China is on pace to become a major coffee producing and consuming country according to a report by the International Coffee Organization (ICO).
Although sales of tea in China outpace those of coffee by 10 to one, coffee consumption in the country is growing at double digit rates and shows no indications of slowing.
Chinese demand in 2013/2014 totaled 1.89 million bags, representing a per capita equivalent of 0.083 kilograms per person per year, or approximately five to six cups of coffee per year. But even at this level, Chinese consumption has more than quadrupled over the past decade.
China’s demand trends closely resemble those of Japan between 1964 and 1973, and comparing the two countries indicates that there is indeed significant room for scale and growth in the industry. And although China’s coffee sector is still in its early stages, by the end of the decade, “China could be consuming over 4 million bags per year, with plenty of potential for further growth,” according to the brief that will be presented at an ICO meeting in Italy next week.
If realized, such consumption rates would place China among the top ten coffee consuming countries in the world – in company with India, Russia, and Canada, but behind the U.S., Germany, and Japan.
One difference that sets China apart from other countries, however, is that China is also developing a strong production sector. In 2013/2014, China ranked ahead of Costa Rica as the 14th largest coffee producing country in the world, producing 1.95 million bags of coffee – a five-fold increase over the 386,000 bags its produced ten years ago. And as tea prices fall, growers are increasingly opting for coffee production.
The bulk of China’s coffee production is taking place in Yunnan, a southern region bordering Vietnam, where there is a drive to increase production to 4 million bags by 2020.
"Farmers in the area can reportedly make double the income [on coffee] compared to tea over the same land area," the briefing said, and China’s climate and mountainous landscape are also "well suited to coffee production".
If this scale of production can be achieved, the resulting output would keep production and consumption generally equal; however, great potential exists for traders and investors, as China grows Arabica beans but the country's consumers drink coffee made from robusta beans.