Can local coffee stir the monopoly market?

[HC360|Food Industry] China's coffee consumption market has great potential, but it has always been monopolized by foreign brands such as Starbucks. Recently, local coffee brands have tried to attract users through massive subsidies with the help of capital; and through the online marketing and take-out business, the younger generation of consumer groups. Can the local squid brand “squid” stir up the long-settled market and reverse the monopoly of foreign brands? Experts believe that the market outlook remains to be seen –

Recently, the WeChat circle of friends has been frequently screened by a new blue-colored coffee brand – luckin coffee has grabbed the limelight with “forwarding articles to lead free coffee”. With strong capital, local coffee brands once again hit the international giant hair such as Starbucks. How far can this go?

New and old brands

For a long time, due to the small market volume and the monopoly of foreign giants, local coffee brands have been struggling to survive in the cracks. Despite the lack of well-known brands and little capital attention, when the coffee market in China's first- and second-tier cities was almost occupied by outsiders, with the power of mobile Internet and capital, local coffee brands once again returned to people's vision.

The reporter learned that Ruixun Coffee entered the market with a net investment of 1 billion yuan, and sold 5 million cups of coffee in just 4 months. As of May, offline stores exceeded 500.

Not only that, Ruixun Coffee began to “dig people” from Starbucks at the end of last year. The main recruits were middle- and high-level managers, and some of the posts were paid more than three times more than Starbucks. It is reported that about one-seventh of the employees in Starbucks Beijing market have been dug up by Ruixing, and some high-end hand-washing employees in important stores have even been dug up nearly a quarter.

Qian Zhiya, the founder of Ruixun Coffee, publicly stated that “beyond Starbucks is the goal of our business.”

As an old player in the coffee market, the performance of the Coffee Wing also ushered in a turnaround last year. The Coffee Wing Annual Report shows that there are four business segments in the coffee wing in 2017. Among them, the proportion of urban smart coffee machine business has jumped to the top, reaching 41.01 million yuan; the income from direct-operated restaurant catering services is 40.11 million yuan, franchise income 16.17 million yuan, supply chain income of 7.45 million yuan. Thanks to timely transformation, its 2017 net profit was 9.41 million yuan, a year-on-year increase of 272%, reversing the situation of a loss of 5.46 million yuan in 2016.

"In the 18 years of my business, there are many opportunities to change careers, but I insisted on it, because I think this market will definitely get up." The reversal of performance made the chairman of Coffee Wing Yin Feng see the hope of the rise of local coffee brands. .

"The coffee industry did not make money in the past, not because of the high cost, but because there are too few coffee consumers in China, and the market size is not big enough. In fact, the gross profit margin of coffee is very high." Yin Feng told the Economic Daily reporter that since last year, China The coffee consumer market is undergoing positive changes, not only the rapid increase in young users who like coffee, but also the emergence of Internet coffee brands.

Of course, an investment manager at Ocean Capital said that it is not easy for local coffee brands to challenge Starbucks. Starbucks has a typical brand “Moat” and it is difficult for new brands to catch up. Although the subsidy can attract a large number of customers in a short period of time, once the subsidy is cancelled, the customer retention will face a severe test. The new brand can only attract consumers to continue to patronize the user experience.

Online marketing or opportunity

The data shows that in 2017, the global coffee market grew by only 2%, and China's coffee consumption grew by as much as 15%. Although the market potential is huge, since Starbucks has entered the Chinese market for nearly 20 years, it has occupied half of the country, and the local coffee brands that have been succumbing to the past cannot shake their monopoly.

However, the local coffee brand has once again exerted its strength because of the positive changes in the current market environment. In the view of Qian Zhiya and Yin Feng, the main pain point of the Chinese coffee market is that it is inconvenient to purchase. The rise of “new retail” will bring opportunities for local coffee brands to overtake.

The reporter learned that in addition to the rapid expansion of the store, all the stores support the mobile terminal single and delivery service, and the store promises to deliver within 30 minutes from 1.5 km to 2 km around the store; and similar products are much cheaper than Starbucks. .

The coffee wing also shifted its focus to "new retail." “The 2017 performance reversal was mainly due to the expansion of our business unit, and the new two lines of business have made tremendous contributions.” Yin Feng said that when they first entered the New Third Board, there were only two main lines of business, one was Offline offline stores, the second is franchise authorization. Later, it expanded into the smart coffee machine and supply chain business. In the future, the two sectors will focus on the business and focus more on the entire coffee industry chain.

The reporter was informed that the Coffee Wing proposed a “one horizontal and one vertical” strategy in 2017. The vertical is coffee universalization, namely offline coffee shops, smart coffee machines, and retail coffee drinks and retail goods; horizontal refers to coffee and light meals. Various models of offline brand chains.

At present, smart coffee machines have become the main source of income for the coffee wing. Yin Feng revealed that the smart coffee machine was officially introduced to the market in July last year. As of now, the number of contracts that have been signed or will be laid has reached nearly 2,500 units; the target for this year will be 5,000 units.

However, Wang Yongping, president of the Commercial Real Estate Research Association of the Real Estate Chamber of Commerce of the All-China Federation of Industry and Commerce, said that the market performance of this wave of local coffee has two main characteristics. First, marketing activities are more based on Internet thinking, relying on high subsidies provided by investment in exchange for traffic; Second, marketing is more concerned with the product itself. He pointed out that consumers have already regarded Starbucks' offline stores as more of a business scene. If local brands only focus on product forms such as take-out, the market outlook remains to be seen.

Be wary of the virtual fire in the capital market

In 2017, the online black tea beverage brand “Xi Tea” swept the social network quickly, which greatly boosted the confidence of local coffee brands. In Yin Feng's view, this just released a huge positive signal to the coffee industry. “The tea's innovative 'tea + milk cover' form is derived from coffee. In fact, milk tea is the 'cappuccino' in tea. The evolution of this model is just a new form of coffee.” Yin Feng Say.

In recent years, foreign coffee brands such as Starbucks have opened more and more stores in the Chinese market, earning a lot of money. In contrast, the Chinese coffee market has not been able to appear a "unicorn" of a local brand. Due to profitability, management and other reasons, the capital market is not too hot for the coffee industry.

It is understood that Yin Feng had sat on the guest table of Tianjin Satellite TV's "You are none of" program for a full 7 years and has a certain popularity. Even with the blessing of the "net red" boss, the coffee wing has not been able to make "China's Starbucks" for so many years. On the contrary, the coffee wing 2016 annual report shows that the company's net profit has turned from profit to loss.

The road ahead of Ruixing Coffee is also destined not to be smooth. Sun Ruochun, a young white-collar worker from a financial company in Shenzhen, was the first user of Ruixing Coffee. She told reporters that the reason why she bought Ruixing coffee was mainly because she bought a coupon for one get one free, and the price was lower than Starbucks; but Rui Xing The taste of coffee is still far from the Starbucks.

"In fact, many of my friends are attracted by the overwhelming advertising. I downloaded Ruixing's mobile client. There are not many people who actually buy it. Even many people don't pay attention after the coupons are used up." Sun Ruochun said.

As early as a few years ago, the Korean coffee brand “Coffee to accompany you”, which was popular in China, also proposed the goal of “to reach 5,000 chain stores in China by the end of 2015”. The current status quo is that the founder Jiang Xun committed suicide due to the financial difficulties of the company's operating difficulties, and also set off a store in the Chinese market.

Experts said that there are many difficulties and challenges in the upswing of local coffee brands. The market needs to be more rational, and beware of the hype after the hype.

Editor in charge: Chen Wei

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