BEIJING Students returning from abroad and frequent international travellers will keep China's coffee consumption at 15 to 20 percent annual growth by patronising new domestic outlets selling high-priced versions of the brew, industry watchers said.
Participants at the Beijing International Coffee Fair at the weekend said China remains a frontier for high-end coffee sales, with domestic and international firms looking at major expansion despite roadblocks such as high taxes.
Starbucks Coffee International (SBUX.O) said last month that the world's largest coffee chain plans to more than triple its cafes in mainland China, from 450 currently to 1,500 by 2015, and bean traders are taking note.
"With more and more Chinese students returning from abroad, China's coffee (consumption) will improve a lot in five years," said Yang Ke, the general manager of Shanghai Walton Concepts Economic & Trading Co., a coffee trader.
But China still remains a marginal coffee producer and drinker, with annual consumption around 30,000-35,000 tonnes and domestic output of 40,000-45,000 tonnes, compared with global production of 9 million to 10 million tonnes, according to industry sources.
"China's average coffee consumption is three cups per person per year, while the world's average is 240 cups, thus there is much room to improve it," said Ji Ming, chief of the Beijing Coffee Industry Association.
In order to help lift domestic output, Starbucks said last year it would work with farmers in the main growing Yunnan province, though Fu Jingya, a deputy secretary general of Coffee Branch under China Fruit Marketing Association, said that finance remains a problem.
Some farmers however may be tempted by high global prices. Supply problems in robusta producers Vietnam and Indonesia have underpinned sentiment in the global coffee market, which has seen the price of higher-quality arabica beans rising to 34-year highs due to a scarcity in the variety.
The International Coffee Organization estimates that global coffee consumption rose 2.4 percent to a record 134.0 million 60-kg bags in 2010 and it sees the upward trend continuing despite the rise in prices this year.
TAXES AND SUPPLY
China's coffee consumption growth and business opportunities for high-end outlets remain challenged by coffee import taxes, industry sources said. Chinese buyers need to pay an 8 percent to 30 percent tariff for coffee imports for raw beans to instant coffee as well as a 17 percent value-added tax.
Shanghai Walton's Yang said for a coffee shop that sells 1,000 cups of coffee per day, sourcing for quality beans at competitive prices remains a major hurdle to expansion, a view echoed by Yu Peng, the general manager with Feel Cafe in the port city of Dalian.
"The stable development of the coffee industry needs the support of favourable trading conditions, otherwise high prices will curb consumption and hurt quality," Yu said.
(Reporting by Zheng Xiaolu and Lewa Pardomuan; Editing by Ed Lane)