Long associated with tea production, city and surrounding area in Yunnan province brewing a different kind of success

In the 1990s, Yang Qiong took a bold step in Ning'er county in Pu'er, southwestern Yunnan province, by leasing nearly 200 hectares of land from local villagers to establish a coffee plantation.

Coffee consumption had not yet become a part of the daily lives of average Chinese people at that time. Despite facing skepticism, Yang, with her visionary outlook, recognized the untapped market potential for coffee in China.

Although immersed in the world of coffee from an early age, Zhang Rui, Yang's daughter, took a different path. She pursued her studies in Chinese language and literature, and specialized in a related field during her postgraduate studies aboard.

"But the plummet in international coffee prices in 2017 made me aware of the challenges facing my family's business," Zhang said. Determined to help them navigate the difficult times, she returned to her hometown in Ning'er.

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Zhang's choice made her part of the new generation of coffee entrepreneurs in Pu'er, commonly referred to as the "coffee second generation" by local people. These young-bloods, armed with higher levels of education and a liking for innovation, have played their role in elevating the coffee industry in Pu'er from cultivation and basic processing to value-added processing and integrated development with the tourism sector.

In recent years, maximizing the value of a small coffee bean has become the common quest for coffee industry insiders in Pu'er, including Zhang. This has led to a push for the value-added processing of coffee beans, namely transforming green beans or roasted beans into higher-priced products such as instant coffee and freeze-dried coffee, with the establishment of coffee estates that combine coffee cultivation and tourism being another important avenue.

Pu'er has long been renowned for its tea both domestically and internationally, and the city is now gaining recognition among coffee enthusiasts, as its natural environment provides ideal conditions for coffee cultivation. With its fertile terraces at elevations ranging from 800 to 1,300 meters and acidic red soil, Pu'er offers perfect soil for Arabica coffee, which is known for its mellow taste, fruity notes and rich flavor without bitterness.

Yunnan dominates coffee production in China, accounting for around 98 percent of the country's coffee growing area and output. As of 2022, the province has developed two national-level leading coffee enterprises and 17 provincial-level enterprises, with one and six based in Pu'er, respectively.

The demand for coffee in China has been steadily rising, with coffee bean consumption reaching 288,000 metric tons in 2022, a 14.3 percent year-on-year increase and a jump of 50 percent from 2018, data from the United States Department of Agriculture shows.

To capture a share of this rapidly expanding market, coffee chain brands have engaged in price wars, offering low-priced coffee to attract customers. Luckin Coffee, in particular, has repeatedly introduced coffee products at 9.9 yuan ($1.40) per cup as part of its promotional strategies. Beijing-headquartered Cotti Coffee has also adopted a similar strategy, maintaining relatively low prices even in its stores in Hawaii and Hong Kong that are known for high levels of spending.

To meet the demand for high-quality, affordable coffee beans, companies have turned to Yunnan as a source. Major coffee brands such as Starbucks, Blue Bottle Coffee and Luckin Coffee have rolled out coffee beverages made from homegrown beans in Yunnan, including those sourced from Pu'er.

Although the increased demand for and recognition of Yunnan coffee beans have contributed to rising prices in recent years, they still remain lower than imported ones. While international beans were imported at an average price of over 27 yuan per kilogram from 2018 to 2022, both the market and export price of domestic beans still lingered between 10 and 25 yuan per kg, according to a research report from last year.

Pu'er is making strides in breaking free from the low-price predicament through value-added processing, as Zhang Xiong, deputy director of the Pu'er Tea and Coffee Industry Development Center, said "even the prices of basically roasted beans are two to four times higher than that of raw beans".

To facilitate this transformation, Pu'er introduced a three-year action plan in October 2022, which aims to enhance the city's capabilities of value-added processing by means such as investment attraction, expanding production lines and technology upgrades.

Yunnan Jinkelong Coffee Industry Co, a company focused on the processing of coffee beans, was brought to Pu'er in 2022 and has become the first firm capable of producing freeze-dried coffee in the city. By the end of last year, the company had completed the construction of two production lines, with an expected annual capacity of processing about 4,000 tons of coffee beans, accounting for 10 percent of the total bean output in Pu'er.

"The strategic location and favorable policies of Pu'er persuaded us to expand our operations into the city," said Jinkelong's production manager Zhao Qingyi. Pu'er is an important node in the "China-Laos-Thailand coffee economic circle" and is located in close proximity to Vietnam, the world's second-largest coffee exporter after Brazil. Moreover, the China-Laos Railway, which was completed in 2021 and passes through Pu'er, has further facilitated logistics for the coffee trade, Zhao noted.

Although the value-added processing rate of Pu'er coffee has soared from less than 8 percent to 33.4 percent within three years, Zhang Xiong said, given the city's exceptional natural advantages, there's still room for further improvement.

In line with this objective, Zhang Xiong said in addition to attracting large-scale enterprises to develop in Pu'er, the city is exploring collaborations with online retail firms in a bid to boost the sales and recognition of Pu'er coffee.

Capitalizing on the logistical advantages brought by its three national-level ports, the city is also considering introducing foreign-grown coffee beans for processing through supportive policies such as tax incentives.

Pu'er is ramping up its efforts to integrate the coffee industry with tourism as another way to maximize the value of its coffee resources.

The city had a coffee plantation area of 45,267 hectares last year, yielding 51,300 tons of coffee beans and an output value of 6.3 billion yuan. "Pu'er cannot compete with industry leaders such as Brazil and Vietnam in terms of quantity. The path to success lies in differentiation," said Xia Bing, head of a Yunnan coffee industry expert group.

Modern coffee estates that integrate coffee cultivation, production, tourism, accommodation and dining have naturally played their role in promoting the differentiated development of the coffee industry in Pu'er.

As a coffee-growing region characterized by picturesque landscapes and a favorable climate, Pu'er offers visitors not only a cup of coffee, but also an immersive experience from handpicking beans to making their own coffee, which sets the southwestern city apart from major coffee-consumption hubs such as Beijing and Shanghai, said Liu Haifeng, executive vice-president of the Yunnan International Coffee Exchange.

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Zhang Rui now operates a coffee estate under her family company in Pu'er that, in addition to tourists, attracts school groups with its research center and the first coffee culture museum on the Chinese mainland. She said the estate receives an average of more than 100 visitors per day, with summer vacations and the harvest period from October to February being peak seasons.

Similar to its peers in Yunnan, Zhang Rui's estate was not designed for tourism when it was established in 2013. Rather, it gradually evolved in response to emerging trends and the government's intensified efforts to develop coffee tourism in 2022. The facilities in these estates may not be as visitor-friendly as dedicated resorts.

As a stimulus for estate owners, the government of Yunnan province held its first selection of specialty coffee estates in 2022, when 10 were recognized, with three from Pu'er. Among the four estates that made it onto the list last year, two of them are from Pu'er.

Contact the writers at irisli@chinadailyhk.com