Case study of Costa Coffee’s marketing in China


Growing demand from an increasingly large middle-class population

British coffee chain ‘Costa Coffee’ has expanded significantly into the Chinese market and has ambitious plans to further increase its market share. Costa currently operates in 28 different countries and owners ‘Whitbread’ are optimistic about this lucrative international opportunity. Costa is targeting China’s huge, emerging middle-class population who are becoming increasingly attracted to European-style coffee culture. Estimates suggest that by 2030 there will be over 850 million middle-class consumers in China, the potential is astounding.

The coffee seller believes that “people in main urban populations can afford to pay for a cup of its coffee once their annual income has reached the $20,000 mark,” reports the financial times.

Along with this increase in disposable income, more people pursue a higher standard of living in China than ever before. With an increasingly ferocious demand for global trends and ideas, the exportation of western coffee culture is hardly a surprising development.

Costa started opening stores in China six years ago as part of a strategy to ‘make China a second home’, according to Andy Marshall, managing director of the company’s international franchise.

Costa Coffee’s Figures:

  • Ambitions to almost treble its business to around 900 stores.
  • It currently operates 344 sites,
  • 43 new stores opened during the last financial year.
  • The number of coffee shops in China doubled from 15,898 to 31,283 between 2007-2012

The trend is clear to see, Chinese coffee consumption has increased dramatically. There is evidently a very high demand.

The ‘Consumer Experience’ is vital

Costa will be competing with American corporate giant ‘Starbucks’ which has been very successful in China by building stores to suit local preferences and elevating the consumer ‘experience’ factor. New entrants are arriving every day into this lucrative market and therefore this consumer ‘experience’ becomes even more vital.

Many Chinese coffee drinkers, “place greater value on the experience and environment these cafes provide, rather than on the quality of the coffee itself,” reports China Briefing.

This demonstrates the importance of understanding and knowing the Chinese market. The Chinese have of course historically drunk tea and not this European style of coffee. The phenomenon is perhaps then not so much a desire for the ‘taste’ of coffee but instead a real appreciation of the environment it is consumed in. The stores are often bigger in China with more seating space.

Unlike Americans, most Chinese customers don’t just ‘grab and go’. People are at leisure, “enjoying the tranquility that’s usually elusive in teeming China” writes Violet Law in the global post.

Coffee shops here are more of a destination. People take their time, they sit and chat with friends and family or conduct lengthy business meetings. In Chinese cities, people look for a quieter, calmer, and more peaceful environment. Space sets itself apart from the constant franticness of the larger, highly populated urban areas which characterize China. Chinese customers seemingly value the ‘environment’ very highly and therefore the space and atmosphere of the coffee store should be considered an important factor when launching here.

With its Italian image in Europe, Costa aspires to capture this type of Italian aura in the Chinese market too. This strategy raises important questions about the brand experience, what do the Chinese actually want in terms of the ‘environment’ of a coffee shop? Market research, social networking, and up-to-date information regarding consumer trends are all vital to continually assessing this (Look at the top 5 Social media strategies).

Costa Coffee has benefited from a local partnership

This is a success story because of a number of different factors. Costa has particularly benefited from the booming coffee culture in Britain and has been helped by the negative publicity surrounding the dubious tax affairs of its closest competitor, Starbucks.

Costa Coffee has also most importantly entered into a joint venture with a Chinese firm, the “Yueda Group” based in Jiangsu Province. The logic is simple, the Costa Coffee brand, being a new entrant to the Chinese market, would take a long time to gain traction if it did this alone. Being in partnership with a local company allows them to utilize the partner’s knowledge of the local market and customers.

China’s consumer coffee market has huge future potential with the largest concentration of potential consumers in the world. Costa Coffee’s decision to embark on a partnership with a Chinese firm emphasizes the importance of knowing and having links within the Chinese market itself to enable the utilization of local knowledge, experience, and the networks that come with this.

How to effectively promote your coffee brand in China?

Be visible on Baidu. Chinese people will search for coffee stores online, ensuring your brand is seen as a top search result.

For more information about marketing on Baidu click here to read our previous article.

Develop your e-reputation. Costa Coffee has only positive information on its brand name. Click here to see the 835000 results for the brand!

 Use social media as a tool for customer loyalty. Costa Coffee for example uses ‘Weibo’ and ‘WeChat’ to communicate with its customers, it also works as a loyalty offer.

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