Could China Become A Top Gourmet Coffee Producer?

Starbucks Investigating Potential Of Southwest China's Yunnan Province As New Coffee Growing Locale When most people think of China, they think, quite rightly, more of green tea than coffee. Although coffee shops both foreign and domestic have multiplied over the last 20 years in major Chinese cities and have even gained popularity in smaller cities down to the third-tier level, coffee is still seen as something of a foreign luxury to the vast majority of Chinese. However, if some coffee companies, like Starbucks, have their way, coffee may soon lose its "foreignness" as the home-grown coffee industry in China develops and gourmet coffee beans are more widely grown and distributed. Coffee beans are not entirely new to China, with beans first being planted in Yunnan by a French missionary in the 19th century, and later a joint project between the UNDP and Chinese government to develop the Yunnan coffee industry taking place in 1992. Despite coffee's relatively long history in China, and increasing popularity, domestic capacity has remained minimal, particularly in Yunnan where, despite a favorable coffee-growing climate, pu'erh and other teas are the main "cash crops." In addition to low domestic capacity, development of the domestic coffee industry has also been hampered by the Traditional Chinese Medicine (TCM) beliefs of many middle-aged luxury consumers. However, in the last decade or so this is changing, particularly among the younger, more educated, urban generation. Coffee, to them, remains something of an indulgence, and not necessarily a drink for daily consumption unless it is of the cheaper, instant variety. Nonetheless, they flock to chains like Starbucks and 85c for comparatively expensive coffee drinks, wifi, and -- perhaps most importantly -- to see and be seen. Today, an article in Seeking Alpha by Patric Chovanec on the subject of a domestic coffee industry looks into the growth in popularity of coffee in China and the potential for growing gourmet-quality coffee in the country's tropical southwest region -- what Chovanec has nicknamed "Shangri-La" -- of Yunnan, Guangxi, and Guizhou (three very different provinces but which do share some geographical similarities). The prospect of huge multinationals like Starbucks going into Yunnan must make the independent roasters of Yunnan coffee that have sprung up throughout China in recent years somewhat nervous, but the presence of global leaders like Starbucks has the potential to bring some much needed expertise and equipment to the region, so for the farmers themselves it should be something of a mixed bag (albeit one that could give them access to global markets). From Chovanec's post: Up till now, China has not had any coffee-growing industry to speak of. But a report today on Chinese web portal Sohu.com suggests that top players in the global coffee business are eyeing major investments in the region, to realize that potential: (Quoting Sohu) Wang Jinlong, president of Starbucks Greater China, who has recently conducted a study tour on the coffee industry in Yunnan, says Starbucks will partner with Yunnan to build a world-class coffee bean growing and research base. He says the company hopes to cooperate with Yunnan to put coffee from China on the shelves of Starbucks chain stores in 49 countries around the world...Recently, Starbucks Vice Presidents of Coffee Acquisition, Dub Hay and Wang Jinlong, came to Baoshan, Yunnan again on a study tour. They said many times that they would like to make Baoshan the company’s first coffee bean growing base in China and the company would like to build a world-class coffee research base in Baoshan. In addition to Starbucks, Nestle and Maxwell also favor coffee beans from Yunnan and will also establish raw material bases in Yunnan. Baoshan is located in the farthest western part of “Shangri-La,” in a valley connecting the narrow gorges of the upper Salween and Mekong Rivers, near China’s border with Myanmar (Burma). This is the part of the world where the tea plant most likely originated, and still grows wild in some places. Plans to introduce coffee-growing on a large scale bear watching closely. Shangri-La borders on Vietnam, which in recent years emerged from almost nowhere to become a giant force in the global coffee trade. ... One can easily see how a similar development just across the border in southwest China — even one limited to the lower end of the market – could have a dramatic effect on world coffee prices and the complexion of the entire industry. For all its market heft, Vietnam may not be a household name associated with coffee, but as far as branding goes, I could easily see beans from “Shangri-La” giving Java a run for its money. Though developing the Yunnan coffee industry, or the wider industry in Chovanec's "Shangri La" would encounter significant obstacles, not least of which being transportation, the region's suitable climate, rich soil, farming expertise (and the investment dollars of Starbucks and others) could see coffee beans from southwest China ending up in your coffee grinder before too long.

Could China Become A Top Gourmet Coffee Producer?

On this page

Published December 10, 2009

Sectors

Insights

Company

Could China Become A Top Gourmet Coffee Producer?