Should Panera enter the China coffee market following Starbucks and Dunkin’?
As of 2019, there are 4,123 Starbucks stores (successfully grew from 185 since 2005) and 16 Dunkin’ Donuts (projected to open 1,600 since 2015 but failed) in China. As the third largest coffee chain in the United States, Panera (combining its JAB brands, has 4,739 units in the U.S. as of Oct 2019, following Starbucks’s 14,875 and Dunkin’s 9570) should take serious consideration before its China adventure.
I will segregate the topic into three parts: revenue opportunity, cost efficiency, and market environment.
Revenue Opportunity
First, let’s take a look at the revenue-related pros and cons of the potential market entry of Panera in China’s coffee market.
Pros:
1. Market size
The coffee market is a fast-growing segment in China, the most populous country with over 17 billion people in the world. According to the data of Statista, the total revenue in the coffee segment amounts to US$14b in 2021, tripled the figure in 2012 ($4.4b), and expected to reach $20b in 2025.
While competition exists, the experience of Starbucks has proved the possibility of successful U.S. coffee brands. The failure of Dunkin’ was due largely to its centering on donuts, rather than coffee. Placing more focus on the coffee segment would help Panera take advantage of the huge China coffee market.
2. Product bundle to replicate — breakfast + coffee
Coffee program is a big deal, but Panera’s advantage also includes breakfast. Intense competition isn’t deterring Panera from sharpening its focus on breakfast, as it is keeping refreshing its breakfast menu with new items. The same model could easily be replicated in China. According to Mintel research on Chinese breakfast foods, while most consumers still turn to Chinese foods for breakfast, there may be potential for Western cereals to increase their market share in the…
