For many of us in Southeast Asia, coconut is something easily accessible and part of our daily lives – from whole coconuts on roadside food stalls to packaged drinks to our favorite recipes (e.g Mango sticky rice, curry).
Coconut, however, is recently surging in popularity in China, for a different reason.
What is happening, and what could be behind the surge?
Luckin could be a culprit
In April 2021, Luckin Coffee launched “Coconut Latte” – using coconut milk instead of cow milk – which quickly became a major hit.
During the 1st year of launch, Luckin claimed to have sold more than 100 million cups. That’s a lot of coconut milk.
Luckin was not the first ‘new beverage’ brand in China to launch coconut-based drinks. In fact many other major brands experimented with similar coconut-based beverages earlier.
For example, HeyTea unveiled Coconut Latte with Cereals in its “summer limited edition” series in July 2020; while Nayuki and LELECHA introduced their own coconut-based drinks in August and September 2020, respectively.
Beverage focused information platform Kamen in China tracked that by 2022, 37 out of the 40 top new beverage brands in China had coconut based drinks in their offerings. Another joint report by Meituan and Kamen revealed a 66% year-on-year increase in the number of coconut-themed beverage stores in 2022.
Coconut, a historically understated ingredient in Chinese beverages, has thus experienced a surge in popularity in China.
How does coconut get blended in?
Like the recent hit of Moutai-flavoured Latte, Luckin worked closely with upstream suppliers to tailor make ingredients for their drinks. The coconuts are sourced from Thailand, Vietnam and China’s Hainan province.
But why coconut? According to Zhou Weiming, SVP of Luckin in charge of coffee products, Luckin chose coconut because many Chinese were already familiar with coconut milk.
“An important consideration while designing coconut latte was to use coconut milk to dilute the bitter taste of coffee, which most Chinese consumers did not like,” Zhou explained during a forum last year. “We were also lucky that many consumers, who used to consume bubble tea as students, switch to creamy coffee when they start working. Coconut latte simply tastes better than most dairy-based coffee products”.
Other food and beverage brands, which followed suit, offer coconut-flavored drinks by collaborating with upstream suppliers and creating their own unique formulas.
Surging coconut demand
The popularity of the coconut concept has driven up the demand for coconuts in China, whether to extract coconut milk, coconut water, or other ingredients for food and beverages.
China’s domestic coconut production can only meet 10% of the total domestic demand, with the remainder relying on imports from countries like Indonesia, Thailand, Vietnam, and the Philippines.
Each of these countries offers its own indigenous coconut variety, suitable for various purposes (coconuts are also vital industrial ingredients for coconut oil, fiber, etc.).
The Thai Fragrant Coconut (or Nam Hom), in particular, is gaining significant traction as a premium variety due to its sweetness and aroma, making it a preferred choice for beverage brands and ingredient suppliers.
Neo, co-founder of BoredCoco, a major B2B supplier of Thai Fragrant Coconuts to China, recently shared with us how his company is making use of Thai Fragrant Coconuts and his views of Chinese consumers consuming more coconut. He shared “’Coconuts are like a gift that keeps on giving; they are treasures in every form, and you can keep harvesting for over 60 years.”
How do you compete in a red ocean of coconuts? BoredCoco leverages their understanding of the market and logistics infrastructure as their core competencies.
Anticipating the growing demand for coconut water in China back in 2019, BoredCoco built a number of factories in Damnoen Saduak, a key production area for Thai Fragrant Coconuts, to collect (directly from farmers) and process coconuts.
Thai Fragrant Coconuts production is relatively consistent throughout the year (usually ~ 18 harvests annually), although demand during summer months for the Northern Hemisphere typically is much higher than winter.
With stable processing capacity and many downstream products (ranging from easy-to-open coconut fruits to blended coconut water for beverage making), BoredCoco is able to buy from farmers all year round, where it does not only benefit from the low prices during non-peak periods, but also gain trust from the local farmers, strengthening BoredCoco’s position in the supply chain.
And of course, Neo’s secret cocktail recipe using coconut water and milk.
For those interested to find out more, give us a shout out at [email protected]