Hong Kong’s cafe business has, at times, held a temperature reading to the status of the greater food and beverage industry in the city over the past six years.
Weathering the double whammy of protests and pandemic, heightened local consumption of coffee and optimism bred cafe innovation in 2020, investments and growth typified 2021, promise and hope was strong in 2022, and reality hit hard in 2023 and the first half of 2024.
As the city has become accustomed to Shenzhen trips and overseas holidays, cafes in the city have met troubled times. Popular independent cafes Flowfloat, Cafe Corridor, Brew Note Coffee Roaster, cafe5月, 休CAFE, Amber Coffee Brewery, and Infiniti C have all met their demise in the past three years.
Top Hong Kong coffee chains have both expanded during the two-year pandemic shut-in, and closed stores following a boom in outbound travel. Hong Kong is not drinking coffee the same as it was before.
Florence Lam, a Hong Kong coffee blogger, has recorded the past four years of optimism and capitulation for the city’s cafe space online. When Hong Kong’s F&B industry thrived, cafes thrived; when it wasn’t, cafes were hit hard.
In 2020, Florence reported that Central, Sheung Wan, and Sham Shui Po saw the most cafe openings, estimating 160 in total city-wide. Almost 300 cafes opened in 2021 with only around 30 closing, a credit due to heightened local consumption.
The downturn came in 2022 with 200 new cafes opening and 80 closing. 2023 saw around 220 cafes open with a whopping 125 shutting business.
Shared amongst Hong Kong’s top coffee professionals is mixed feelings of both optimism and brutal reality. The founder of a small coffee business in Hong Kong tells of such despair. Once managing three cafes at its peak, two in Mid Levels and one in Causeway, he claims he was the first coffee company in Hong Kong to make and manufacture their own coffee capsules.
During the pandemic, their store on Caine Road saw an abrupt reduction in sales and visits. “We were probably one of the first specialty cafes in the area, but suddenly we saw more moving trucks come onto the street and fewer people come to our store,” he told Foodie.
Now only operating one small cafe beside Hollywood Road, he found Hong Kong’s taste and habits for drinking coffee directly affecting business and his peers’ business.
“Because Hong Kong people have a lot of disposable income, we can spend a lot, but not inside a cafe. People were spending elsewhere. I didn’t believe in the market when everyone was believing in it.”
In a reaction to the swathe of openings during the pandemic calm, he noted an over-saturation of the Instagrammable factor of cafes during the past five years a big factor for the mass shutdowns of cafes when viral chaos came back in the city. Cafes were reliant on style over substance. “On the surface, everything looks good,” he says, “but underneath, the coffee may not be good. Even before COVID, you still had to think about how Instagramable your cafe was.”
“It has been too easy to open a cafe without experience. A lot of the shutdowns in cafes are businesses miscalculating how many cups of coffee you need to sell to break even.” Fiona also noted this in her annual cafe reports on Instagram.
The great move of consumption from cafes to drinking coffee at home has hurt coffee businesses like Filters Lane even more than cheaper coffee and dining options available in Shenzhen. “When customers do not treat coffee as a craft, people would prefer to save and drink at home. We saw the coffee capsule movement coming into Hong Kong and now it is disrupting the market,” he says.
Where store closures and false hope over a quick economic turnaround have left some coffee professionals despaired, others operating in the space are brashly optimistic.
Scottie Callaghan, co-founder of FINEPRINT, claims that “more people are drinking coffee in Hong Kong nowadays than ever before. FINEPRINT coffee sales are very good and there are substantially more cafes in Hong Kong now than ever.”
He has personally seen a reduced frequency of people dining at “nice restaurants” and opting for casual dining experiences, such as cafes and takeaway shops. “This definitely has a positive effect on the preference for coffee. I suspect this is the result of coffee’s growing popularity in Asia over the past 15 years combined with post COVID dining preferences.”
The pandemic, nor Shenzhen consumption, had largely not affected FINEPRINT’s bottom line over their seven locations. They benefit from the sustained trend of cafe culture becoming central to the Hong Kong dining scene. “FINEPRINT did grow during COVID, and we were very busy, but we were also very busy before COVID and more busy post-COVID.”
After all, Scottie tells of the “beauty and romance behind coffee that Hong Kong is slowly growing to appreciate.” Whilst he agrees with sentiments shared by cafe owners that more people are drinking coffee at home, “more people are visiting their local specialty coffee shop to buy good coffee and engage with the professionals about the coffee they buy.”
The flush of new mainland Chinese tourists to Hong Kong from spring 2023 onwards found FINEPRINT as a key destination for uploading pictures onto Xiaohongshu (Little Red Book). Their Soho location in particular has made the cafe a must-hit spot on “city walks,” a perfect backdrop for pictures. Increase of cafe sales at the location has been linked to the increase of overseas tourists visiting.
Similar to Scottie, Teddy Pun, founder of The Cupping Room, finds coffee an essential part of life. “Cafes are a significant part of Hong Kong’s dining scene,” he told Foodie. To him, and many professionals in the cafe space, coffee has and is a daily necessity rife in Hong Kong.
“Along with the entire F&B industry in Hong Kong, the coffee shop business suffered post-COVID with trips to Shenzhen and decline in inbound tourism from overseas and Chinese visitors. Yet, cafes have become less impacted than any other F&B businesses.”
With more than half a dozen cafes operating across Hong Kong Island, Kowloon, New Territories, and Lantau Island, Teddy is confident of the survival of coffee. Where COVID prompted a rise in work-from-home culture in cafes, influencing and the advent of Instagram advertising have seen coffee shops prioritising style and aesthetics with fashionable latte art and plates of food.
All day breakfast, pasta, French toast, savoury crepes, smorrebrod, and salty snacks bring variety to The Cupping Room’s coffee game, lifting up profit when coffee consumption may appear on a decline.
With the rise of specialty coffee varieties, drip bags, and coffee capsules in Hong Kong, Tedd notices “more discerning coffee lovers who are looking for really exotic beans single origin beans are engaging the market more. They are focusing on certain coffee roasters that a growing number of players can serve. The COVID wave of coffee shops certainly allowed more people to learn about and appreciate specialty coffee.”
The strategy Gerald Li, co-founder of Leading Nation group, has taken with Hong Kong’s coffee chain Elephant Grounds has been to promote a culture of coffee in every aspect of the brand: flavours, location, image, and style.
“Cafes in Hong Kong are in the best position they have ever been in the past 20 years. We are constantly improving,” Gerald argues. Launching the brand in 2013, Elephant Grounds began as a coffee bar in Soho before expanding to seven locations across Hong Kong Island and Tsim Sha Tsui 11 years later.
The “affordable luxury” of coffee has enabled Elephant Grounds to survive, and sometimes thrive, in a competitive cafe market. The brand maintains a 100% direct trade partnership with international coffee growers and roasts all their beans in their Hollywood Road location, enabling the chain to cut costs and control quality. Like Teddy and Scottie mention, coffee drinking is a routine for many Hong Kongers.
“The intent for Elephant Grounds was to create a culture around the brand,” Gerald says. Over the decade, the chain has served ice cream sandwiches at select cafes, hosts a comprehensive brunch menu of Asian comforts, and sells a myriad of alcoholic beverages. The co-founder cites location as a vital aspect to growing in a neighbourhood and becoming a key part of the street, especially at a time where more people are shunning the office for flexible working arrangements.
Impact has indeed affected Elephant Grounds this year. “During the first couple years of the pandemic, [business] was great. The only time we have seen a big impact was Chinese New Year earlier this year. A lot of the Xiaohongshu tourists from China weren’t coming as much.”
All four leading cafe business owners agreed on one fact, in spite of waning profit or increased fever in the past year: coffee drinking is here to stay in Hong Kong. The city’s compulsion for caffeine may have adapted with more Hong Kongers working from home, travelling to Shenzhen for day trips, taking overseas trips, or spending becoming tighter. Yet, the cafe business proved innovative during the early 2020s and will continue to show its revolution.
