INSIGHTS
Emerging Boutique Instant Coffee Snatches Market Share from Traditional Instant Coffee
BY Rita BaoNov 18, 2022
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market-banner-8.gifDriven by growing coffee consumption, the Chinese coffee market has entered a stage of rapid growth and market segmentation. By categories, Chinese coffee products include instant coffee, ready-to-drink (RTD) coffee and freshly-ground coffee. Due to convenience and price advantages, instant coffee has dominated the Chinese coffee market since its first appearance in the late 80s. According to iResearch, in 2020, the market shares of instant coffee, RTD coffee and freshly-ground coffee were 52.4%, 11.1% and 36.5%, respectively. 1

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Boutique Instant Coffee Brands Challenge Traditional Instant Coffee Brands

Instant coffee products are classified into traditional 3-in-1 instant coffee and boutique instant coffee (including freeze-dried coffee and liquid coffee concentrate). In the instant coffee market, traditional 3-in-1 instant coffee brands represented by Nestle and Maxwell have occupied the leading position. Meanwhile, through upgrades of raw materials, technology, packaging, marketing etc., boutique instant coffee brands have rapidly seized the market share. Leading Chinese boutique instant coffee brands such as Saturnbird, TASOGARE, and Yongpu have won eye-catching investment and achieved remarkable revenue growth since their establishment. According to MKTINDEX, in Q1 2022, the top five instant coffee brands on Tmall were Nestle, TASOGARE, Saturnbird, Starbucks and Yongpu, with sales approaching 188, 120, 112, 74.6 and 68.3 million yuan, respectively. 2

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Why Is Boutique Instant Coffee so Popular

Upgrades of Flavor, Technology and Packaging

Traditional 3-in-1 instant coffee contains non-dairy creamer and sugar. As consumers have higher requirements for coffee’s quality, healthiness and flavor, traditional 3-in-1 instant coffee is gradually labeled as "low-end", “unhealthy” and "unpalatable". Against this background, boutique instant coffee is made from high-quality coffee beans with no additives. Besides, the enhanced production technology not only preserves the original flavor of coffee but also ensures the instant dissolution of coffee powder in liquid at any temperature. These upgrades cater to consumers' demands on quality, healthiness, flavor and diversified drinking scenarios. In addition, to catch young consumers' attention, boutique instant coffee adopts fashionable packaging such as Saturnbird's small-cup-like packaging, Yongpu's flying-saucer-like packaging, and Secre's donut-like packaging.

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Competitive Price

As boutique instant coffee has a competitive price between freshly-ground coffee and traditional instant coffee, it is in line with consumers' pursuit of high-quality coffee at affordable prices. 

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Enhanced Sociability Through DIY Coffee

The burgeoning of boutique instant coffee is boosted by social networking. In 2021, Luckin launched its top-selling product—Coconut Latte, which was frequently sold out. Since then, thousands of consumers have tried to DIY this flavor. On the Little Red Book, there are over 30,000 notes about "Homemade Coconut Latte" and over 600,000 notes about "Homemade Coffee". The prevalence of homemade coffee on social media has led to the soaring exposure and demand of boutique instant coffee (especially liquid coffee) as a suitable material. According to Nint, the sales of liquid coffee on Tmall (June 19, 2021-June 20, 2022) increased by 215% over the same period last year (June 19, 2020-June 20, 2021).3 

图片5.jpg“Homemade Coconut Latte” notes on the Little Red Book

Ingenious Marketing

1. Young-consumers-oriented Content Marketing (Saturnbird as an Instance)

Saturnbird launches the "Return Project" semi-annually with different cultural themes. Consumers can make a reservation on Saturnbird's WeChat mini-program, and then bring the small-cup-like packaging to one of the nearly 300 recycling points among more than 60 cities, which are usually cafes in collaboration with Saturnbird. After that, they can get delicate peripherals. In addition, Saturnbird once launched the "Turning Small Cup to Flowerpot" activity, encouraging consumers to use the waste small-cup packaging as mini flowerpots, which was interesting and environment-friendly. These activities have shortened the psychological distance between Saturnbird and consumers and subtly enhanced brand image in practising social responsibility.

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2. Collaboration with Super IP (TASOGARE as an Instance)

In April 2021, TASOGARE became the official designated coffee provider of the 19th Hangzhou Asian Games in 2022. This is the first time that a Chinese coffee brand has stood out in an international arena. In June 2021, TASOGARE officially announced famous actor Zhan Xiao, who has a huge fan base, as the global brand ambassador, which aroused heated discussion on social media and achieved over five billion views on relevant topics. The Asian Games and the endorsement have brought massive traffic to TASOGARE, enabling this brand to gain high recognition from the public.

3. Co-branding (Yongpu as an Instance)

Co-branding can help brands reach consumers from all walks of life. On the Double-eleven Shopping Festival in 2020, Yongpu teamed up with 60 brands to carry out a joint marketing campaign, through which Yongpu ranked the first in liquid coffee sales with a revenue of over 20 million yuan.4 Successful co-branding provides brands with huge data traffic from extended consumer groups, generating the effect of 1+1>2.

7-1.jpgYongpu’s Co-branding Partners

How Can Traditional Instant Coffee Brands Defend

In addition to 3-in-1 coffee, traditional instant coffee brands also innovate coffee flavor, production technology, and packaging to meet consumers' increasingly diversified needs. For example, after Nestle and Starbucks formed a global coffee alliance, they jointly launched the Starbucks At Home series, which includes boutique instant coffee products. Maxwell House also launched freeze-dried coffee.

Chenyu Liu, an analyst of iResearch, indicated that coffee brands should not only focus on products but also lead consumers to explore diversified coffee culture and lifestyle. For traditional coffee brands, it is necessary to convey their brand concept established through the long history while guiding customers to discover more coffee scenarios in line with the latest consumption trends. Content marketing, KOLs and co-branding are effective ways.

Angela Wang, an analyst of Euromonitor, highlighted the importance of channels. Instant coffee sales on e-commerce platforms has upsurged and is expected to account for 37% of the total sales in 2022. Compared to traditional offline retail channels, e-commerce platforms have a higher return on investment and can raise brand awareness more quickly. That is why emerging boutique instant coffee brands focus on e-commerce channels. Traditional instant coffee brands should also increase their investment in e-commerce channels. Angela Wang also indicated the potential of B2B business through cooperation with high-end fitness centers and stadiums because coffee's positive effect on sports and fitness has been increasingly recognized.  

According to Yi Zhang, the CEO and chief analyst of iiMedia, emerging boutique instant products are mostly without high technological barriers and are produced in the Original-Design-Manufacturer (ODM) model. Therefore, it also gives traditional instant coffee brands the chance to enter this segment. By upgrading the product matrix to cover both traditional instant coffee and boutique instant coffee, and optimizing channels with more focus on young coffee consumers, traditional instant coffee brands have the chance to reach a wider range of consumers and hence consolidate their dominant position in the market. 


Rita Bao
ChemLinked Market Research Analyst
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