Coffee houses top the profitability ranking in Shanghai's catering industry, according to a report released by the Shanghai Food Association.

Cafés in the city reported an average profit margin of 16.37% in 2010, well above the catering industry average of 10.6%, and their revenues represented 17.2% of the industry's total, the report found.

The number of coffee shops - including bakeries that also sell coffee - in the city skyrocketed 213.6% to over 12,000 between 2006 and 2010, and up to 60% of those who started doing business in the city's catering industry in 2010 chose to open a café, the report said.

Starbucks Corp (NASDAQ: SBUX) has opened over 100 stores in Shanghai since 2000, making it the most rapidly developing city in China, or even in the world, when it comes to the coffee industry, which locally employs 100,000 people.

Nestle SA's revenue from Shanghai has risen 23% annually over recent years and is comparable to that from the entire north China region, including Beijing, figures from the Shanghai Food Association's coffee industry commission showed.

Shanghai was China's first port opened for foreign trade 170 years ago, and its earliest cafés were built by British and French settlers in the international concessions in the 1920s. This history helps explains why the city's coffee industry has grown much faster than the rest of the nation, the report added.

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