Cappuccino: The New Fashion in China and Hong Kong

On Christmas Eve 2018, China’s hottest tea house, Heytea, opened its first outlet in Hong Kong, adding a new blood to the already-dynamic café industry in the city. Founded in 2012 in Mainland China’s southern province Guangdong, Heytea is famous for both its cheese-inspired beverages and its Scandinavian minimalist design and is widely seen to be more like a Brooklyn coffee shop than a pure milk tea store. For anyone in town, it would be irresistible to have a fancy experience in drinking a freshly-brewed cheese bubble tea while getting soaked in the gentle ambience at the store.

There is nothing new about coffee and tea shops being popular in both Mainland China and Hong Kong. In fact, according to Euromonitor International, the value CAGR for Specialist Coffee and Tea Shops between 2013 and 2018 is 42% in Hong Kong and 173% in Mainland China (see Figure 1). Coffee and tea houses are literally found on every single street in Hong Kong and top-tier cities in Mainland China like Shanghai.

Figure 1 Number of Outlet & Growth Rate of Foodservice Value in Hong Kong & Mainland China

Source: Euromonitor International

The new lifestyle cafés in town

However, what is new is that the kind of coffee and tea houses offering a lifestyle experience like Heytea is on the rise in both Mainland China and Hong Kong.

More and more chained coffee and tea shops are providing customers with an expanded product range such as all-day breakfast and beer to bring about a quality experience for them to enjoy life.

For instance, Starbucks Hong Kong established a flagship store at Lee Gardens in Causeway Bay in 2018, a prime location in the CBD area, with a view to setting up ‘an urban retreat within the bustling city’, according to the global coffee giant. With a 5500-square-feet store filled with branded homewares and merchandise and 50 new food and beverage items including gourmet toasts as well as coffee-inspired alcoholic drinks from ‘Mixology Bar’, the flagship store is an ideal spot for consumers to chill out and a ‘Third Place’ for customers to socialise with family and friends.

In Mainland China, Nayuki, one of the key competitors to Heytea, has successfully attracted a huge number of consumers by its premium fresh-fruit tea and soft European bread. It also offers comfortable in-store sit-down zones with bright lighting for customers to relax in premium locations in cities. As a result, the brand has been able to establish itself as a major force in the industry.

Nayuki in Shanghai, Source: Euromonitor International

Another observation is the emergence of new independent cafés operating under various fashion brands. Luxury fashion brands have launched namesake cafés within their retail stores to actively offer shoppers ‘a diverse and an interactive experience’ as per the latest research report on Consumer Foodservice in Hong Kong from Euromonitor International. The collaboration has thus been instrumental in promoting the culture of lifestyle cafés in the metropolis.

For example, the world’s first Vivienne Westwood Café set foot in Shanghai in 2015. The café is the heavily filled with Vivienne Westwood Ord as well as the signature tartan elements, all being used in the design of tea sets and in-store decorations to allow customers sense the punk element of the famous designer.

Vivienne Westwood Café in Hong Kong, Source: Euromonitor International

In Hong Kong, Ralph Lauren located its first café in the Asia territory in 2018. Featuring Ralph’s signature green motif and ultra-high-quality coffee and food sourced from prestigious manufacturers like Brooklyn’s Fine & Raw, Ralph’s Café offers consumers the joy of having coffee in a relaxing environment with a chill vibe.

Therefore, the puzzle here is, how do these lifestyle cafés rise to prominence?

Consumer’s passion for innovation

Looking at the perspective of customers, it is not hard to conclude that consumers in the region are a big fan of novelty. Consumers in Hong Kong – 7.4 million Hong Kongers and 65.1 million visitors from the Chinese mainland every year – and in Mainland China – 1.4 billion Chinese citizens – worship innovation as they would like to stay trendy and try on new things as soon as they are available. This is part of the consumption culture in Asian megacities.

These lifestyle coffee and tea houses are new to consumers in Mainland China and Hong Kong as most of the existing stores are traditional café focusing on coffee and tea per se without blending products with lifestyle experiences. As a result, it is not surprising to always see long queues outside Heytea or ChaTraMue which is another popular tea shop from Thailand recently established in Hong Kong thanks to the novelty of these new lifestyle cafés to consumers.

New branding of companies

There is also something in it for the outlets themselves. Through establishing these ‘lifestyle cafés’, companies can build up and reshape the meaning and image of their brands to consumers.

‘My product is not only about a drink, but also about the environment and experiences,’ said founder of Heytea Neo Nie, adding that every brand culture needs a space to develop. By saying so, he implied a unique brand proposition has been created for Heytea’s success through a precise combination of products, environment and experiences.

Similarly, by stepping into the F&B sector with newly set-up cafés in town, luxury fashion companies can reshape their brandings – ‘We are not just selling products but also experiences’ – and consequently stay profitable with a multi-dimensional business model.

Look ahead

‘We are confident that as long as we hit it big in China, we will certainly hit it big in the international market,’ said Neo Nie. Since Heytea’s arrival, there are already 6 stores in Hong Kong. Heytea has then become a big name and a timely witness of the vibrancy of lifestyle cafés in town. It is sure that the aroma of ‘Cappuccino’, the new sexy fashion in town, will be flowing all over the place in the Chinese mainland and Hong Kong shortly.