August 8, China Resources Enterprise Ltd. (0291.HK:) plans to increase the number of its Pacific Coffee chain stores in China 5-fold by the end of this year as it looks to tap into the country’s booming coffee market.
China Resources Enterprise acquired an 80% stake in Pacific Coffee, Hong Kong’s second-largest coffee shop chain after Starbucks Corp., from Chevalier Pacific Holdings Ltd. for HK$326.6 million last year.
The company counts the coffee shop chain as part of its plans to expand its retail business in China, where consumer spending is surging as the country’s economy continues to grow.
Pacific Coffee, which had about 100 stores in Hong Kong, Macao, Singapore and Malaysia at the end of last June, was founded in 1992 by U.S. technology executive Thomas Neir in Hong Kong, where most of its outlets are located.
Coffee Market
At the time of the acquisition, China Resources Enterprise deputy managing director Frank Lai said the company was planning to increase Pacific Coffee’s presence in mainland cities alongside the expansion of its hypermarket business.
Lai said China Resources Enterprise was hoping to build Pacific Coffee into a high-end brand catering to more sophisticated consumers.
China’s growing middle classes are boosting demand for coffee, and consumers are being assiduously courted by international coffee chain giants Starbucks and Costa Coffee and local brands; earlier this year the head of Starbucks praised the country’s emerging “morning coffee ritual”.
About 30,000 tons of coffee is consumed in China per year, with a market value of RMB 50 billion. The domestic market is growing at a rate of 25% annually, which is much faster than the global average rate of 1.5%, according to data seen by the 21st Century Business Herald.
Xiong Xiangru, director of the Coffee Association of Yunnan, believes the value of China’s coffee market will reach RMB 3 trillion by 2030. Yunnan province is China’s main coffee growing region.
The world’s largest coffee chains see China as a key growth market, and many have plans to make it their second-largest national market in the coming years.
Starbucks had more than 800 stores in 33 cities in China, Hong Kong and Macao as of this March, including 450 or so on the mainland. Starbucks has said it plans to have 1,500 stores across the mainland by 2015, which is already the Seattle-based company’s second-largest market outside of the U.S.
UK-based Costa Coffee also said it would open more than 100 stores in China next year, after having recently inaugurated its 100th China-based outlet in Beijing.