Source: CHEAA-run China Appliance magazine

Chinese consumers’ attitudes towards coffee change along with their growing pursuit of a high quality of life. From beverage to social lubricant, coffee seems to become a cultural symbol nowadays and has been penetrating into our daily life. Clearly, the growing number of coffee consumers generate new business opportunities for coffee machine makers. How will they embrace the up-and-coming coffee wave? What kind of deployment will they make?

The industry is to take off with great prospects ahead

As coffee culture heats up in China, the number of cafes balloons. Luckin Coffee, as a rising star that excels in new retailing mode, is pushing the boundary of coffee consumption, which drives the industry to flourish. Chinese coffee consumption grows at a rate of up to 15% with a market size of more than 100 billion Yuan for year 2017 alone, as China Appliance journalist learns from open online data. It is learned that the market is estimated to hit 300 billion Yuan in 2020 and 1000 billion Yuan in 2025.

Coffee machine manufacturing industry sees the rising trend too. International players including Delonghi, SMEG, Siemens, Philips, Nespresso, Dolce Gusto and Jura as well as domestic brands including Scishare of Xiaomi, Merol and OneCup of Joyoung are all actively making deployments.

Sales of household coffee machines in Chinese market registered 1.44 million units in 2018 with 1.26 million units from online channels and 0.18 offline, according to China Market Monitor. The number hit 0.63 million units in the first half of 2019 with 0.54 million units from online and 0.09 million units from offline. The sales value for the same period posted 700 million Yuan. Insiders believe that the sales number will to go further up in the second half this year.

It is worth noting that sales performances differ by coffee machine types. The first half of 2019 saw a clear rise in sales of fully-automatic espresso machines which grew by 7% year-on-year in sales volume and 26.9% in sales value, and nespresso machines which grew by 23% and 27.1% in sales volume and value respectively, according to China Market Monitor. In a contrast, semi-automatic espresso machines and drip coffee machines slid in sales at online channels.

Speaking of reasons, Zhang Yaohua, Sales Director of Merol, believes that, Chinese consumers are different from Western consumers in many ways from preferred tastes to drinking time. For example, 70% of Chinese consumers prefer frothy coffee with milk such as Latte or Cappuccino and 30% preferred Americano. He further explains that, “Chinese consumers like fully-automatic coffee machines and nespresso machines for the diversified flavors they offer, while are less interested in semi-automatic machines and drip machines for the complicated manual operations.”

Hu Jiehui, General Manager of Scishare, points out that, the strong sales momentum of nespresso machines reflects the fast pace of life in modern cities which, in the sense of coffee, means making a cup of coffee fast. “It is also related to the development stage of Chinese coffee machine market. Currently, most Chinese consumers are at a beginning stage where they’d love to try out more flavors yet they do not drink regularly. Coffee beans could hardly show the flavor visually as coffee capsules do. Plus, capsules measure the quantity in an accurate way, and are easy to preserve.”

When it comes to the prospect of the industry, Hu Jiehui believes that, Chinese coffee machine market has been growing all the way up. The consumer base are expanding and their knowledge of coffee is growing too though the total number is relatively small. He adds that, western market is saturated but in Asia, China is the most valuable market.

“Coffee culture is penetrating in Chinese market and the average consumer age is getting young. This will bring more opportunities to Chinese coffee machine brands and market.” Our interviewee from Joyoung says.

Nespresso, the “internet celebrity” of coffee machines

Nespresso machines sell in huge numbers online in recent years. The nespresso machine of Dolce Gusto entered Chinese market in 2013 and won the heart of Chinese consumers with its stylish look and easy-to-use design. After that, nespresso machines expand fast in China by capitalizing on China’s rising coffee consumption trend. Plus, the affordable price, compact look and fast operation meet the needs of Chinese consumers in the beginning stage of Chinese coffee consumption.

Apart from Dolce Gusto, Nespresso, OneCup and Scishare also stand out in market performance.

I visited an experience store of Nespresso in Sanlitun, Beijing and learned more about the brand from the staff. According to them, Nespresso pumps are designed and manufactured in its Switzerland-based headquarter. Some of the models are manufactured by Delonghi. Regarding brand positioning, Nespresso and Dolce Gusto target different audiences. “Nespresso is positioned higher than Dolce Gusto with some models charged at the same price level of fully automatic machines. Plus, Nespresso coffee capsule gives the same aroma as the aroma of grinded beans in making Espresso or Americano. It focuses mainly on coffee while Dolce Gusto offer multiple kinds of beverages including milk tea and iced tea despite coffee.”

Scishare nespresso machines make great efforts in digging into consumer needs. “We offer quality service to consumers by staying close to their needs and addressing their pain points.” Hu Jiehui says. Scishare targets young consumers aged 25 to 40 living in first-tier cities. Hu Jiehui introduces that, “we currently have two models S1101 and S1103 which are developed to compete with the low-end and high-end models of Nespresso. They are mostly sold online.” He underlines that, “Scishare machines are compatible with Nespresso capsules. Speaking of R&D, we develop a steam wind that is capable of frothing milk without adjusting angles.” It is learned the design has been applied to the brand’s commercial coffee machines. Hu Jiehui reveals that the technology will soon be used in household models.

OneCup, a sub-brand of Joyoung, focuses on flavors. As a household name for soybean milk machines, Joyoung launched OneCup. Our interviewee from Joyoung explains that, OneCup is committed to localizing nespresso machines. Instead of devoting solely on coffee, it expands its portfolio to include soybean milk, milk tea, and floral and herbal tea. It calls for a simple, efficient and healthy life style. Through standardized beverage capsules, it is ready to provide more options for a healthy, efficient breakfast.

Fully-automatic coffee machines are mostly used commercially due to high prices

Fully-automatic coffee machines take the lead in high-end market.

International brands such as Delonghi, SMEG, Siemens, Jura and Philips deploy this sector early and have seen good market performance. Our interviewee from Shundian, an e-commerce platform of home appliances, introduces that, fully-automatic coffee machines are still very much to the liking of consumers who prefer high-end products though charged at high prices. “Only real coffee lovers buy semi-automatic products. Common consumers tend to choose more easy-to-use fully-automatic ones. This is why fully-automatic models sell in larger numbers than semi-automatic ones.”

The price range of fully-automatic coffee machines is higher than other categories of the kind. After visiting stores and browsing mainstream online platforms, I learn that drip coffee machines and nespressos are charged at around 1,000 Yuan with some imported products higher than average, semi-automatic machines are mostly under 2500 Yuan, while fully-automatic machines are generally above 2,500 Yuan with quite a number of high-end models above 10,000 Yuan.

The hefty price, in some way, is a drag on the process of fully-automatic machines entering households. Most consumers use fully-automatic machines in commercial areas such as hotels and companies. For this reason, Merol highlights its expansion in commercial scenarios. Zhang Yaohua says, domestic coffee machine market grows steadily and the growth in commercial use is faster than household use. He adds that, “Merol is deploying our products in more and more commercial scenarios. Down the road, more enterprises will do the same thing.” He believes that fully-automatic machines will expand its application in more commercial areas including clothing stores, restaurants, even bullet trains.

More consumer education is needed

Speaking of the barriers the industry faces, our interviewees generally believe that, consumers’ knowledge of coffee machines are insufficient, which restricts the further development of the market.

Zhang Yaohua says, on its surface, Chinese coffee machine market grows excitingly driven by the popular coffee culture, but the truth is, few people really know coffee. Coffee machine ownership in Chinese households is still rather low. Coffee machine is not a must-have home appliance for Chinese families for the time being. He adds that, currently, the market is in a stage that needs consumer education. He believes consumers’ knowledge of coffee products including coffee machines will grow along with the strong campaigns at various channels.

“At current stage when consumers know little about coffee machines, we expand the product’s commercial scenarios to allow consumers to get to know coffee, to like coffee, and start to drink coffee as a daily routine and eventually have their own coffee machines. This is how we do consumer education.” Zhang Yaohua says.

Hu Jiehui believes that, the prospects of Chinese coffee machine market goes hand in hand with the development of household coffee machine market, which would not possibly grow without the involvement of consumers. “Consumers don’t have a lot of leisure time at home now. They haven’t find the value of a household coffee machine.” He points out that, “The market will be very different when the penetration rate of coffee machines in urban areas hit 30%-40%. But the process could be long.”