As competition intensifies in China’s home coffee market, local brands are looking beyond their borders, eyeing international expansion. Leading the charge is Nowwa Coffee, which announced plans to accelerate its global growth, with Southeast Asia serving as just the initial step. North America and Europe are now on the radar as part of its broader international strategy.
Nowwa is not alone in this ambitious push. Luckin Coffee, a prominent Chinese coffee chain, made its international debut in Singapore in March 2023. Cotti Coffee, another major player, opted for Seoul, South Korea, as its first overseas market. Since its Seoul launch in August 2023, Cotti has rapidly expanded across Southeast Asia, opening locations in Japan, Canada, and even the Middle East. According to 36Kr, Cotti now operates multiple outlets in Doha, Qatar, and Dubai, UAE.
As Chinese coffee brands increasingly set their sights on international markets, Southeast Asia is no longer a novel destination. With growing investments in the Middle East from China, the region has emerged as a new frontier for coffee brands seeking global reach.
Cotti Coffee Leads the Charge in the Middle East
In March 2024, Cotti opened its first store in the Middle East, located in Dubai’s Deira district, a hub for Southeast Asian and Chinese workers. The area, known for its mix of tradition and commerce, provides a fertile ground for Cotti’s value-focused approach, appealing to cost-conscious consumers. The company’s second Dubai location opened in July in the Dubai Internet City, part of Knowledge Park, a free-trade zone that offers tax exemptions and other business-friendly incentives.
Cotti’s strategy in the Middle East mirrors its domestic approach, emphasizing affordable pricing to attract customers in markets where international chains like Starbucks dominate. In major cities such as Doha and Dubai, a cup of coffee from brands like Starbucks can cost around RMB 40 (USD 5.6), while Cotti offers its brews for between QAR 10-15 (USD 2.8-4.1). This price advantage has made Cotti popular among expatriates and locals alike, especially in regions known for their high living costs.
Cotti’s rapid expansion, with seven stores in the Middle East within just six months, marks a swift entry into a competitive market. However, it was Luckin that first explored the region. In 2019, Luckin partnered with Kuwait-based Americana Group to challenge Starbucks’ dominance, but setbacks delayed its plans. After a period of restructuring, Luckin returned to its international expansion efforts in 2023, focusing initially on Singapore without making immediate moves into the Middle East.
The Growing Appeal of the Middle East Market
For Chinese coffee brands, the Middle East’s appeal is further fueled by the region’s successful track record with Chinese tea brands. Popular milk tea chains like Happy Lemon, Koi, and Yi Fang have made notable inroads, with Gong Cha signing a significant franchise deal in January 2024 to open 300 stores across the region.
Unlike tea, however, coffee holds a more entrenched place in Middle Eastern culture. Coffee was introduced to the region by Ethiopians as early as the 13th century, becoming a staple of social life, particularly in countries where alcohol is prohibited. In Saudi Arabia, for instance, coffee serves as the primary social beverage, with coffee shops operating around the clock. During Ramadan in 2023, the Saudi Food and Drug Authority even issued a reminder for moderate coffee consumption, suggesting a daily caffeine limit of 400 milligrams.
In the UAE, coffee consumption is also on the rise, with projections showing the market growing at an annual rate of 8.4% between 2023 and 2029, and per capita consumption reaching 1.36 kilograms in 2023.
Challenges for Chinese Coffee Brands
Despite the thriving coffee culture, competition is fierce, with established local players posing a significant challenge to new entrants. Chinese coffee brands must not only contend with established market leaders but also adapt their offerings to local tastes and preferences.
For example, traditional Saudi coffee often incorporates unique spices, while popular Western variations, such as Irish coffee, are prohibited due to religious restrictions on alcohol. Cotti has made some adjustments to its offerings, tweaking everything from the roast level to the sweetness of its coffee, but its menu largely mirrors its Chinese selections.
As Chinese coffee brands continue to adapt their products for international markets, especially the Middle East, they may face the need for more significant changes to meet local demands. This could require more investment in research and development, and could strain existing supply chains. While a value-driven strategy may work in the short term, sustaining growth in the Middle East’s competitive coffee market could prove more challenging for these up-and-coming brands.
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