Building a coffee brand in a land of tea

Following the Marketing Society Asia launch event a couple of weeks ago, I’ve been reflecting on my five years to date in China. I’ve spent those five years working with clients to develop brand differentiation and consideration amongst the mind-bogglingly enormous and diverse Chinese population. Tackling the unique challenges of each brand, in each sector has been brilliant. From luxury hotels to high-end jewellers, consumer electronics retailers and skincare brands it’s been a privilege to be at the sharp end during such a dynamic period of growth and change.

And it’s getting more challenging. Whether the brand is of Chinese origin, or is an international powerhouse built over decades, there is usually something about the Chinese market that levels the playing field. And that’s the challenge I enjoy most.

Take coffee for example.
Walking through the Xintiandi area of Shanghai, or Sanlitun Village in Beijing it would be easy to think that the great tea-drinking nation of China had succumbed to the same coffee addiction that’s fuelled the coffee business of Europe and North America for decades (centuries in fact). It’s true that Starbucks and our client Costa have a strong and growing presence in China, and on the surface their outlets look largely the same as any around the world. A source of great relief to many a western traveller.

However, there is still huge opportunity for growth, and building these brands (there are many others in China, both domestic and international) in the land of tea presents some unique challenges. It’s great to have a footprint of shops, and have people sitting in them. But to make money it’s important to sell product. And to do that, consumers needs to understand, and appreciate, great coffee. They need to understand the effort and skill that makes a Mocha Italia espresso from Costa perfect every time and that every espresso is not equal. A nation of tea drinkers need to learn about coffee. The good news is that the demand is there.

Quality coffee shops started to appear in major cities in China in the early part of the 19th Century, centred very much on the east coast during Shanghai’s heyday as the ‘Paris of the East’. But after a half-century Mao inspired (or dictated) hiatus, it was only in the 1990’s that coffee began to resurface.

Today...
Chinese consumers love the coffee shop experience. They also love the status that patronising a western coffee shop brings (as evidenced by the sheer volume of social media pics featuring branded coffee cups). Dwell times are high as a result. However, many consumers are still on a path to becoming lovers of coffee and it’s here that the brands are working hard to educate their customers, encourage trial, develop understanding and facilitate a journey of discovery. And this is where brands such as Costa in China start to ‘localise’ the proposition and experience to create synergy with their global brand positioning.

China is undoubtedly a booming market with huge potential, but the consumer starting point in terms of understanding and taste is different from western markets, and the competitive environment is ever changing.

Starbucks and Costa have an early advantage, but the market is becoming more competitive. New international brands are entering, domestic brands are getting stronger and the consumer is getting ever more savvy.

First mover advantage has largely disappeared. The playing field is levelling and the challenge to create brand differentiation and increase consideration and preference is getting tougher.

This is true not just for coffee, but for almost every sector.

Bring it on!

Jonathan is MD of StartJG in Hong Kong. Read more from him in our Clubhouse and follow him on Twitter @JonathanHK