Hot Drinks in China

Hot drinks continues to grow steadily in spite of intensifying competition from RTD formats

Hot drinks in China continued to post steady retail volume and current value growth in 2017, albeit slightly weaker than that seen in previous years. Slower growth can be mainly attributed to saturation in coffee and other hot drinks, as well as increasingly fierce competition from RTD drinks as more consumers are switching to the latter as a result of ever busier lifestyles.

Trading up trend strongest in coffee

While hot drinks overall recorded steady growth in 2017, fresh coffee posted a very strong performance, registering double-digit gains in both retail volume and current value terms, fuelled by consumers trading up as well as the booming coffee culture, especially among urban dwellers. With rising disposable incomes, more consumers are trading up from instant coffee to fresh coffee, and even fresh ground coffee pods thanks to their greater convenience.

Nestlé (China) continues to lead a fragmented market

Nestlé (China) continued to lead the country’s hot drinks market in 2017 in retail value terms thanks to its dominance in instant coffee and fresh ground coffee pods, with the latter being the fastest growing category in hot drinks overall. Besides fresh coffee pods, the company also markets a wide range of pod coffee machines, with this helping to engender customer loyalty to its brands.

Trading up trend leads to the launch of new high-end products

The trading up trend has not only had a positive impact on coffee but also tea, which remained the largest hot drinks category in value terms in 2017. As a traditional tea-drinking country, China witnessed the launch of many premium tea products in 2017, with manufacturers seeking to benefit from consumers’ rising disposable incomes.

Further stable growth anticipated over the forecast period

Despite instant coffee and other hot drinks being saturated categories, the wider hot drinks market in China is expected to remain stable over the forecast period, largely maintaining the volume and value CAGRs it achieved over the review period. Sales will continue to be driven by steady demand for tea and rising demand for fresh coffee.

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