China Resources Enterprise Tuesday agreed to pay HK$327 million (US$42 million) for 80 percent of Pacific Coffee, the second-biggest Hong Kong coffee chain.

The retail conglomerate aims to boost its coffee chain business on China's mainland with this purchase, which would further brew competition as international leading chain operators, including Starbucks and McDonald's McCafe are also keen to expand to tap the rapidly growing coffee consumption.

Investment holding firm Chevalier Pacific Holdings Ltd will hold the remaining 20 percent in Pacific Coffee, the company said in a statement yesterday.

Established in 1992, Pacific Coffee operates 90 outlets, with 83 in Hong Kong, four in Singapore and three on the mainland. It also runs coffee outlets via franchise in Malaysia and Macau.

China Resources, which manages about 2,900 stores on the mainland, said "its directors see increasing demand for high-quality coffee on China's mainland, particularly in the Pearl River Delta region, prompted by rising living standards."

According to statistics from research firm Euromonitor International, China's coffee sales may reach US$3.6 billion by 2011, up from US$2.4 billion in 2006.

A Reuters report said China Resources hopes to open a Pacific Coffee outlet in each of its 200 key retail stores, citing its Deputy Managing Director Frank Lai.

Starbucks, which has more than 700 outlets on the mainland, plans to add thousands of new stores in the next 10 years. McDonald's, the world's biggest fast-food chain, also aims to have a McCafe in more than half of its 1,100 stores in China by the end of this year and raise the percentage to 80 percent within three years.