Since its reform of the economy, China has undergone many changes. The market economy launched in the 1970s had a major impact on the society and lifestyle of the Chinese. The Chinese are not typically lovers of coffee, especially not of fresh roasted or specialty coffee, and certainly not as a morning habit. With the rise of coffee culture in China, Starbucks has played a key role in educating Chinese people about quality coffee.
People who grew up in this context have therefore had different education and learned other values than those who received their parents. These changes are important to take into account as a marketer because you should always know your target to be able to reach it in the most efficient way. That’s why we’re going to see what changes this new generation has undergone and how these are important issues for marketing.
Generation Y is made up of people born between the 80s and the beginning of the 90s. In China, this population gathers more than 300 million young people! They are not only very numerous, but they are also the future of the country. It is therefore very important to know and understand them. This group has a unique vision of society, very different from that of previous generations. Whether it’s about work, life, culture, the world, etc. Overall, they are more open, more positive, and above all, very connected.
Context of the evolution of millennials
The Chinese generation Y was born at a time when the economic situation of the country was dynamic, the political situation was stable, and the country was entering a phase of modernization never known before. As a result, they generally grew up in good conditions. They had access to new technologies, which allowed them to form their own ideas. This has also facilitated success and access to longer studies. Generation Y in China is very educated. Notably, it has received strong pressure from their parents because most millennials are only children. Indeed, the one-child policy was introduced in 1979 and ended in 2015.
The majority of this population has therefore had similar education as being the only child in the family: they have received a lot of pressure, but also a lot of attention. One even uses the term “tiger mum” to define severe Chinese mothers. This confirms the pressure placed on the shoulders of these children, especially for studies. But the term “little emperors” also exists to talk about the children of this generation who were too pampered because they were the only children of the family.
Characteristics of Chinese Generation Y
The biggest cultural gap between millennials and their parents is their behavior toward the Westernization of China. Young people are adopting Western fashion, watching American movies, taking their coffees at Starbucks, driving German cars, and so on. They are much more open than their parents to foreign brands. They even prefer them to Chinese brands! They love to share their purchases on social networks. Generation Y Chinese are relatively connected, much more than Westerners. Never without their smartphones, they spend their days on their screens to check apps, play video games, or show off their latest acquisitions.
Their mode of consumption is also different! Unlike their parents, young Chinese people prefer e-commerce to real shops. They order a lot on these platforms, including Tmall and JD.com. Because thanks to their better level of education, millennials have also been able to reach better positions and thus better wages. In the professional field, the spirit of entrepreneurship is also more and more present in this generation. Which was far from the case for previous ones. They are freer, more independent, and less afraid to make their voices heard. They are also more eager to open their minds and travel abroad.
Beyond consumer habits, their relationship with traditional society has also evolved. They are becoming more independent and less interested in the old “codes” of society, even if they still have a strong influence. However, this tends to change, for example, marriages are done more and more later. Millennials now value their education and career rather than starting a family quickly. The place of women in the world of work is also improving. However, they remain very dependent on their parents, and their education as “child king” is sometimes problematic, as they can sometimes lack maturity and be capricious.
The Relation Between Starbucks and Chinese Millennial
Starbucks begins its thesis with an estimate of Starbucks’ growth opportunity in China. At just 2,543 units in China at the end of F1Q17, Starbucks expected it will likely double its current footprint over the next five years, including at least 500 net new stores per year, and with aggressive plans to nearly double that to 6,000 by the end of 2022.
Even though coffee is the exclusive word for western people, China has had its own coffee farming industry for more than a century. It started when a French missionary to the southern province of Yunnan introduced the crop in the late 1800s, and the industry is now rapidly expanding along with national consumption. The International Coffee Organization estimates China now grows more beans than Kenya and Tanzania combined.
In the beginning, the most popular kind of coffee in China was the three-in-one: granulated robusta, powdered creamer, sweetener, and perhaps some other flavoring to cover any remaining coffee taste, all blended in one container. But after more than a decade of corporate pushing and the slow evolution of markets and tastes, craft coffee and coffee shop culture have begun to catch on.
After the first Starbucks outside the US opened in Tokyo in 1996, China mainland was just a few rounds of international expansion behind, with a store in Beijing in 1999. The corporate giant, alternately reviled and revered by coffee drinkers around the world, is a sort of gauge for the status of coffee culture in any market, from national to the neighborhood. They won’t go to places that don’t have at least a sprouting taste for craft coffee, but they are shy of pushing into markets with well-developed, independent coffee scenes.
Starbucks takes over the market of coffee in China
Now, after seventeen years in China, Starbucks controls 60 percent of the café market, and about one and a half new Starbucks opened in the country every day.
According to UBS’s statistics, coffee consumption in China has tripled in the last few years. And this mostly goes to Starbucks. In other words, more and more Chinese people learn to drink coffee thanks to Starbucks. More importantly, it shows Starbucks is already well-positioned in China compared to competitors. A survey indicated SBUX maintains the strongest loyalty base vs. the comp set, with nearly 50% of consumers indicating they would find another Starbucks if their usual store was closed, compared to ~30-35% for competitors.
Chinese people usually will be cautious about foreign brands, but once they earn Chinese trust, Chinese people will be attached to them for a long time. This is the one of reasons Chinese mostly learn to drink coffee from Starbucks.
Localize to fit local tastes
It is hard to market coffee in China in the same way in western countries, so it is essential to adjust the flour to fit Chinese tastes and ways of selling coffee, and Starbucks already did it.
Starbucks is well known for specializing in its shops to fit local tastes, which in China translates to eastern-style architecture for some of their stores, and local menu offerings like green tea frappuccinos and red bean scones. It’s a genius move for the bottom line, and undeniably endearing to the local market, where lots of Chinese people visiting coffee shops don’t want coffee at all. They want tea, sugary drinks, and, most of all, a place to socialize.
Thus it is important to realize that drinking coffee Chinese is not only about coffee itself, but about all sorts of drinking and desserts they can acquire and it is a nice place to study and socialize and even for business.
Starbucks plainly states on its website that it is “creating a coffee culture in a traditional tea-drinking society.” The honesty of a statement about such contrived cultural change brings into focus the global effort that goes into drinking Starbucks in China: American branding, Italian espresso machines, Central American and African beans, and Chinese baristas. It all seems like proof that globalization has won; China is Westernized. But the coffee culture in China doesn’t always mean cultural homogenization.
In the case of this differentiation, Chinese people also have done a lot of thinking and changes. For an instance, there is a spacious coffee shop called 36th Story, owned and run by a thirty-three-year-old Chinese man named Max Wang, just across the street from the new Starbucks in Suzhou.
While Starbucks injects typically Chinese flavors into the same drinks it sells everywhere in the world, Max concocts complex, intricately layered ones, with flavors such as blue curaçao, peach, mango, and rose, with shots of espresso, and layers of cream and sugar. His drinks are a Chinese take on coffee, not Starbucks’ take on China.
Despite selling mostly coffee in the land of tea, Max’s shop is undeniably Chinese—an authentically local coffee shop, in a country that is only beginning to discover for itself what that means.
In a way, Starbucks does lead to the tendency for Chinese people to learn to drink coffee, but on the way to cultivating its own coffee culture in China, more and more small businesses or characteristic coffee shops also show Chinese people other ways to learn to drink coffee in Chinese ways.
You can also read our Strategic Guide to Export Food Brands in China
The Gold Mine
Representing a market of 300 billion people, it is easy to imagine the impact that a good marketing strategy could have on this generation. They are becoming richer, with a purchasing power that continues to increase, as their openness to foreign cultures! The potential of Chinese Generation Y is immense. To understand these millennials today is to ensure that they can be touched and understood in the world of tomorrow.
Today, they are still slightly torn between traditional China and its massive Westernization. But they should not be approached as their parents were. To seduce them, it will be necessary to bet on digital marketing. Today’s youth no longer pay attention to billboards or TV ads. They do not trust them. However, by picking them where they spend the most time (ie on their smartphones), it is possible to convince them. The most popular networks in China are WeChat, Youku, and Weibo. Regarding how to approach them, a more specific, individual, and personalized approach would be appreciated.
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