In October 2019, Nongfu Spring launched three new ready-to-drink coffee products under its Carbon Bing line: black coffee, low-sugar latte, and sugar-free latte. The new products, along with its carbonated coffee, form two parallel coffee product lines, completing the brand's coffee product matrix.

In September 2019, Mengniu's fresh milk brand "Daily Fresh" launched a coffee beverage—cold-brew coffee latte. Like its fresh milk products, this cold-brew coffee latte requires refrigeration and has a shelf life of 15 days. In July 2019, Yili, together with new-generation idol Chen Linong, officially announced on Weibo its new product—Saint Ruis ready-to-drink coffee, adding to its health food business. Coupled with earlier entries like Uni-President's Yaha, Coca-Cola's Georgia, and Want Want's Bond, it's clear that almost all food giants are eyeing the ready-to-drink coffee cake!

With the expansion of the coffee market, bottled ready-to-drink products are ushering in new development. As many brands engage in the ready-to-drink battle, where is the ready-to-drink coffee market headed?

-01- The Wind Rises, Opportunities Finally Arrive The rapid growth of the coffee category is influenced by the overall beverage environment, consumption upgrades, and changes in market demand due to generational shifts.

1. Luckin Coffee Drove the Surge in the Coffee Market and Brought Coffee into the Mainstream First, let's review the development of coffee in China. The popularization of coffee in China cannot be separated from Nestlé and Starbucks. Nestlé, with its low prices, completed category popularization during the growth dividend period. Starbucks, on the other hand, leveraged its "third space" concept to elevate drinking coffee to a status symbol, associating it with petty bourgeoisie, refinement, and taste.

The domestic coffee category, led by Nestlé and Starbucks, has passed through its nascent stage and stable development period. On one hand, Nestlé and Starbucks entered early and dominate their respective fields with no competitors; on the other hand, domestic consumption levels limited spending. Economics has a term called the "latte factor," which uses latte as an example to describe non-essential expenses in life that can be saved.

When the economy is not yet developed, coffee is placed in the user's "enjoyment" account, with lower spending priority, so users restrain themselves from drinking freshly ground coffee. Nestlé products, however, are more about providing functional benefits like refreshing, so they are generally placed in the "necessity" account. This is why Nestlé instant coffee has been strong for years with rapid sales growth.

Therefore, even though Nestlé is considered coffee with non-dairy creamer, and Starbucks is expensive with indifferent service, we still drink them. But instant coffee cannot meet the growing demand for health and fashion, and Starbucks cannot meet the need for good quality at a low price and convenience. This situation remained unbroken until Luckin arrived.

Luckin entered the coffee market with a disruptive force, becoming a "catfish" that invigorated the industry.

Through delivery coffee, it combined functional needs with quality upgrades, creating "good coffee that everyone can afford." Luckin brought users back to the functional attributes of coffee. Why drink coffee? Because you need the caffeine boost. Why not Nestlé? It's unhealthy, full of non-dairy creamer, and doesn't taste like coffee—just flavorings. Why not Starbucks? Luckin is cheaper and more convenient.

The demand for coffee upgrades has always existed, but because brands didn't provide good solutions, the pain points remained unresolved.

When Luckin appeared, it first solved the pain points for some heavy and medium coffee users; secondly, Luckin promoted the spread of the entire category, making more users curious to try, transitioning from non-coffee drinkers to trying, liking, and becoming addicted.

Luckin made more people start drinking coffee and successfully brought the coffee category into the mainstream. Luckin was like a spark that ignited the potential of the coffee market and brought new market growth for different forms of coffee.

2. Coffee Culture Is Accepted: From Fearing Bitterness to Appreciating It, Users Begin to Understand Coffee Chinese people have a preference for sweet drinks, and coffee's bitterness contradicts that. Even the best-selling flavored coffees like mocha and latte still affect user choices. Therefore, in early competition with cola and juice, coffee was at a disadvantage, directly impacting consumption.

But with the spread of coffee knowledge, the rise of cross-border e-commerce, and increased overseas travel and study, the new generation of young users has more opportunities to encounter authentic coffee and different flavors, forming consumption habits. We can see that many students returning from overseas continue their coffee-drinking habits.

When these people return to China, or move from first-tier cities to third- and fourth-tier cities, their habits lead them to continue consuming coffee and seek better quality, more authentic coffee. They also influence others to try coffee in work and life, and "treating someone to coffee" has become a social tool in the office.

3. Changing Consumer Demographics: Coffee Moves from Luxury to Necessity The changing times have given coffee new opportunities. Currently, the post-80s to post-95s have become the mainstream in the workplace, with faster life and work rhythms, and 996 has become the norm in many companies. To secure good job opportunities and higher incomes, young people have to extend working hours and increase work intensity, inevitably needing coffee and other foods to adjust their mental state.

In this context, refreshing is a rigid need, and coffee is no longer a label for petty bourgeoisie life; it returns to its product essence. Stripping away superficial pursuits, users need high cost-performance and faster access—ideally, coffee that can be opened and drunk immediately, without waiting, without delivery, and even without brewing, while keeping costs within control, as the cost of living rises.

-02- Ready-to-Drink Is Indispensable, with Strong Market Potential The domestic ready-to-drink coffee market maintains annual growth of 16%, higher than instant coffee and other beverages. According to Euromonitor data, the ready-to-drink coffee market share is expected to reach 14.9 billion yuan in 2021, becoming a new ten-billion-yuan market. It can be said that the spring for ready-to-drink coffee is coming.

"Coffee + delivery" allows users to buy high-quality coffee at lower prices, driving functional consumers to upgrade. According to the experience of developed countries, as GDP rises, consumers gradually shift from instant to freshly ground coffee. But although freshly ground coffee tastes better, its drawbacks cannot be ignored.

1. Freshly Ground Coffee Has Insufficient Market Penetration and Needs Time to Cultivate Even fast-growing companies like Luckin mainly open stores in first- and second-tier cities. Since freshly ground coffee is inconvenient to carry and can only be consumed in-store or via delivery, the consumption radius is strictly limited. In the US, freshly ground coffee accounts for a very high proportion, with about five times as many Starbucks stores as in China. Therefore, the market penetration and deep coverage of freshly ground coffee still need time.

2. The Latte Factor Theory Still Holds: Rational Consumers Want Both Good Taste and to Keep Their Wallets Safe Freshly ground coffee is relatively expensive, and for high-frequency consumers, this expense is significant. Taking Luckin as an example, if you drink one cup a day, even with buy-one-get-one-free, the cost per cup including delivery is about 16 yuan, totaling around 6,000 yuan a year—even in Beijing, that's about 2-3 months' rent for a shared apartment for a white-collar worker.

Young consumers are becoming more rational in their spending: they can spend without blinking on products they love, but they are also very rational where they think they can save money.

In summary, from instant to freshly ground, there is a distance of 100 ready-to-drink coffees. The coffee market is expanding, but the growth rate of the instant coffee market is declining, and its decline may shift to ready-to-drink and freshly ground coffee. Ready-to-drink coffee can fill the price gap between instant and freshly ground, offering different product types. So, freshly ground may be the ultimate form of coffee, but it doesn't hinder the development of ready-to-drink. Currently, ready-to-drink and freshly ground complement each other, jointly opening up different consumption scenarios.

Compared with other forms of coffee products, ready-to-drink coffee has the following advantages:

  • Compared with instant coffee: Stable quality, not affected by factors like temperature and water volume like instant coffee, and easy to carry and drink;
  • Compared with freshly ground coffee:

(1) Relatively lower price, richer channels, and convenient for major brands to leverage mature channels.

(2) The proportion of coffee geeks is still relatively low, and most coffee users do not have in-depth knowledge of coffee bean characteristics and processing methods, limiting homemade coffee.

From the perspective of user consumption scenarios and living habits, ready-to-drink coffee also has significant development space.

3. Convenience Is the First Principle of Lazy Consumption If I want a freshly ground coffee at work, I either spend time going to a store or order delivery. Going to a store takes time and requires considering distance; ordering delivery incurs an extra delivery fee. Taking Luckin as an example, the free delivery threshold is 55 yuan, meaning you need to find someone to share an order.

The principle of today's young people is: 30 yuan for coffee is not expensive, but a 5 yuan delivery fee is like robbery. To save on delivery fees, you need to find someone to share an order or reluctantly pay the fee, which consumes time and energy—not worth it. The advantage of ready-to-drink is that you can just open and drink it, saving time and energy, and no need to brew or clean.

4. Ready-to-Drink Fills the Demand in New Scenarios The coffee consumption habits developed by today's "corporate slaves" do not disappear when they are not working; the addictive nature of coffee prompts users to enjoy a cup even during non-intensive tasks. At home, on trips, or in other places where freshly ground coffee is not convenient, ready-to-drink fills the gap well.

-03- Ready-to-Drink Is Good, but There Are Many Problems Although ready-to-drink coffee seems promising, there are many issues to be resolved in practice.

1. High Brand Concentration, with Top Brands Holding a Large Share Current major brands such as Nestlé, Coca-Cola's Georgia, and Uni-President's Yahua have been developing for a long time, with CR3 as high as 89%. Moreover, these major brands have mature customer bases and channel resources, and with the backing of large groups, they have ample marketing budgets, making it difficult for new brands to enter.

2. Little Difference in Taste, Severe Homogenization Currently, the differentiation in many ready-to-drink coffee flavors is only in the description, such as "rich latte" or "silky latte," but the actual product flavors are not much different. Users cannot satisfy their coffee flavor needs, nor can they form loyalty.

3. Many Additives, Severe Flavor Loss: How to Achieve Quality Upgrades A problem ready-to-drink coffee must face: how to meet users' demands for coffee quality upgrades. In fact, in current products, processing methods like high-temperature extraction of coffee powder cause significant loss of coffee aroma substances, so many ready-to-drink coffee products have lost most of the unique coffee aroma.

If ready-to-drink is still based on similar taste and mouthfeel to ordinary instant coffee, and coffee just changes from powder to liquid, then for users, there is no essential upgrade, and such products are more likely to hit a ceiling.

I speculate that this is probably the reason behind Carbon Bing's new product development. Carbon Bing uses SOE single-origin coffee beans and cold-brew processing to preserve the unique coffee aroma as much as possible, achieving product differentiation.

4. Upgraded Instant Coffee Products That Cannot Be Ignored Although the market share of instant coffee powder is declining, it does not mean the entire instant coffee market is in decline. It can be seen that the instant coffee market is also upgrading. Brands like Three Squirrels (San Dun Ban) are online upgraded instant coffee brands, focusing on low-temperature cold brew and intelligent drying processes, which better preserve coffee flavor, making them closer to freshly ground coffee in aroma, freshness, and layering. They are convenient to use, dissolve in cold water in 3 seconds, and pair well with milk and soy milk, quickly rising to become the top online instant coffee brand.

This line's feasibility has been proven, and it will continue to grow in the future. Therefore, how to fight a defensive battle is a major issue for ready-to-drink products.

-04- Summary Ready-to-drink coffee has unique form and channel advantages compared with instant and freshly ground coffee. With the rise of the coffee craze, ready-to-drink has significant development space. Brands need to do consumer insight, grasp consumer demands, optimize and upgrade products, and better acquire users. The ten-billion-yuan track has opened; let's see who can laugh to the end!

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