---
title: "Why Are Nongfu Spring and Coca-Cola Entering the Coffee Sector?"
description: "Across China, a fierce battle for the coffee market is underway. Although coffee is simple, it can take on many forms. On the weekend, at the Panic Coffee Shop on Xinnan Road in Chongqing, a customer with a strong literary bent, Ms. Liu, said she loves the fresh, forest-style decor and the signature dirty coffee, which the owner specifically advises not to stir, offering a layered taste that is refreshing."
author: "李国"
publisher: "New Distribution"
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published: "2019-05-17"
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# Why Are Nongfu Spring and Coca-Cola Entering the Coffee Sector?

> Across China, a fierce battle for the coffee market is underway. Although coffee is simple, it can take on many forms. On the weekend, at the Panic Coffee Shop on Xinnan Road in Chongqing, a customer with a strong literary bent, Ms. Liu, said she loves the fresh, forest-style decor and the signature dirty coffee, which the owner specifically advises not to stir, offering a layered taste that is refreshing.

**Across China, a fierce battle for the coffee market is underway.**
Although coffee is simple, it can take on many forms. On the weekend, at the Panic Coffee Shop on Xinnan Road in Chongqing, a customer with a strong literary bent, Ms. Liu, said she loves the fresh, forest-style decor and the signature dirty coffee, which the owner specifically advises not to stir, offering a layered taste that is refreshing.
Chongqing, originally a fast-paced metropolis, has seen internet-famous coffee shops spring up like mushrooms in recent years, from commercial streets to cultural and creative stores, with styles ranging from fresh and elegant to bold. Coffee lovers now span all age groups. With so many enthusiasts, a new industry has emerged.
The advantages of being a junction of the "Belt and Road" and the Yangtze River Golden Waterway have given Chongqing a natural edge in opening up to the outside world, and this is particularly evident in the coffee industry, which was built from scratch. A reporter learned from the Chongqing Coffee Exchange Center Co., Ltd., located in Liangjiang New Area, that coffee trading volume reached 15 billion yuan in 2018, making Chongqing a new coffee trade hub.
Chongqing, which does not produce a single coffee bean, plays a very important role in the domestic coffee industry. Across the country, a lively battle for the coffee market is underway. In addition to existing competitors, several beverage brands not originally in the coffee sector have also announced their entry into the coffee market. **Among them are industry giants such as Nongfu Spring and Coca-Cola.**
Industry insiders say that with the improvement of people's living standards, growing awareness of coffee culture, and the huge demographic dividend, the coffee market has become a new growth point for the beverage industry. At the same time, the high profits of ready-to-drink coffee have also excited the giants.
**Beverage Giants Enter the Coffee Market**
Recently, a Nongfu Spring spokesperson revealed that they will launch a new product, officially entering the coffee sector. According to reports, the product is a carbonated drink that incorporates coffee ingredients, priced at 5-6 yuan.
A reporter from Workers' Daily learned that before Nongfu Spring announced its entry into the coffee sector, Heytea and Nayuki had already launched coffee products. Later, beverage companies not in the coffee field, such as Coca-Cola and Vitasoy, also announced their entry into the coffee market.
In addition, coffee newcomer Luckin Coffee is growing rapidly and recently filed for an IPO in the United States. At the same time, emerging coffee brands such as Youyin Coffee, Lian Coffee, and Coffee Zero Bar are making aggressive moves. Traditional coffee giants Nestlé and Starbucks have also been active recently.
For example, after Nestlé officially joined forces with Starbucks in August last year to establish a global coffee alliance, in February this year it launched 24 Starbucks coffee new products, including coffee beans, ground coffee, and capsule coffee. In April, Nestlé launched three fruit-flavored cold brew coffee new products and opened a Beijing-style coffee pop-up store in Beijing.
Luckin Coffee is also growing rapidly. This company, known as "the one that plays capital best in the coffee circle," has not forgotten to launch new coffee products while playing with capital. Luckin Coffee claims that as of the end of 2018, based on the number of its stores and the number of cups sold last year, it is China's second-largest and fastest-growing coffee operator.
Online, e-commerce companies such as Amazon and JD.com are also testing the coffee market, wanting to share a piece of the "coffee" cake.
Industry insiders believe that as multiple giants gradually increase their presence in the coffee sector, emerging markets and traditional coffee fields are about to enter a new round of rapid competition.
**The Coffee Sector Has Promising Prospects**
"Coffee drinks have become one of the favorite beverages among young people, showing a trend of high sales and high profits," said Cheng Wei, the owner of an internet-famous coffee shop in Jiangbei District, Chongqing. He admitted that in the past two years, coffee sales in his store have increased year by year, especially in the afternoon, when the number of consumers buying in-store and ordering delivery is so high that six or seven staff members can barely cope.
Cheng Wei said that Chongqing does not produce a single coffee bean, but it has the largest coffee trading center in the country, providing many raw material options for those in the coffee industry, greatly saving costs. Moreover, relying on this trading market, people are increasingly recognizing "coffee culture." "I had two staff members who learned for over a year in the store, and now they have opened their own coffee shops in their hometown counties."
The head of another coffee company in Chongqing revealed that a cup of coffee of more than 300 milliliters generally requires only 5 grams of roasted coffee beans, and a two-group Italian espresso machine can hold at most 20 grams, so each cup will not exceed 10 grams of coffee beans. Calculated at an ex-factory price of 69 yuan per kilogram, the cost of 5 grams of coffee beans should be 0.345 yuan. "Now, with an average selling price of 25 yuan per medium cup, one kilogram of coffee beans can sell for 5,000 yuan, while the ex-factory price is less than 70 yuan. Even after adding taxes, transportation, labor, rent, and other costs, the cost per kilogram of coffee beans will not exceed 200 yuan, which shows how large the profit margin for coffee is."
From a market perspective, China's coffee market is entering a stage of rapid development. Luckin Coffee's prospectus shows that in 2018, per capita coffee consumption in China was 6.2 cups, which is only 1.6% of that in the United States compared with developed countries. In 2018, China's coffee market size reached 56.9 billion yuan. With the improvement of people's living standards, growing awareness of coffee culture, and the huge demographic dividend, domestic coffee consumption is stimulated. It is expected that by 2023, per capita coffee consumption in China will reach 10.8 cups, and the coffee market size will be 180.6 billion yuan.
Seizing the demand for integrated service platforms from the rapid growth of the domestic coffee consumption market, the Chongqing Coffee Exchange Center quickly became the largest coffee electronic trading platform in China with the only financial settlement function. It has also cooperated with institutions such as the Ethiopia Commodity Exchange and the Coffee and Tea Authority to promote the entry of foreign specialty coffee into the Asian market through the trading platform.
According to Peng De, general manager of the Chongqing Coffee Exchange Center, after the center was established, it quickly attracted more than 300 member companies, covering the entire industry chain including coffee cultivation, storage, trade, and deep processing. In addition, the coffee trading center has also triggered a "siphon effect," with coffee-related industrial supporting facilities being arranged in Chongqing, making Chongqing's coffee industry chain increasingly complete.
"With a large market and high profits, giants have no reason to ignore the 'cornucopia' of the coffee sector," said industry experts. They believe that China's coffee market is far from saturated, and its prospects are very broad. In the future, more industries and companies may enter this field.
**Where Do Offline Companies Go in the "Fast-Moving Consumer Goods Era"?**
"Although major beverage giants have entered the coffee sector, making coffee 'hot' again, it is worth noting that the number of coffee shops in many first- and second-tier cities is experiencing negative growth," said Luo Gang, a veteran practitioner in the coffee circle. **In his view, the current development of China's coffee market is relatively abnormal, with cases of well-known coffee shops closing down everywhere. "Many practitioners have left the industry, while many 'new forces' are trying to squeeze in, moving from the front stage to behind the scenes, from offline to online... Coffee, which was originally meant to be savored, has entered the fast-moving consumer goods era."**
It is understood that in recent years, the new retail trend has continuously blown into the coffee field. First, a senior executive of Shenzhou Youche claimed to enter the market with 1 billion yuan. Then, coffee delivery brand Lian Coffee announced that it had received 158 million yuan in Series B financing, transforming from a "follower" delivering for Starbucks to a brand of its own. In addition, self-service coffee machine operators such as Laibei Coffee, Coffee Zero Bar, Xiaoka, and Youyin have all raised funds. For a time, a story of new retail saving the coffee industry was about to unfold, and the industry seemed prosperous.
Luo Gang believes that despite the apparent prosperity, returning to coffee itself, the core of coffee taste lies in raw materials rather than production processes. The quality of coffee beans determines about 60% of the taste. The supply chain is mature and stable enough to be commercialized, meaning that coffee bean production areas are stable and roasted bean processing technology is mature. The cost of opening a store mainly comes from rent and labor rather than coffee beans themselves. The coffee industry has low entry barriers and low core barriers, so coffee may not really be a good business.
He suggested that offline coffee shops need to actively move closer to fast-moving consumer goods and plan ahead to occupy a proactive position on the future fast-moving consumer goods track. "If a company is already operating well, it should ensure coffee quality while taking a differentiated competition path to further explore potential consumers."
In addition, during interviews, many practitioners told reporters that although the current coffee market is expanding, it still faces the problem of insufficient rigid demand.
Although the market is far from mature, it does not mean there are no opportunities. Some experts suggest that native players in the coffee industry, while doing a good job in the main coffee business and ensuring taste and quality, can also expand their sales areas by developing derivative products. Since non-coffee beverage companies can enter the coffee sector, they can also broaden their business scope. Furthermore, they can actively integrate into other industries, making coffee a sub-industry and mutually guiding traffic with the parent industry.
Source: Workers' Daily
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