RTD Coffee in China

PROSPECTS

New variants drive category growth

Given the relatively standard products in the category, mainly latte flavoured RTD coffee, new and existing players see an opportunity to offer differentiated products. Local player Nongfu Spring Co Ltd launched cold brew flavoured carbonated RTD coffee in May 2019 as the first carbonated RTD coffee brand in China.

Consumption upgrading occurring in RTD coffee

Currently RTD coffee can be divided into three levels in terms of unit price per litre of each brand, namely high-end, mid-priced and low-end. The high-end segment is dominated by Starbucks, while most brands such as AHA, Georgia and Nescafé, lie in the mid-priced segment.

Convenience stores will be next growth driver

Convenience stores have a better shopping environment and more products on display than independent small grocers, and are usually located more closely to communities and workplaces than supermarkets or hypermarkets. Thus, the rise of convenience stores makes RTD coffee an ideal selling channel.

COMPETITIVE LANDSCAPE

Nestlé (China) Ltd continues to dominate mass market

Nestlé (China) Ltd continues to dominate the category in both value and volume terms in 2019, benefiting from the large geographical coverage and nationwide retail network of Nescafé. In addition to introducing cold brew flavoured RTD coffee, Nestlé promotes the growth of RTD coffee through intensive consumer interactions such as launching Nescafé pop-up stores.

Mid- to high-end brands gradually push out economy brands

Local economy brands continue to lose share in both value and volume terms in 2019, due to fierce competition from mid- to high-end brands, and lack of product innovation. Pokka Four Seas Suzhou Food Co Ltd and Jiangsu Mocca Food Co Ltd face sales decline, and products from these two companies can no longer be found on major online shopping sites.

Wei Chuan Foods Corp achieves highest growth rate

Targeting the mid- to high-priced segment, Bernachon continues to maintain double-digit growth in both value and volume terms in 2019. Wei Chuan introduced a new RTD coffee brand named Bernachon Premium Selection in early 2019, which targets the high-end segment and mainly sells in convenience stores and boutique supermarkets.

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