee chain expansion and growing popularity of instant coffee. The report begins with the global coffee market overview comprising the global market size and projected growth in production till 2012. Global coffee production volume followed by key regional segments and variety of coffee forms a part of the global coffee market scenario section. The domestic coffee market overview provides projected growth of coffee production in China till 2020. Domestic market overview also includes the split share of the hot drinks market in China covering tea, coffee and others. Major coffee producing hubs in China are also highlighted in this section. Furthermore, the report delves into the coffee supply chain beginning from production of coffee to retail sales. Export-imports chapter lays down the trade figures of coffee under specific HS codes for the period between 2006 and 2010. It provides export-import figures both in terms of volume and value with a country-wise split. Key drivers of the industry explain the factors influencing the growth of coffee market in China. Some of the drivers include growth in population and urbanization, rising disposable income, changing lifestyle, young population driving the coffee demand and low per capita consumption. Coffee industry also faces some challenges that impede its development and growth prospects in China. Some of the major challenges identified includes rising labour costs, taxes and duties and health hazards. Emerging trends that are of marked importance to the coffee market in China are also described including factors such as coffee retail chain expansion, rising demand for instant coffee and investment plans. The report also covers key mergers and acquisition deals information that have taken place in the Chinese coffee market during 2009-11. The competition section outlays the competitive landscape of the coffee market in China briefing some of the key facts and figures about the domestic and foreign players operating in the market. The section provides a three dimensional analysis of key players’ incomes, profits and market capitalization. The report also features brief profiles of major domestic and foreign players in the market and a snapshot of their corporation, financial performance, business highlights and their product portfolio, providing an insight into the existing competitive scenario. Some of the key industry relevant statistics covered in the report includes global coffee market size, global coffee production volumes, domestic market size, domestic coffee production figures, export-import figures, rise in total population and urbanization rate, coffee consumer base, per capita urban disposable income, per capita coffee consumption and share of young population. Key takeaway section summarizes the entire m

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Coffee Market in China
February 2012

2. Executive Summary
 Coffee is one of the fastest growing segments of the beverage sector in China projected to
grow with a CAGR of x% to y tons by 20‐‐ from z tons in 20‐‐
Market  Low coffee consumption at only 5 cups per capita per year provides robust growth
opportunity for coffee in China
Drivers: Challenges:
 Rising Population and Urbanization  Rising Labour Costs
 Rising Disposable Income  High Taxes and Duties
Drivers &
 Changing Lifestyles  Health Hazards
Challenges
 Young Population Drive Coffee Demand
 Low Per Capita Consumption
 Retail Chain Expansion
Trends
 Rising Demand of Instant Coffee
 Investment Plans
Major Players
Competition
Company 1 Company 2 Company 3 Company 4 Company 5 Company 6
COFFEE MARKET IN CHINA 2012.PPT 2

3. •Market Overview
• Global
• China
•Supply Chain
•Exports and Imports
•Drivers & Challenges
•Trends
•Mergers & Acquisitions
•Competition
•Key Takeaway
COFFEE MARKET IN CHINA 2012.PPT 3

4. Global coffee production with a greater emphasis on
‘Arabica’ variety is expected to witness a steep rise
Global Coffee Market ‐ Overview Growth in Coffee Production
• Global coffee production is expected to increase to x mn bags
X%
mn (y kg) bags by 20‐‐ 150 x2 x4
x1 x3
• South America accounted for z mn bags of the global
100
coffee production in 20‐‐
• Global coffee production is dominated by the Arabica 50
variety of coffee
0
• Arabica coffee accounted for x% of the coffee produced
20‐‐ 20‐‐ 20‐‐ 20‐‐e
in 20‐‐
Production by Variety Regional Production (20‐‐)
A B mn bags
mn bags
60 z4
100
x1 x3
80 x2 x4 z2
40
60 y1 y2 y3 y4
40 20 z3
z1
20
0
0
A B C D
20‐‐ 20‐‐ 20‐‐ 20‐‐
Source:
COFFEE MARKET IN CHINA 2012.PPT 4

5. Despite a relatively low share of coffee sales Chinese coffee
market is expected to witness a robust growth
Domestic Coffee Market ‐ Overview Coffee Market Growth ‐ Production
• Coffee market in China is expected to grow from x
‘000 tons
thousand tons in 20‐‐ to y thousand tons by 20‐‐ x2
Coffee demand in China is increasing at a rate of z% to y% 300
Z%
per year compared to a a world average of mere x%
200
• X Province is the major coffee growing region in
China producing only Y variety of coffee 100
X accounts for y% of the coffee bean production in China x1
_ Z Province is the major producer of X coffee with an annual 0
production of y tons
20‐‐ 20‐‐e
Coffee Production Hubs in China Hot Drinks Market Share (20‐‐)
x1
x3 A
B
C
x2
X
Z
Source:
COFFEE MARKET IN CHINA 2012.PPT 5

6. Chinese coffee market accounted for a trade surplus of over
USD y mn in 20‐‐
Coffee Market – Exports under HS Codes
USD mn Countrywise Segmentation
150 Y% Z% Country 1
x8 Country 2
Country 1 is the largest x4
Country 3
100 x4
importer of coffee
x3 x5 x6 x7 Country 4
accounting for x% of x2 x4 x1
x1 Country 5
China’s coffee exports 50
x3 Country 6
Country 7
0 x2 Country 8
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐
Coffee Market – Imports under HS Codes
Countrywise Segmentation
USD mn Y% Z% Country 1
80 y5 Country 2
y3 y8
Country 1 is the largest Country 3
exporter of coffee to 60 y4 y6
y2 Country 4
China accounting for x% y1 y5 y7
40 y4 y1 Country 5
of China’s coffee
Country 6
imports 20 y3
Country 7
0 y2 Country 8
20‐‐ 20‐‐ 20‐‐ 20‐‐ 20‐‐
Source:
COFFEE MARKET IN CHINA 2012.PPT 6

7. In volume terms, 20‐‐ witnessed a trade surplus of mere x
tons in China coffee market
Coffee Market – Exports under HS Codes
Countrywise Segmentation
‘000 tons
40 Y%
Coffee export volumes x4 x5 x6
remained almost stagnant 30 Country 1
x3 x5
during 20‐‐ ‐20‐‐, however x1 x2 x4 Country 2
20
registered a growth of x% x3 x1 Country 3
value wise, indicating price 10 Country 4
increase Country 5
0 x2
Country 6
2006 2007 2008 2009 2010
Coffee Market – Imports under HS Codes
Countrywise Segmentation
‘000 tons Y%
Z%
40
y5 y5 y6 Country 1
Coffee import volumes 30 y3 y4 Country 2
rose by x% between 20‐‐ y2 y3 y4 y2
y1 Country 3
and 2010 attributing to a 20
Country 4
rise in demand
10 Country 5
0 y1 Country 6
2006 2007 2008 2009 2010
Source: Note:
COFFEE MARKET IN CHINA 2012.PPT 7

8. Drivers & Challenges – Summary
Drivers Challenges
Rising Population and Urbanization Rising Labour Costs
Rising Disposable Income Taxes and Duties
Changing Lifestyles
Health Hazards
Young Population Drive Coffee
Demand
Low Per Capita Consumption
COFFEE MARKET IN CHINA 2012.PPT 8

9. Rising population and rapid urbanization to act as the major
growth driver for the coffee market in China
Rising Population and Urbanization Impact
• Finding 1
• Finding 2
• Finding 3
• Finding 4
Rise in Population Increase in urbanization
leads to growth of the
mn Z% coffee market
1,500 z1 z2 z3 z4
1,000 x1 x2 x3 x4
A B
500
y1 y2 y3 y4
0
20‐‐ 20‐‐ 20‐‐e 20‐‐e
Source:
COFFEE MARKET IN CHINA 2012.PPT 9

10. Rising disposable income leading to greater spending
increase demand from branded retail outlets
Rise in Disposable Income Impact
•Finding 1
•Finding 2
•Finding 3
•Finding 4
Urban Disposable Income Urban Consumer Spending
USD bn USD bn
x3
20,000 5,000 y3
Z%
15,000 4,000 Z%
x2 3,000
10,000 y2
2,000
5,000 x1
1,000 y1
0 0
20‐‐ 20‐‐e 20‐‐e 20‐‐ 20‐‐e 20‐‐e
Source:
COFFEE MARKET IN CHINA 2012.PPT 10

11. Rapidly changing lifestyle is a major contributor to the
growth of coffee market in China
Changing Lifestyles Impact
• Finding 1
• Finding 2
• Finding 3
• Finding 4
Share of Spending
% A B
100%
80% x1
x2
60%
40%
y1
20% y2
0%
20‐‐ 20‐‐e
Source:
COFFEE MARKET IN CHINA 2012.PPT 11

12. Low level of per capita consumption provides a huge
opportunity for growth to the coffee market in China
Low Per Capita Consumption Impact
• Finding 1
• Finding 2
• Finding 3
Per Capita Coffee Consumption China’s per capita coffee
consumption is the lowest
offering substantial
No. of Cups
opportunity for growth
x1
1,500
x2 x3 x4 x5
1,000 x6
x7 x8
500 x9 x10
x11
x12
0
Finland Sweden Netherlands Norway Denmark Austria France Germany USA Japan Korea China
Source: Coffee Consumption = Per capita per year
COFFEE MARKET IN CHINA 2012.PPT 12

13. Favorable demographics in China to lead to the growth of
the coffee market
Young Population Drive Coffee Demand Impact
• Finding 1
• Finding 2
• Finding 3
Demography ‐ Age Split (20‐‐) Major Attractions of Coffee Outlets
A B C
x1 A B C
Young
population is
x3 the primary
target of the Major Purposes Served
x2 coffee retail 99%
outlets in
China
X Y
Source: International Coffee Organisation
COFFEE MARKET IN CHINA 2012.PPT 13

14. High cost of labour is one of the major challenges faced by
the coffee market in China
Rising Labour Costs Impact
• Finding 1
• Finding 2
• Finding 3
Labour Costs – Emerging Asia
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000
USD
Country 1 x1
Country 2 x2
Country 3 x3
Xxx
Country 4 x4
Country 5 x5
Country 6 x6
Country 7 x7
Country 8 x8
Country 9 x9
Source: Note: :Per capita Average Annual Salary has been considered
COFFEE MARKET IN CHINA 2012.PPT 14

15. Trends – Summary
Retail Chain Expansion
Key
Trends
Rising Demand for
Investment Plans
Instant Coffee
COFFEE MARKET IN CHINA 2012.PPT 15

16. High end retail chain expansion has emerged as a major
trend in the coffee market in China
Retail Chain Expansion
• Finding 1
• Finding 2 Major Coffee
outlets to expand
• Finding 3 their operations in
• Finding 4 the China market
Starbucks Expansion Plan Growth of Retail Segments (20‐‐)
Outlets % Retail food sales is one of
x2 the highest growing
1,500 40 x2 segment
Z%
30 x3 x4
1,000 x1 x5
20 x6
x1
500
10 x7
0 0
20‐‐ 20‐‐e Total Jewelry Clothes Food Electronics
BuildingFurniture
Retail
Source: Note:
COFFEE MARKET IN CHINA 2012.PPT 16

17. Coffee market in China is witnessing a rapid rise in demand
for instant coffee
Rising Demand of Instant Coffee
• Finding 1
• Finding 2
Rising Popularity of
• Finding 3 Instant Coffee
• Finding 4
Product Innovation Instant Coffee Market (20‐‐)
x2
Company A Brand X
Company B Brand Y A
x1 B
Source:
COFFEE MARKET IN CHINA 2012.PPT 17

18. Major Public Companies ‐ Summary
Net Profit
45,000
Size of the Bubble represents Market
40,000
Capitalization in USD bn
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0 x1 x2
‐5,000
‐10,000 Total Income
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000 12,000 13,000 14,000 15,000 16,000 17,000 18,000
Company 1 Company 2
Source: Note:
COFFEE MARKET IN CHINA 2012.PPT 18

19. Domestic Company – Company 1
Company Information Locations – China
Address Line
Corporate Address
Tel No. ‐‐‐‐
Fax No. ‐‐‐‐
Website ‐‐‐‐
Year of Incorporation 19‐‐
Ticker Symbol Xxx
Stock Exchange Yyy
Products and Services
Category Products/Services Headquarters
Beverages Product 1, Product 2, Product 3 Key People
Instant Noodles Product 1, Product 2, Product 3 Name Designation
Services Service 1, Service 2, Service 3 Person 1 Designation 1
Person 2 Designation 2
Person 3 Designation 3
Person 4 Designation 4
Source:
COFFEE MARKET IN CHINA 2012.PPT 19

20. Domestic Company – Company 1
Financial Snapshot Key Ratios
y‐o‐y
Total Income Profit Particulars change 20‐‐ 20‐‐ 20‐‐ 20‐‐
A Y
(20‐‐ ‐‐‐)
USD mn USD mn
Profitability Ratios
3,000 150 Operating Margin ‐‐ ‐ ‐ ‐ ‐
x4 Net Margin ‐ ‐ ‐ ‐ ‐
2,000 x1 x2 x3 100
Profit Before Tax Margin ‐ ‐ ‐ ‐ ‐
1,000 50 Return on Equity ‐ ‐ ‐ ‐ ‐
Return on Capital Employed ‐ ‐ ‐ ‐ ‐
0 0 Return on Working Capital ‐ ‐ ‐ ‐ ‐
20‐‐ 20‐‐ 20‐‐ 20‐‐ Return on Assets ‐ ‐ ‐ ‐ ‐
Return on Fixed Assets ‐ ‐ ‐ ‐ ‐
Financial Summary
Cost Ratios
• The company incurred a net profit of USD x mn in FY 20‐‐, as Operating costs (% of Sales) ‐ ‐ ‐ ‐ ‐
compared to net profit of USD y mn in FY 20‐‐
Administration costs (% of Sales) ‐ ‐ ‐ ‐ ‐
• The company reported total Income of USD y mn in FY 20‐‐,
Interest costs (% of Sales) ‐ ‐ ‐ ‐ ‐
registering an increase of x % per cent over FY 20‐‐
Liquidity Ratios
• The company earned an operating margin of y per cent in FY 20‐‐ a Current Ratio ‐ ‐ ‐ ‐ ‐
decrease of x percentage points over FY 20‐‐
Cash Ratio ‐ ‐ ‐ ‐ ‐
• The company reported debt to equity ratio of x in FY 20‐‐ an Leverage Ratios
increase of y per cent over FY 20‐‐ Debt to Equity Ratio ‐ ‐ ‐ ‐ ‐
Financial Summary Debt to Capital Ratio
Interest Coverage Ratio
‐ ‐
‐
‐
‐
‐
‐
‐
‐
Indicators Value (dd/mm/yy) Efficiency Ratios
Market Capitalization (USD) Fixed Asset Turnover ‐ ‐ ‐ ‐ ‐
x1
Asset Turnover ‐ ‐ ‐ ‐ ‐
Total Enterprise Value (USD) x2 Current Asset Turnover ‐ ‐ ‐ ‐ ‐
EPS (USD) x3 Working Capital Turnover ‐ ‐ ‐ ‐ ‐
PE Ratio (Absolute) x4 Capital Employed Turnover ‐ ‐ ‐ ‐ ‐
Source: Improved Decline
COFFEE MARKET IN CHINA 2012.PPT 20

21. Domestic Company – Company 1
Key Business Segments Key Geographic Segments
A B C
X%
100%
100% The company’s geographic
80% 50% reportable segment is ‘A’
60% x1 y1 z1 n1
40%
0%
20% x2 n2
y2 z2 20‐‐
0% x3 y3 z3 n3
20‐‐ 20‐‐ 20‐‐ 20‐‐ A
Key Recent Developments
Description News
• Company is primarily a manufacturer of beverage and instant food products. It operates
Overview
in x provinces of China through different channels of sales and distribution points.
• Company plans to raise its distribution channels in China from x1 to x2
New business • Due to increased production capacity and distribution channels capital spending of the
company is estimated to be around USD z mn
Share Holding pattern • Company 1 operates as a subsidiary of the Y
Source:
COFFEE MARKET IN CHINA 2012.PPT 21

22. Growing popularity of instant coffee and rapid expansion of
retail outlets will lead to robust growth of coffee market
Coffee production is expected to grow with a CAGR of Z% from X tons in 20‐‐ to Y tons in 20‐‐
Opportunities in the Competitive
Market Size
Market Landscape
‘000 tons
Rising population and x2
urbanization coupled 300 Coffee market in
Z%
with a rise in disposable China is dominated
income are major growth 200 by foreign retail
drivers for the coffee coffee players
100
market in China x1
0
With retail coffee
Changing lifestyle and 20‐‐ 20‐‐e chains gaining rapid
rising demand among popularity, retail
young population are players dominate a
major contributors to the greater share of the
growth of the coffee coffee market in
market in China Challenges China
Low per capita coffee
consumption provides a • Rising Labour Costs Players are
scope for growth thus diversifying into
• High Taxes instant coffee with a
acting as a major growth
driver for the coffee • Health Hazards view to capture
market in China greater market share
COFFEE MARKET IN CHINA 2012.PPT 22

23. Thank you for the attention
The Coffee Market – China report is a part of Netscribes’ Food and Beverage Industry Series.
For more detailed information or customized research requirements please contact:
Jitendra Punjabi
Phone: +91 33 4064 6215
E‐Mail: jitendra.punjabi@netscribes.com
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COFFEE MARKET IN CHINA 2012.PPT 23