A storm brew­ing in the cof­fee cup

Ne­spresso looks poised to cap­i­tal­ize on the fast-grow­ing mar­ket in China where con­sumers pre­fer to drink cof­fee in the com­forts of their homes

China Daily (Canada) - - SHANGHAI - By XU JUNQIAN in Shang­hai

xu­jun­qian@chi­nadaily.com.cn

For Al­fonso Troisi, the coun­try man­ager of Ne­spresso China, the de­ci­sion to not use the brand’s global ad cam­paign fea­tur­ing Ge­orge Clooney wasn’t a hard one to make as he be­lieves that the Chi­nese mar­ket is still not ma­ture enough to re­late to the Hol­ly­wood celebrity’s mus­ings about the prod­uct.

With more than ten years of ex­pe­ri­ence in China’s bev­er­age mar­ket, the Ital­ian said that the tai­lor-made video clip for the coun­try, one which vi­su­al­izes flow­ers, fruits and nuts cap­sulized into alu­minum con­tain­ers would in­stead be more ap­peal­ing to the con­sumers in the coun­try.

“In China, the abil­ity to choose the type of cof­fee fla­vor, for dif­fer­ent oc­ca­sions or moods, has just been es­tab­lished among a very small hand­ful of cof­fee drinkers,” said Troisi, who took over the reins of the brand’s China mar­ket about two years ago.

“They are very open minded, ready to ex­per­i­ment and taste new fla­vors,” he added.

As a tra­di­tion­ally tea-drink­ing na­tion, China has in re­cent years dis­played a rag­ing thirst for freshly roasted ground cof­fee, turn­ing it into one of the fastest grow­ing mar­kets among the 50 coun­tries that Ne­spresso has a pres­ence in.

Ac­cord­ing to a 2015 re­port by the In­ter­na­tional Cof­fee Or­ga­ni­za­tion, the pro­duc­tion and consumption of cof­fee in China has ex­pe­ri­enced dou­bledigit growth for the past few years, with the lat­ter grow­ing at 16 per­cent per an­num over the last decade. Im­ports of cof­fee have also grown sig­nif­i­cantly — 1.4 mil­lion bags en­tered the coun­try from 2013 to 2014, as com­pared to just 418,000 from 2004 to 2005.

Fur­ther­more, the or­ga­ni­za­tion es­ti­mates that China cur­rently pro­duces more cof­fee than Kenya and Tan­za­nia com­bined, and its consumption has al­ready ex­ceeded cof­feecrazy Aus­tralia.

Be­fore join­ing Ne­spresso, Troisi worked at Bri­tish al­co­holic bev­er­ages com­pany Di­a­geo, and it was there that he learned the drink­ing habits of the Chi­nese, who loved in­dulging in bai­jiu along with a wide range of other western liquors. He at­tributes this to their abil­ity to quickly adapt and ap­pre­ci­ate the ex­cite­ment that dif­fer­ent cof­fee beans bring.

Cou­pled with the fact that there has al­ways been a strong tra­di­tion of drink­ing hot bev­er­ages in China, even dur­ing sum­mer — Troisi es­ti­mates the daily consumption to be about seven or eight cups per capita — cof­fee has in­ad­ver­tently man­aged to quickly grow in pop­u­lar­ity.

In ev­ery Ne­spresso China bou­tique, 23 fla­vors, each la­beled with a dis­tinct color, are stylishly dis­played. Kazaar, the most in­tense of fla­vors, has en­joyed un­ri­valled pop­u­lar­ity here in China.

Chi­nese con­sumers have also demon­strated that, as com­pared to the past when they would rather stay home to enjoy a cup of sol­u­ble or in­stant cof­fee, they are now more will­ing to spend at restau­rants and cafes in or­der to try new fla­vors. How­ever,ac­cord­ing­toTroisi,the num­ber of peo­ple who pre­fer to sa­vor their coffees at home still forms the ma­jor­ity.

“In­ter­est­ingly enough, there is a com­mon per­cep­tion that out-of-home cof­fee consumption is big­ger, which is per­haps due to the high vis­i­bil­ity of cafes and peo­ple walk­ing with cof­fee cups in their hands. But it’s not yet the case in China, where there is more cof­fee con­sumed at home,” said Troisi, who added that China has the high­est growth rate of Ne­spresso club mem­bers.

He noted that Chi­nese cus­tomers are also very keen to have “a full shop­ping ex­pe­ri­ence” and most of them spend a min­i­mum of 30 min­utes at Ne­spresso’s bou­tique stores, talk­ing to cof­fee spe­cial­ists about their pref­er­ences and de­part­ing with their own per­son­al­ized col­lec­tions.

“Cof­fee has al­ways been a very so­cial drink. But for the Chi­nese, we are see­ing a unique trend where cof­fee is made and sipped alone at home as part of self-in­dul­gence,” said Troisi, re­fer­ring to find­ings from the com­pany’s cus­tomer re­search re­port about the China mar­ket. He added that an­other in­ter­est­ing find­ing is that Chi­nese con­sumers really value their mo­ments of in­tro­spec­tion while hav­ing a cup of cof­fee.

The Swiss brand has been one of the most pro­lific mon­ey­mak­ers for its par­ent com­pany, Nes­tle, with re­ported global sales of $300 mil­lion in 2013. Since its in­tro­duc­tion in China in 2007, the com­pany has gone on to open six bou­tique out­lets in the coun­try, though it has yet to un­veil a flag­ship store.

“Open­ing a flag­ship store in China is some­thing that we are con­sid­er­ing to do in the next three to five years,” said Troisi in an in­ter­view with China Daily USA, prior to the launch of its new Aguila 220 cof­fee ma­chine in China.

The name of the ma­chine as means “ea­gle” in Span­ish and it is con­sid­ered a break­through in the in­dus­try as it al­lows users to make a cup of cof­fee as pro­fes­sion­ally as a sea­soned barista. All cus­tomers have to do is push but­tons.

Troisi sees the new ma­chine as a ma­jor growth en­gine for Ne­spresso’s busi­ness-to-busi­ness sec­tor in China, given that there is a lack of ex­pe­ri­enced baris­tas in China, in ad­di­tion to other fac­tors such as in­creas­ing la­bor costs and high em­ployee turnover rates in the ser­vice in­dus­try. The com­pany is tar­get­ing restau­rants, ho­tels and cafes with the Aguila 220.

As of 2015, the num­ber of Star­bucks stores in China had ex­ceeded 1,500 in more than 80 cities, a clear sign of cof­fee’s grow­ing pop­u­lar­ity. How­ever, Troisi be­lieves that there is still much room for growth.

“Our fo­cus for now is mainly on Shang­hai and Beijing. The per­cent­age of peo­ple in the two cities drink­ing cof­fee is still quite low, around 20 to 30 per­cent,” he said.

“But this also means that the op­por­tu­ni­ties for cof­fee to flour­ish in China are huge.”

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