Home brew - as more people work from home, Nongfu creates new coffee brand | Article – HSBC VisionGo

Drip-bag coffee sales are seen as a higher-growth opportunity, perhaps increasing as much as 40% a year in China

Lifestyle  ·    ·  2 mins read

For years Starbucks has marketed itself as a ‘third place’ where people gather outside their homes or workplaces, contributing to a new sense of community (and paying for a latte or two at the same time, naturally).

Over the last year or so Starbucks has shifted its position a little on the same notion, investing in drive-thru formats and delivery options. But the coronavirus outbreak is now putting the concept under tremendous strain as it closes outlets or cordons off seating as part of social distancing efforts.

In China, its second largest market, staffers take the temperatures of customers before letting them in. Visitors are also encouraged to input their orders online so they can just pick up their drink and depart.

With the pandemic pushing coffee consumption out of shops and outlets, Nongfu Spring, China’s largest bottled water supplier, may have spied an unexpected chance to tempt coffee lovers with caffeine they can enjoy from the comfort of their own homes.

Nongfu’s latest product – drip-bag coffee – was first popularised in Japan around the 1990s. The bags of pre-ground beans offer high quality coffee in an instant. All you need to do is rip open the packet, hang the sachet ‘ears’ onto the mug, and drizzle some hot water over the contents.

“From the perspective of consumption, a coffee drip-bag is more convenient than freshly ground beans and often tastes better than traditional instant coffee. So it is the perfect solution for coffee lovers at home and in the office,” applauds Jiemian, a news portal.

This is not Nongfu Spring’s first foray into the coffee sector, following the launch of a carbonated coffee drink brand Tanbing last May. In October it added three types of canned lattes to its portfolio. More recently, Nongfu also introduced grind-and-brew coffee machines into Wumart convenience stores and supermarkets.

The drip-bag coffee range, which is also marketed under the Tanbing brand, comes in a box of 10 packets. A blend of arabica beans grown in Brazil, it is being sold at a promotional price of Rmb45 a box on Tmall, although it seems likely to return to a regular price of Rmb74 a box, or Rmb7.4 ($1.20) a packet, after the promotional period.

Even though tea is still the most popular hot drink, much more coffee is drunk in China than in the past. Coffee fans have become more discerning about their choices too, although instant coffee is still the most consumed format, accounting for 72% of the market, according to CBN.

Back in the 1990s when it was first introduced, instant coffee was even perceived as a premium drink. But sales growth in the segment is more or less stagnant, increasing at not much more than 3% annually. Drip-bag coffee sales are much lower but seen as a higher-growth opportunity, perhaps increasing as much as 40% a year, based on demand from younger consumers that are more eager to try novelty products.

Industry insiders attribute some of the wider interest in coffee to the homegrown chain Luckin Coffee. “With the success of Luckin Coffee, China’s coffee market has become busier than ever. In addition to coffee giants like Nestle and Starbucks, other food companies that had little to do with coffee – like Nongfu, Yili, Coca-Cola and Pepsico – have piled into the market,” says Tencent. “Convenience store chains, too, now offer fresh-ground coffee. Yum! and McDonald’s didn’t want to miss out on this opportunity. And even Sinopec wants to grab market share.”

Nongfu is not without competition in the drip-bag coffee business. The bottled water giant will have to wrestle with coffee giant Nestle, for instance, which has been introducing its own drip-bag brand Gold Barista, which costs about Rmb4.8 a packet. Luckin Coffee also rolled out its own drip-bag coffee label last December.

Week in China
Week in China