Looking to coffee for great marketing case studies in China

A leisurely Sunday morning is one of the few times many urban Chinese have the chance to relax and reflect amidst the bustle of city life. Parked up at a local café, taking in the gentle rhythms of the day, a light pastry or dim sum awaits, paired with a fragrant, freshly brewed coffee. But who needs a boring old cappuccino, when you could complement your croissant with a beef balls coffee, or one with preserved egg or pickled cabbage ?

“Chinese-style coffee” is one of the more interesting product localisations in China. The concept’s popularity has ballooned, with searches on food & lifestyle app Dianping soaring 4,713% last year . It is representative of the Guochao trend , which has seen waves of Chinese consumers opting for brands and products which incorporate Chinese elements.

Starbucks is well-known for making coffee popular in the predominantly tea-drinking land. It was rewarded as a result. As recently as five years ago, the Seattle-based chain commanded a whopping 70% share of the coffee shop market . That is nearly unheard of for a mainstream category in China, where markets are generally contested and fragmented.

Starbucks has done many things right and over the years in China, providing best practice examples of how foreign brands can localise to appeal to Chinese consumers while maintaining their DNA . Just last week, Starbucks opened its China innovation and technology centre in Shenzhen to continue to help it continually evolve in a locally-relevant way. While we still have much to learn from Starbucks, China’s coffee industry has matured along with its consumers, and we can look wider than Starbucks for examples of how to reach and connect with Chinese consumers.

Starbucks recently announced an impressive 51% rise in revenue last quarter, and had clocked up nearly 6,500 locations in China by last month , but it was trumped by its old foe Luckin. In most markets, any company exposed for fabricating $310 million – 42% of reported sales – would have died a swift death. Yet in a survey at the time over half of Chinese accepted that their “national champion” can make mistakes . The company who’s value fell from $13 billion to around $1 billion in three months, before being delisted from Nasdaq, has ‘risen from the ashes ’. Earlier this month Luckin announced it had overtaken Starbucks in sales for the first time . It’s revenue grew 88% last year and it had opened 10,000 locations in China by June.

For many Chinese, Luckin’s spectacular comeback far outweighs any reputational damage it suffered from cooking the books. It is a classic come-back-against-all-odds story which Chinese consumers love.

But Luckin didn’t do it just from offering cheaper versions of Starbucks coffee. It read the market, understanding Chinese consumers’ need for convenience, with a strong delivery and takeout focus – this was particularly lucrative over the pandemic. It also brought in 50 million new customers in June with its affordability promotion . And it diversified offerings and made them much sweeter to appeal to the many Chinese people who are averse to the bitter taste of traditional coffee.

Luckin’s sweet ‘coffees’ follow the same vein as “Chinese-style coffee” which appeal to the Chinese palate and to Chinese consumers’ love of the new and novel . The guochao trend isn’t just for local brands, there are numerous examples of foreign brands have successfully tapped into this across different categories. It also illustrates to consumers how seriously they take China.

Coffee stores’ willingness to localise by city and region is also a steer many brands could take . Examples include coffees embracing characteristics of a region, such as “stinky tofu coffee” in Changsha and “lotus coffee” in Hangzhou , a term which saw searches increase 12,033% last year on Dianping.

Whether you’re selling coffee or cosmetics, there is plenty to learn from China’s coffee category. Brands should stay true to their roots, but not be too staid. Have some fun. Work with an agency like China Skinny to identify local preferences, trends and potential collabs that will may make your products a little more interesting and sharable to Chinese consumers. And when localising, don’t only think about products and labels, but everything from formats, to channels, to messaging.

Starbucks believes that there is “so much more opportunity ahead in underpenetrated areas within this market.” That is applicable to so many categories in China beyond coffee.