A Start-up Business of Drip Coffee in China Market

Edited from Nestle to further tap China market with new drip coffee - Chinadaily.com.cn 

 

Chinese consumers' rising awareness of coffee varieties, their demand for beverages made of freshly ground beans, with an emphasis on convenience and low price, have accelerated the development of drip coffee products in the market.

Global food and beverage producer Nestle unveiled its first drip coffee product in China last year.

Drip coffees, or small cones or cubes containing ground coffee that "hang by the ear", to use Chinese consumers' preferred phrase for them, allow fresh brews to drip through them when immersed in hot water in a mug.

Nescafe's gold drip coffee series have launched two products in the emerging market segment. The hand-brew master drip coffee, in turn, has two kinds-dark roast and medium roast, mixing coffee beans grown in Yunnan province with those from Colombia, Brazil and Ethiopia.

Coffee is the mainstay of Nestle's beverage business that boasts three brands: Nescafe, Nespresso and Starbucks. Nestle China said it grew in double digits in 2018 on the back of innovation.

The new drip products have been launched in response to the fast-growing market trend in China. Ground coffee has the potential to become a further growth driver, just as instant coffee varieties became popular a few decades back, according to Nestle.

Adrian Ho, senior vice-president, coffee business unit, Nestle China Ltd, said China has big potential for coffee consumption. To exploit opportunities brought by the rapid development of the Chinese market, brands must keep changing and innovating, he said.

Nestle is not the only company that has taken a shine to drip coffees. Luckin, which operates coffee houses that compete with Starbucks, has jumped on the drip bandwagon. Its mobile app as well as its e-stores on JD and Tmall are seeking to capitalize on its large database of consumers. To further endear itself to coffee connoisseurs on its app, Luckin rolled out its snack business as a bonus in November last year.

Zhu Danpeng, an independent food and beverage analyst, said it is no surprise that drip products are emerging as a growth point in the coffee market that was tending toward homogenization. Drip coffees are cheaper and offer more convenience compared with hand-brewed coffee consumed at coffee houses, he said.

According to Mintel Group Ltd, China's hand-brewed coffee house market sales were worth 64.7 billion yuan in 2018, up 7.5 percent over 2017. Mintel estimated the market is expected to rise at 6 percent year-on-year between 2019 and 2023.

 

RESEARCH REQUIREMENT

NineCup, a start-up business for a group of UIBE MBA students, plans to introduce their own drip coffee products to China market in May 2021, expecting to seize this market opportunity. Due to lack of funds and other resources, they first plan to sell their coffee products online. 

Although Nestle and Luckin coffee have already launched their drip coffee, the students are still worried about the awareness, recognition, attitude and acceptance of this new coffee variety by Chinese consumers. And they also wonder who are buying drip coffee. Therefore, they decide to invite you to conduct a business research for them.

Based upon your research findings, they will make further decisions on marketing and promoting NineCup online in China market. You have one month to end this research. Despite of the time constraint, you believe an overall design for this project is a two-step approach: an exploratory study first and the formal study follows. A sample survey will be conducted in the formal study stage.                                                                                                                                                                                            EXAM QUESTIONS

1. Specify the Management dilemma, management decision question(s) and the research questions of this research project. (3 points)
   1. Management dilemma
   2. Management decision question(s)
   3. Research questions