China Food

Whether the coffee industry can truly define its own brand and product standard is the core link in the investment judgment logic of the coffee industry

This is food plus’s second review review article,

This is an internal learning material from foodplus in May this year. How to think about the investment judgment logic of the coffee industry is now published in the form of the review · review column article for reference by entrepreneurs in the coffee field and investors who pay attention to the coffee track.

Statement: This article is the original article of foodplus and cannot be reproduced without authorization

“Review · review” mainly analyzes and comments on some phenomena in China’s food and beverage venture capital market, and may make sharp comments on some companies, institutions and phenomena, hoping to give domestic food entrepreneurs and investors some perspectives to observe and think about the current situation and development of China’s food and beverage venture capital. At present, it is in the stage of column testing, which will be updated irregularly and may be cancelled later.

Author: Hai Feng

1. Coffee is a kind of consumer demand that can be met by multiple products and scenes

The core demand of coffee consumption is to supplement caffeine. Caffeine itself can mention the refreshing effect, so it has a certain functional appeal for coffee. Some dependent consumption generated by this will gradually evolve into a very daily living habit and lifestyle.

Multi product and multi scene classification of coffee consumption, photo source: foodplus research and analysis team

In terms of product types, there are three main sources of coffee consumption in China, namely, coffee shops, instant coffee and ready to drink coffee. In addition to instant coffee, coffee shops, takeout coffee and ready to drink coffee are showing rapid growth. The overall market scale of instant coffee is shrinking, but high-end instant products are growing, mainly reflected in Nestle gold medal and three meals Half a brand.


In the U.S. market, in addition to freshly ground coffee accounts for about 50%, other markets are dominated by instant coffee, capsule coffee, coffee beans and ready to drink coffee. There is no big difference in the scale of these categories. Ready to drink coffee is considered as the category with relatively fast growth in the US market, especially the medium and high-end ready to drink coffee market.


Coffee consumption scenarios are rich and diversified, each individual scene has different products to meet, and a certain type of product can cover multiple coffee consumption scenarios, which is the most significant feature of the coffee industry.


As can be seen, excellent brands are laying out a variety of coffee product lines, such as Nestle. There are both instant coffee product line, ready to drink coffee product line, and capsule coffee product line. Starbucks covers freshly ground coffee, prepackaged coffee products and coffee drinks.


Therefore, it is the core to measure the competitiveness of a coffee company whether it has the ability of layout of multiple product lines and brand foundation, and then it needs to judge the competitiveness of each product line, what echelon is in the product category, and whether it has established the scale advantage, etc.


2. The imagination space of a coffee company lies in the extensibility of its brand, so as to have the opportunity to realize the diversification of coffee product line, so as to expand the sales channel and expand the company scale


Coffee is a product with strong cultural attributes. Even Nestle instant coffee, a very common and common instant coffee product, has also created a coffee consumption culture in the Chinese market and cultivated a lot of Chinese consumers’ cognition of coffee. This kind of coffee consumption culture was even created earlier than Starbucks, but its focus is different from that of Starbucks.


For the coffee brands positioned in the middle and high-end, we should pay attention to the shaping of coffee culture, which is reflected in the pursuit of coffee quality, whether there are different types of coffee products, such as manors, venues, beans, raw beans processing methods, baking depth, etc., and also reflected in the understanding and shaping of coffee drinking mode and coffee lifestyle.


In terms of brand building and shaping, it is very important to define standards. The standards here are more presented in products, and the standard system based on products is extended. For example, Starbucks’ experience in the third space extended by Arabica coffee beans, and the high integration of Starbucks store experience, store design and coffee products, illy emphasizes the mixing of nine kinds of coffee beans, and illy only lives from beginning to end To produce a mixed coffee product, whether it is coffee beans, coffee powder, instant coffee or capsule coffee, it emphasizes that only the coffee mixed with 9 kinds of coffee beans can give illy the fundamental characteristics: richness, elegance, balance and consistency.


To some extent, three meals and a half are also defining the standard, namely, the standard of boutique instant coffee, from No.1-6, fast drink pack, No.0 barista cooperation fund, etc., to define the average standard line of boutique instant coffee with No.1-6. The fast drink package is to make more affordable boutique instant coffee products, while the No.0 coffee maker cooperation model is exploring the limit and possibility of boutique instant coffee.


Manner, a boutique coffee chain brand founded in Shanghai, also defines the standard in the field of fine freshly ground coffee. The latte product small cup is 15 yuan per cup, and the American Standard cup is also 15 yuan. If you reduce 5 yuan for each cup of your own cup, manner can be understood as the standard for defining the price of fine freshly ground coffee.


No matter how the culture of a coffee brand is shaped, it is necessary to return to whether there is a standard defined on coffee products. No matter how the standard is developed from any angle, it is necessary to evaluate whether the standard has been established or has the ability to establish standards, and whether the standard market and consumers are recognized.


3. Development trend and consumption trend of coffee industry in China


The market size of American coffee shops is 47.5 billion US dollars. If the proportion of freshly ground coffee and other types of coffee is 1:1, the size of American coffee market is about 100 billion US dollars, and China may be less than 100 billion RMB at present. More specific and accurate data need to be checked and verified by more information and cross comparison.


In terms of the development of China’s coffee market, it has passed the stage of market enlightenment and market education. Nestle, Starbucks and a series of ready to drink coffee brands, large and small cafes have been completed. At present, the market is in the period of growth and even rapid growth, which is a good opportunity for all types of participants in the coffee industry, that is, how to stay in the market Market growth period and even rapid growth period to find their own position, and achieve growth, when the market growth reaches a certain stage, we can achieve a certain scale.


From the perspective of foreign coffee consumption, it will gradually enter the stage from low-end consumption to middle end, medium high-end and even high-end consumption. The main factor is the maturity of coffee market and coffee consumption. When reaching a certain stage, low-end coffee consumption will shrink, and medium and high-end consumption will increase. The low-end consumption mentioned here refers to coffee product lines with low price and quality Such as three in one instant coffee. The medium and high-end consumption does not refer to coffee products and coffee consumption with very high prices. It is more coffee products with high quality but middle price, such as three and a half meals and manner.


On the other hand, the demand for coffee based products in the U.S. will be shifted from the high-end coffee market to the U.S. market in recent years. On the other hand, the demand for coffee based products in the U.S. will expand to meet the demand of the American consumers On the other hand, American consumers have reached unprecedented intensity. This signal can enter the Chinese market from oatly, cut in from boutique coffee shops, and be widely recognized among coffee lovers.


From the perspective of consumption trend, price balance, quality pursuit, taste and flavor pursuit are the general trends of coffee consumption in China. From the perspective of the development trend of the coffee industry, the growth of coffee shop market will drive the growth of other coffee products. Coffee business represented by coffee shop will not replace other coffee products, because different product lines meet different coffee scenes, and the same coffee consumption scene can have a variety of coffee products to meet. The ground coffee is more compatible with other coffee products Status of.


4. The consumption upgrading direction of prepackaged coffee products is not only three and a half meals


How to understand the consumption upgrading of three and a half dins of coffee, the key words are: high-quality instant, relative parity, multi flavor combination, low, medium and high-end product line and pricing coverage strategy. The more core key words are the affordable quality coffee, which reduces the coffee consumption of 30RMB + to about 5-7 yuan. In terms of how to define standardization, three and a half meals focus on 5-7 pieces of fine instant coffee. The products are mainly black coffee, and the coffee depth is not low. Relatively speaking, it is to provide more standardized boutique instant coffee products.


The upgrading idea is extended from two directions: ①, coffee upgrading of non instant products, medium and high-end products and boutique; ②, the differentiated competition of fine instant coffee, compared with the relatively standardized cheap instant coffee products defined by three and a half meals, starts from taste richness, product innovation, quality and pricing.


There are two core issues to be considered here: 1) is there a big market for non instant coffee products, such as capsules, coffee liquid, coffee beans, etc. where does the increment come from, which one may be a big market, and why? ② Will high-quality instant noodles become a big market? If it will be a big market in the future, how will the market share be divided according to the pricing, taste and quality of products.


Capsule coffee is basically monopolized by Nestle in China, with two brands Nespresso and duoqukusi. The maturity of coffee bean / powder market is highly popular with coffee machine and coffee consumption. Therefore, coffee liquid may be an entry point for start-ups. However, whether this entry point is established or not needs to be verified, market guidance and market popularization should be carried out.


Corresponding to the three semi standardized and affordable boutique instant coffee, there are characteristic, mid high-end and even high-end instant coffee. Its characteristics are embodied in the innovation of coffee beans, coffee quality, flavor and product composition. Flavor innovation, such as adding other flavors into coffee, such as fruit, chocolate, tea, flowers and plants, etc., is the product composition innovation Milk coffee, plant milk, etc. The price of three and a half meals is 5-7 yuan, and the price of some high-end product lines of three and a half meals is about 10-12 yuan. Then, the price of this kind of characteristic boutique instant coffee product is about 10-12 yuan, and some high-end product lines can reach 15 yuan.


From the current sales situation of three and a half high-end product lines, it has occupied a certain sales share of three and a half meals, and is also shaping the coffee brand image and coffee culture.


5. The possibility and feasibility of early exit of coffee investment


Generally speaking, the exit path is more likely to be acquired, because if a coffee brand wants to IPO as a coffee listed company, from the perspective of instant coffee, that is, the chain cafe, the size of the store and the benefit of the store are the key. This is not only a coffee problem, but also involves the operation and management of offline chain stores.


If it is a separate coffee brand, there needs to be a complete chain in the business layout, that is, from the upstream coffee planting end to coffee processing and manufacturing, to the layout of various coffee product lines, there needs to be a certain scale and volume.


Another possibility is to become a coffee brand controlled by multiple brands. For example, JDE and Peet’s coffee are about to merge and go public. Another major business includes J.M. Smucker of coffee, which not only includes coffee, but also pet food, sauce and snack business.


Therefore, to sum up, it is a high probability to be acquired in terms of exit. The core lies in who is to be acquired and several possibilities:

① Nestle and JDE are merged by giant companies, but Nestle and JDE are unlikely. Because coffee business is the core of Nestle, unless the volume is huge or a certain short board of Nestle’s coffee business is supplemented, JDE is more likely to be acquired than Nestle;

② . being acquired by offline coffee chain brands, such as manner in the future, as well as the possibility of merger and acquisition of other chain coffee brands, which is more to supplement the business segment of prepackaged coffee products;

③ Large coffee companies, such as illy and Lavazza, of which illy is less likely because illy is a family run company and its core development is illy brand. Lavazza has done a lot of mergers and acquisitions, including the coffee business of Mars. In addition, Lavazza itself is still in its infancy in China’s coffee business, and has established a joint venture with Yum! Brands to develop coffee shop business;

④ , large food companies or food listed companies that want to enter the coffee field;

⑤ It is an important possibility to integrate with brands like Santon and a half and make joint efforts. However, after the merger and integration, the exit path depends on IPO. If there is no IPO, the significance of integration is not significant.

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