Tencent "Deep Net" author Xiang Xin Sun Hongchao
In 1999, Starbucks opened China's first store in Beijing International Trade Center. Starbucks regards China as the fastest growing and largest overseas market and has opened more than 3,400 stores in China.
Today, 19 years later, the giant who has grown into a super coffee is facing a major externally initiated change. The background of this upheaval is that Starbucks has experienced its first decline in the Chinese market for nine years. In China/Asia Pacific, Starbucks' operating margin has dropped from 26.6% to 19%, and same-store sales in China have also fallen by 2%. %.
Behind the Starbucks dilemma is the rise of China's Internet and new retail. Chinese Internet entrepreneurs will not miss any opportunity to shape the “unicorn”. In the coffee business, they see a new opportunity for the transformation of consumption patterns.
Ruixing Coffee is one of the biggest “spoilers” this year. It has completed the coverage of 1,300 stores in less than a year. With the help of capital, the valuation has climbed to US$1 billion. Not only is Ruixun Coffee, but even the coffee that was founded in 2014, I hope to get more attention with the social-based gameplay such as the small program “Pocket Café”, such as fission, coffee, and many other self-service retail coffee machines. This new open scene has become popular.
Starbucks President and CEO Kevin · Johnson said in an email sent to employees in September this year, "We must accelerate customer-related innovations that motivate our employees and make sense to the business." In order to achieve this goal, there will be some “significant changes” to the company, such as selective closing.
In terms of market share, although Starbucks and Costa still occupy the head position in the chain coffee market, with the continuous influx of competitors, the coffee market is fermenting rapidly and fiercely under the promotion of giant reshaping and new retail coffee brands. Change.Domestic brands, in the future, can we replicate the success of Huawei millet in the mobile phone market in the coffee field?
Start the battle
Li Chao (pseudonym) has been in the coffee industry for more than ten years and is one of the earliest and largest suppliers of milk in Starbucks China East China. In his memory of the past, Starbucks brings American coffee that is different from the past, “clear coffee + sugar + creamer”, European coffee mode, “the cup of milk is sweet and fragrant”, which makes many consumers addicted to it. among them.
Since its first store, Starbucks has opened more than 3,400 stores in China with nearly 45,000 Starbucks partners. As of December 2017, Starbucks accounted for 51% of the Chinese chain coffee market, ranking first.
Another important event was that in July last year, Starbucks announced the acquisition of the remaining 50% stake in China's East China region, bringing all of its operations in China to direct sales. The price of the transaction was $1.3 billion, setting a record for the acquisition price in Starbucks history. This is enough to show Starbucks' preference for the Chinese market.
Kevin · Johnson said in a conference call last year that Chinese consumers consume half a cup of coffee per person per year, compared with 300 cups for American consumers. In addition, the number of middle class in China is expected to reach 600 million in 2021, twice the total population of the United States. This shows that Starbucks still has huge room for development in China.
Regarding the Chinese market, Starbucks is ambitious. They plan to double the number of stores in mainland China by 2020 by the end of fiscal year 2022. They will enter 100 new cities and cover 230 cities. The total revenue in China will reach FY2017. More than 3 times.
Starbucks' expectations for the Chinese coffee market have been unexpectedly impacted by the disclosure of the latest quarterly earnings reports, and the high-profile Chinese market is worrisome. The latest financial report shows that same-store sales in China fell by 2%, down from 7% in the same period last year. This is the first time in the nine-year decline of Starbucks China market, becoming the world's worst performing market.
Not only Starbucks, according to Li Chao, the coffee shop basically reached its peak in 2017, and the turning point began to decline in 2018.
A group of statistics that the US team has done has more clearly quantified the inflection points, including the number of cafes in 16 cities across the country, including the North, Guangzhou, and Shenzhen. In 2016, the average bank closure rate in major cities across the country reached 18%. Among them, the number of coffee shops in the two cities with the largest proportion in the country, Shanghai and Beijing, was 6% and 20% respectively. Even South Korea's famous coffee chain coffee company (Caffe Bene) in China joint venture coffee with you (Shanghai) Investment Management Co., Ltd. announced bankruptcy on October 9.
Cooperation with Ali is seen by the outside world as an important turning point for Starbucks. From September 19th, in some stores in Beijing and Shanghai, trial operation & ldquo; special star delivery & rdquo;, at the same time on the line of hungry take-out platform, and is expected to cover 30 first- and second-tier cities across the country, involving more than 2,000 stores, coverage rate is super 50%.
After Starbucks pulled the line to the new online retail, McDonald's became a “follower”. At the end of the National Day holiday, McDonald's China announced that its Mac coffee brand will launch a delivery service. Consumers can place orders through the “Wei Mai Coffee Delivery”, WeChat applet, Hungry and Meituan platform. Professional delivery staff can Coffee is delivered within 28 minutes.
However, Li Chao believes that Starbucks is more passive in its way of finding changes, and from the perspective of suppliers, there is still no significant increase in volume.
While Starbucks encountered Waterloo in the Chinese market, it also gave important opportunities for the rise of local brands such as Ruixing Coffee and Even Coffee. Although Ruixun Coffee has been questioned by the outside world as a bundled Starbucks marketing, it is undeniable that it has quickly won a position in the Chinese coffee market with the classic Internet style.
The coffee culture in China's urban life is in the ascendant, so that Ruizhi Coffee CEO Qian Zhiya saw the space and opportunities in this market. The former boss of Qian Zhiya, the chairman and CEO of UCAR, Lu Zhengyao, has always spared no support for Ruixun Coffee. Not only did the angel investor of Ruixing borrow a sum of money from her, but also rented out the spare area of the new building of the company. Part of it is used for office work.
Guo Jinyi believes that China is already on the eve of coffee consumption, which is a good entry point. According to the London International Coffee Organization, China's coffee consumption is growing at an astonishing rate of 15% per year compared to the global average of 2%. It is estimated that by 2025, China will grow into a giant energy consumption empire of 1 trillion yuan. As domestic consumers continue to improve their coffee, the Chinese coffee market presents enormous potential.
According to Guo Jin, co-founder of Ruixun Coffee, a pair of "Deep Net" recalled that the team spent nearly a year on market research. They have done research on the entire coffee chain industry through large foreign investment banks, from the cultivation of coffee beans. , trading, baking, then coffee machine production, coffee shop business model, and back-end logistics.
Through research, they found that compared to the British local coffee brand Costa, Australian local coffee brand Patricia, Canadian local coffee brand Tim Hortons, China does not have a local coffee brand of scale. “Our first starting point is to see how many people in China can be our target customers. In the top-level design, we have subverted the existing traditional brands based on the way stores are acquired, but through the mobile Internet brand operation methods, including brand advertising, spokespersons, friends circled investment, WeChat social fission, etc., so that consumers perceive Rui Fortunately, there is a brand that is textured, young and fashionable. ”
At the beginning of the line, Ruixun Coffee launched a series of promotional activities, buy two get one free, buy five get five, new customers can also be free for the first cup. Later, by inviting Tang Wei and Zhang Zhen to endorse, a large number of advertisements were tried to grab the user's mind.
Regarding subsidies, Ruixing Coffee has never been soft. Guo Jinyi told Deepnet that through promotion activities, Credit Suisse has reduced the consumption of single cups to around RMB 10, which will enable more consumers to cultivate coffee consumption habits and better promote coffee to consumers' daily lives. .
When the $200 million Series A round of financing was completed in July this year, Qian Zhiya also disclosed his thoughts on subsidies to Shenshen. The $1 billion of Ruixing coffee in the early stage “burned” did not mean a loss. One billion yuan is used in the supply of fixed assets such as supply chain supporting facilities, information system construction, and store expansion. “These are cash consumption, but they do not represent all losses. ”
Guo Jinyi believes that traditional chain coffee brands have not completely solved the problem of cost-effectiveness and convenience of Chinese coffee consumption in the Chinese market. Ruixing Coffee hopes to stimulate the popularization of Chinese coffee consumption by using the same quality and better cost performance and convenience. . Regarding subsidies, he said that “there is no end timetable, mainly based on market feedback. The market still needs education. (We) is to let consumers know what a good cup of coffee, what kind of a good light food. ”
According to reports, the supplier of Ruixun Coffee "Blue Partner Alliance" is in line with the big brand suppliers, hoping to let more consumers have more choices in breakfast and lunch through the advantage of price. “This investment in the education market is worthwhile. & rdquo; Guo Jinyi said.
Internet-style subsidy play, so that it can quickly get good results. Aurora big data shows that the DAU data of the Ruixing coffee application has ushered in rapid growth immediately after going online, and the momentum continued until mid-May, and then entered the stationary period. Since August, the DAU value of the application has once again shown a rapid upward trend. As of August 31, the DAU value of the Ruixing coffee application has reached 146,600.
At present, the number of Ruixing stores has exceeded 1,400, which is equivalent to more than one-third of the number of Starbucks stores in China. According to data released in May, during the trial operation, Ruisheng Coffee has completed an order of approximately 3 million orders; as of now, it has sold more than 30 million cups of coffee and more than 5 million service users.
Li Chao judged that Starbucks maintained a very high-speed store growth rate until 2018, and has a very mature profit model. In comparison, Ruixing Coffee has no profit point yet. “Like the drop of the year, the drip mode is on fire, and there are various modes of taxiing. Wait until the money is burned out to see the final state. ”
New opportunities under the giants
According to Guo Jinyi, the environment of the Chinese coffee market has undergone a very big change this year. “On the one hand, there are more and more players entering the coffee industry, and the entire capital market has also given more attention to the coffee industry; on the other hand, consumer awareness of coffee and the need for improved consumer experience are more prominent. ” Especially with more brand choices and cheaper prices, more and more consumers are categorizing coffee as a daily drink.
Data on China's coffee consumption show that China's coffee market consumption has grown steadily in 2014-2018. In 2014, the total coffee consumption was 207.714 million tons, a year-on-year increase of 34%. In 2017, the total consumption was 348.095 million tons, a year-on-year increase of 29%.
Driven by the huge potential market, the eager attention of capital and the booming new retail, new players in the coffee industry have gradually explored a breakout channel that can compete with the giants.
More social play, lower operating costs, and a more flexible application space in the new retail environment, which is spurring more and more than the traditional coffee industry. The coffee brand focuses on playing more tricks online.
Among the many new retail coffee brands on the market today, even coffee, which was established in 2014, was the first to enter. After completing the closed-loop service verification from the international chain brand Starbucks and Costa, and gradually transitioning to the self-operated brand coffe box, even coffee is well-versed in the Internet. Compared with other brands, even coffee has its own characteristics in the “closer combination of interpersonal relationship and consumption scene”.
This year, even four years of coffee has been put more emphasis on social games such as building small programs, showing its emphasis on online gameplay to attract passengers. Prior to this, even the coffee has already launched the blessing bag (fission) and the gameplay of the group. Both of these games have strong new functions. After the online team, the sales of coffee at that time rushed to 100,000 cups per day. Above ("Deep Net" Note: At present, it has reached 250,000 cups).
Even coffee CMO Zhang Hongji told Deepnet that this is a brand new attempt, but the core is not to bring quantity, but to push consumers' understanding of even coffee brands and products forward. “We think this is not a short-term marketing, it is a long-term product form. ”
While competing for online traffic, players are also breaking the boundaries of coffee consumption by constantly opening offline stores as an online supplement.
Compared with online channels, offline stores are bound to have higher labor costs and rental costs. In order to optimize this part of the expenditure as much as possible, Ruixun Coffee continues to optimize the way of working through big data obtained online. According to the introduction of Ruixing Coffee CMO Guo Jinyi, Ruixun Coffee has created a flexible store layout, which enhances the efficiency through take-out, and also relies on smart operation to improve store efficiency and optimize cost structure.
According to reports, based on its own stage of development, even the coffee shop is preparing for the display store will soon meet with you. Even Coffee said that "Deep Net" revealed that as of the end of September this year, even more than 300 Coffee Stations in the coffee industry have achieved overall profitability, and added the Hangzhou area outside the original Beishang-Guangzhou area, which can be opened in batches within the month. .
Zhang Hongji believes that Chinese coffee players are now standing on the new starting line in terms of the current size of the market and the future coffee market. “There are currently strong players in the market, and they will face a lot of room for growth for a long time now and in the future. Under the premise of rapid market expansion, everyone has a great opportunity. ”
Subsidies have clearly become an effective means of entering new players. Li Chao revealed to Shennet that the material cost of the coffee industry has increased rapidly in recent years. For example, the milk industry once had an overall price increase a few years ago. However, coffee shops generally do not dare to raise prices, because the fear of causing consumer rebound, so the profit of coffee shops is actually falling. More mature chain stores like Starbucks, the older products will not increase prices, but through the continuous introduction of new products to obtain profits. Rui Xing does not care about profits at present, so he does not care about the rise of materials, mainly relying on price wars to impact the scale.
Zhang Hongji believes that although it is not a "perfect means", there is no need to demonize it. “Subsidy is an important factor in the Internet model. It is very effective for the rapid acquisition of users, scale of expansion and influence, but it is not essential. The essence is whether products and services can impress users. ”
In the context of coffee brand giants seeking change, new players entering the market, capital doubling favor, and Internet giants vying for new retail positions, the coffee market is still facing a lot of changes. Can new players stand firm and rely on Internet to fight for landing? to be observed.