Coffee culture takes root in unexpected places

PUBLISHED : Friday, 07 December, 2007, 12:00am
UPDATED : Friday, 07 December, 2007, 12:00am

The number of coffee shops in the city is expected to at least double to about 1,000 over the next five years as the burgeoning market benefits from a growing number of local Chinese coffee connoisseurs, an industry expert says.

'I thought the market had peaked five years ago,' Stuart Bailey, general manager of Asia Business Events, said. 'But Hong Kong is genuinely only getting started.'

Asia Business Events is launching the Coffee Culture trade show at its annual Restaurant & Bar Hong Kong exhibition next September to cater to an explosion in coffee culture in Hong Kong, Macau and the Pearl River Delta.

On average, the cost of the raw materials needed to make coffee is between HK$1.50 and HK$2 a cup, making it a very high-margin business, Mr Bailey said.

He said the conventional thinking was that the Hong Kong coffee market would be limited to expatriates and returning overseas Chinese, and that the mostly tea-drinking local Chinese would not consume coffee.

However, coffee consumption has jumped 50 per cent in the past three to four years, he said.

Expatriates and overseas Chinese have a culture of meeting someone over a cup of coffee and this was catching on in the Chinese community, which was learning more about coffee, Mr Bailey said. This was what Nespresso discovered when it opened its first boutique coffee equipment store in Hong Kong in April this year.

About 60 per cent of the customers who purchased its coffee machines were local Chinese, Nicolas Gigaud, Nespresso's Hong Kong country manager, said.

The company yesterday opened its biggest outlet in the region and second in Hong Kong at the Elements shopping mall in Kowloon.

'The plan was to open one in Hong Kong but sales have surpassed our expectations,' Nespresso's international commercial director Roberto Eggs said.

Although it is rare for Nespresso to have more than two boutiques in any one city, a third one in Hong Kong might be possible depending on how well the existing two perform, Mr Gigaud said.

Pacific Place in Admiralty was the ideal location, while Festival Walk could be considered if the company wanted to further develop its business in Kowloon, he said.

Worldwide, boutique sales only account for 25 per cent of Nespresso's total sales as mail order sales make up another 25 per cent and internet orders account for the rest.

Mr Eggs played down competition with major chains such as Starbucks and Pacific Coffee, which have had a presence in Hong Kong for about a decade.

Pacific Coffee plans to open up to 10 new coffee houses each year and has about 60 already in the city.

'Indeed, we are seeing increasing competition from other operators, whether they are international or locally based,' a spokesman for Pacific Coffee Company said.

A Starbucks spokeswoman declined to comment on its competitors, but said Hong Kong people were becoming more receptive to the coffee culture and the local market had room for further growth.

Hot brew

Coffee consumption in the city has jumped 50 per cent in the past four years, signalling a growth in coffee culture among locals

The number of Nespresso boutique coffee shops worldwide by 2010 will be: 250