Luckin and Brazil signing an MoU reveals the next major partnership for the coffee sector

stag in front of Brazil flag
  • China’s Luckin Coffee recently signed an MoU with the Brazilian government for a transaction valued at $500m
  • China has jumped from the 20th to 6th largest buyer of Brazilian coffee in just a year
  • This is a strategic partnership that will help consolidate market power for both countries 

THE global coffee trade witnessed a remarkable shift in 2023 as Chinese imports of Brazilian coffee tripled within a year, according to the Council of Coffee Exporters of Brazil (Cecafé). 

This has set the stage for Chinese coffee chain Luckin Coffee recently entering a memorandum of understanding (MoU) with the Brazilian Trade and Investment Promotion Agency (ApexBrasil). 

The MoU outlines Luckin Coffee’s proposal to purchase 120,000t of Brazilian coffee up to 2026 in a transaction valued at $500m.

“This is fantastic news for the Brazilian coffee value chain,” says Vinícius Estrela, Executive Director of the Brazil Specialty Coffee Association (BSCA). 

“It represents a commitment for one million bags per year over a two-year period. Luckin’s annual imports of about $250 million approaches the entire amount imported by China 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 leading coffee producer, renowned 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 enhance its sourcing, supply chain efficiency, and market access in the global coffee trade.

“Brazil is the largest exporter of green beans to China, accounting for 38.73% of the total import volume and 27.63% of the total imported value in 2023,” says Mau Perez, Purchasing Manager for Shanghai Cooway Trading Co.,Ltd. 

“Mechanisms like this MoU help to build trust amongst 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 leapfrogged from the 20th to the 6th largest buyer of Brazilian coffee within the space of a year. The driving force behind this surge is the expanding footprint of Chinese coffee chain Luckin Coffee, which, in 2023, outpaced Starbucks in terms of sales value in China.

As China’s coffee consumption continues to rise and the country emerges as a growing power in the global coffee market, industry observers are taking note of China’s increasing influence and competitiveness in the green coffee buying space. 

Meanwhile, traditional consumer markets are seeing their buying power become more restricted – a combination of inflation, tight margins, low access to finance, and upcoming mandatory supply chain due diligence.

“I think China will become the world’s main coffee buyer in terms of value and volume,” says Mau. 

“For example, for Panama, China is already the largest market for their super expensive geishas. If the EU Deforestation Regulation also comes into effect in 2025, I believe China will just accelerate that trend.”

The rise of China as a prominent coffee consumer and importer underscores the country’s evolving taste preferences, shifting market dynamics, and strategic initiatives to secure diversified coffee sources, including partnerships with key coffee-producing regions like Brazil. 

“Chinese demand for coffee, especially quality coffee, has been growing markedly over the past few decades and Brazil is unique in its ability to supply large volumes of high-quality coffees of 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 expanding footprint on the broader coffee industry landscape.

The China-Brazil coffee relationship is strategic on both sides

The MoU between China and Brazil included not only this substantial coffee deal but also eight intergovernmental instruments and 30 outcomes, along with 11 private sector agreements. 

It underscores a strategic alignment that transcends mere commerce, hinting at deeper economic integration and cooperation between the two nations.

The collaboration between China and Brazil in the coffee sector unveils a strategic vision for mutual cooperation and market synergies – both countries aim to secure stable coffee trade relations.

“The move is strategic, it’s about a larger partnership between the two countries, and it’s most definitely about more than just coffee,” says Omar Ali, Managing Director at Ocean Grounds Coffee Roasters in China. “It takes a big move like this to introduce coffee drinkers in China to new origins.”

China’s interest in Brazilian coffee extends beyond sourcing efficiency and price considerations. It reflects a strategic intent to diversify coffee supply channels, cultivate long-term relationships with key coffee-producing countries, and address consumer preferences amidst inflationary pressures and market uncertainties. 

China, like the rest of the world, doesn’t have great confidence in its economy right now. Retailers are fiercely competing on price, forcing tough cost cuts onto their suppliers, and squeezing profit margins

“Besides increasing consumption, we are in a battle for market dominance between Luckin Coffee versus Cotti Coffee, and Starbucks which is struggling to maintain its position,” says Mau. “We also have 蜜雪冰城 (Mixue Ice Cream and Tea), with more than 36,000 shops across China, also offering coffee drinks at more affordable prices in lower-tier cities.”

China’s pivot towards Brazilian coffee over other origins is anything but random.

“There is a preference for Brazilian coffee, it has a different flavour 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 largest producer of coffee in the world – the sheer volume of production gives it the most substantial influence on the global coffee market,” says Omar. “This could also be a longer term strategy to help meet the ever growing coffee demand in China with economic efficiency as well.”

This new partnership between China and Brazil in the coffee sector signifies 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 consolidate China’s rapid consumer growth, and maintain Brazil’s status as one of the coffee sector’s leading powers.

Coffee Intelligence

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