China's Luckin Coffee recently signed a memorandum of understanding with the Brazilian government for a transaction valued at US$500 million.
China jumped from 20th to 6th largest buyer of Brazilian coffee in just one year.
This is a strategic partnership that will help consolidate the market power of both countries.
The global coffee trade witnessed a remarkable shift in 2023 as Chinese imports of Brazilian coffee tripled in a year, according to the Brazilian Coffee Exporters Council (Cecafé).
This set the stage for Chinese coffee chain Luckin Coffeeto recently sign a memorandum of understanding (MoU) with the Brazilian Trade and Investment Promotion Agency (ApexBrasil).
The memorandum of understanding outlines Luckin Coffee’s proposal to purchase 120,000t of Brazilian coffee by 2026 in a transaction valued at US$500 million.
“This is fantastic news for the Brazilian coffee value chain,” says Vinícius Estrela, Executive Director of the Brazilian Specialty Coffee Association (BSCA).
“It represents a commitment of one million bags per year over a two-year period. Luckin’s annual imports of around $250 million are close to China’s total import value in 2023 of $280 million.”
China's choice of Brazil as a strategic partner in the coffee industry can be attributed to Brazil's prominent position as a major coffee producer, known for its good price-quality ratio, diverse coffee varieties and robust coffee industry infrastructure.
By partnering with Brazil, China aims to leverage the country's rich coffee heritage, vast production capabilities and established market presence to improve its sourcing, supply chain efficiency and market access in the global coffee trade.
“Brazil is the largest exporter of green coffee to China, accounting for 38.73% of the total imported volume and 27.63% of the total imported value in 2023,” says Mau Perez, purchasing manager at Shanghai Coolay Trading Co., Ltd.
“Mechanisms like this MoU help build trust between different stakeholders in relevant industries as they know they have the support of both governments.”
China is emerging as a force to be reckoned with in the coffee market
China has jumped from the 20th to the 6th largest buyer of Brazilian coffee in the space of a year. The driving force behind this rise is the expansion of Chinese coffee chain Luckin Coffee, which, in 2023, surpassed Starbucks in terms of sales value in China .
As coffee consumption in China continues to rise and the country emerges as a growing powerhouse in the global coffee market , industry observers are noting China’s growing influence and competitiveness in the green coffee purchasing space.
Meanwhile, traditional consumer markets are seeing their purchasing power become more constrained – a combination of inflation, thin margins, low access to finance and the upcoming mandatory supply chain due diligence.
“I believe China will become the world’s leading coffee buyer in terms of value and volume,” says Mau.
“For example, for Panama, China is already the biggest market for its super-expensive geishas. If the EU Deforestation Regulation also comes into force in 2025, I believe China will only accelerate this trend.”
China’s rise as a major coffee consumer and importer highlights the country’s evolving taste preferences, changing market dynamics and strategic initiatives to secure diversified sources of coffee, including partnerships with major coffee-producing regions such as Brazil.
“Chinese demand for coffee, especially quality coffee, has grown significantly in recent decades and Brazil is unique in its ability to supply large volumes of high-quality coffees with diverse sensory profiles consistently year after year,” says Vinícius.
As China asserts its presence in the global coffee market, industry stakeholders are closely monitoring the country’s trajectory and the implications of its growing presence on the broader coffee industry landscape.
The China-Brazil relationship with coffee is strategic for both sides
The memorandum of understanding between China and Brazil included not only this substantive agreement on coffee , but also eight intergovernmental instruments and 30 outcomes, as well as 11 private sector agreements.
It highlights a strategic alignment that transcends mere trade, suggesting deeper economic integration and cooperation between the two nations.
The collaboration between China and Brazil in the coffee sector reveals a strategic vision for mutual cooperation and market synergies – both countries aim to ensure stable coffee trade relations.
“The move is strategic, it’s about a bigger partnership between the two countries, and it’s definitely about more than just coffee,” says Omar Ali, CEO of Ocean Grounds Coffee Roasters in China. “It takes a big change like this to introduce coffee drinkers in China to new origins.”
China’s interest in Brazilian coffee goes beyond supply efficiency and price considerations. It reflects a strategic intent to diversify coffee supply channels, cultivate long-term relationships with major coffee-producing countries, and address consumer preferences amid inflationary pressures and market uncertainties.
China, like the rest of the world, doesn't have much confidence in its economy right now. Retailers are competing fiercely on price, forcing severe cost-cutting on their suppliers and squeezing profit margins .
“In addition to increasing consumption, we are in a battle for market dominance between Luckin Coffee versus Cotti Coffee, and Starbucks is struggling to maintain its position,” says Mau. “We also have 蜜雪冰城 (Mixue Ice Cream and Tea), with over 36,000 stores across China, also offering more affordable coffee drinks in lower-tier cities.”
China's shift to Brazilian coffee over other origins is not at all random.
“There is a preference for Brazilian coffee, it has a distinctive flavor and always delivers high quality,” says Silas Brasileiro, president of the National Coffee Council (CNC) . “Thanks to large-scale production, we have availability and reach an affordable price compared to other producing countries.”
The China-Brazil partnership has the potential to reshape the global coffee industry by fostering cross-cultural exchange, technological innovation and market growth opportunities that benefit stakeholders across the coffee value chain.
“Brazil is the world’s largest coffee producer – its sheer volume of production gives it the most substantial influence in the global coffee market,” says Omar. “This could also be a long-term strategy to help meet China’s growing demand for coffee in a cost-effective manner as well.”
This new partnership between China and Brazil in the coffee sector represents a new chapter in international coffee trade relations.
As China’s coffee influence expands and Brazil continues to lead, the partnership between these two coffee giants could cement China’s rapid consumption growth and maintain Brazil’s status as a leading coffee powerhouse.
What do you think of this partnership that further enhances the value of Brazilian coffee and reaffirms our leadership as the world’s largest coffee exporter? Leave your comment.
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