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once Ruixing only regarded coffee as the “flow entrance” in the business model, which is just the starting point of a grand story.
In the past two years, coffee is undoubtedly a high-profile track in the field of consumer goods. Among them, the competition of freshly ground coffee is the most intense.
According to the report of foresight Industry Research Institute, in 2019, the market scale of China’s freshly ground coffee accounted for more than 70% of the total, reaching 50 billion yuan.
Looking at the whole market, Starbucks used the “third space” to expand its territory, and Ruixing used Internet thinking and tools to grow rapidly. In addition, competitors from convenience stores and new tea drinking departments entered the market one after another.
But so far, the industry has initially crossed the first stage of consumer education.
According to Aurora survey data, 64.9% of consumers in first tier cities drink coffee every week. But what’s interesting is that there has always been a clear boundary between commercial coffee and boutique coffee before, and few people in the middle zone have explored or have the ability to integrate.
This and the current multi-level coffee consumption wave, there is a certain dislocation. Dislocation often means big opportunities, and some enterprises have realized this.
On January 5, lucky coffee announced that it plans to purchase 1000-2000 tons of fine coffee beans every year from 2021 to 2023 in Ethiopia’s yegacheffe production area.
This may become the largest fine coffee bean purchase order of Chinese coffee enterprises in Ethiopia.
Today, after Beijing and Shanghai, Ruixing’s “little black cup · SOE” has landed in Guangzhou and Shenzhen.
This move, people can not help but look back to the topic of the coffee industry. Despite the financial fraud crisis, lucky has not stopped the momentum of development, and even achieved the profit and loss balance at the store level in the middle of 2020.
How does it save itself? At this time, we have reached the largest order of fine beans from Ethiopia. How will lucky stir the current market of freshly ground coffee?
Despite the controversy, lucky is still a business practice worthy of attention in the current new wave of consumption.
By combing the adjustment and trend of its business strategy, we may be able to see a different evolution path of China’s current consumer market, and also give many consumer entrepreneurs in the same competitive situation enlightenment.
Giants seize the market of freshly ground coffee,
New opportunities under consumption classification
1. Giant increases market investment in freshly ground coffee
Not long ago, there was an article that criticized China’s coffee market and thought that the rapid development of freshly ground coffee was just a false proposition. Chinese consumers who can accept freshly ground coffee are in the minority after all.
However, what is the development trend of the industry is the action of the giants.
On November 16 last year, Starbucks announced that its China Coffee Innovation Industrial Park was officially opened in Kunshan, Jiangsu Province. This is Starbucks’s largest productive investment outside the United States and its first in the Asia Pacific market, with a total amount of 1.1 billion yuan.
Coincidentally, on the same day, McDonald’s, the fast food giant, said it would upgrade its coffee brand. McDonald’s China plans to invest 2.5 billion yuan in the next three years to accelerate the layout of the mainland market. It is estimated that by 2023, there will be more than 4000 coffee shops in China, which can provide handmade coffee with high cost performance.
In addition, new tea brands such as Xicha and Naixue have also introduced coffee grinding products one after another, and regional boutique chain coffee brands such as manner have obtained financing
All these changes prove that China’s freshly ground coffee market is far from reaching the ceiling.
Especially in China, the average annual growth rate of the market in recent years has been more than 30%, and the giants are also showing their optimistic outlook on the industry with practical actions.
2. Diversified consumer demand implies untapped market opportunities
In such a large emerging market, there must be a very diverse consumer demand.
Once, Starbucks was synonymous with freshly ground coffee, but in just a few years, the rapid development of new brands made the industry blossom.
Objectively speaking, lucky is indeed one of the best. In recent years, with the integration of online and offline, cheap and convenient office coffee playing method, it once led the frontier model innovation of the coffee industry.
But the main “convenient and fast” path dependence may also make it difficult for Ruixing to capture those consumers who pay attention to high quality.
According to the survey data of Aurora, 31.1% of the consumers of freshly ground coffee are mainly motivated by “tasting coffee”.
Since Ruixing already has a network of outlets deep into office buildings, and its main customers are urban white-collar workers with the latest trends and considerable consumption power in the first tier cities, why not make a cup of convenient and high-quality handmade coffee?
The purchase of Essen gaffe beans is a reflection of lucky’s new ideas.
On November 30, 2020, lucky launched its high-quality SOE limited series in Beijing and Shanghai, namely, the American style and latte of yergacheffe, “little blue cup” has been upgraded to “little black cup”.
The product has been deployed by SCA professional team, and the q-grader score has reached more than 80 points.
At present, there must be a market segment with medium price, convenience, high quality and low price in the market of freshly ground coffee. The former “lucky mode” is not a false proposition.
But after anchoring the price range and forming the initial user cognition, how to break through and sell the products with higher premium, so as to increase the profit margin of the enterprise?
We can see that lucky is the solution to bind the best raw material origin and high investment in product development, and the recent swipe of “little black cup” on the social network also proves that this method is really effective.
Win the largest order of fine beans in Ethiopia,
It is a miniature of lucky’s remolding itself
As a matter of fact, the purchase of high-quality beans from upstream Ethiopia and the launch of new product line from downstream yerga Sheffield are the epitome of Ruixing’s remolding in the past six months.
The financial fraud crisis once caused Ruixing to be in turmoil, and the development direction of the enterprise was also faced with high uncertainty.
Fortunately, the matter has come to an end for the time being. On December 17, Ruixing announced a settlement with the sec. The next day, Ruixing commented on the first liquidation report submitted by the joint liquidator of the company to the Grand Court of the Cayman Islands, and “boots” finally came to the ground.
We can observe that lucky launched a series of “self-help” ways after the crisis to stabilize the ship. In a sense, it is also a case of crisis management for new consumer brands. How does it do it?
1. Reorganize the management, reform the corporate governance structure and optimize the store operation efficiency.
On the one hand, lucky has replaced some of the management staff and transformed the existing senior management team into a professional manager team. On the other hand, Ruixing, which announced that it would open 10000 stores in 2021, has obviously slowed down its expansion.
At the same time, a number of stores with low single volume and remote location were closed down. Instead of using the extensive development mode of holding high and beating high, they turned to comprehensively optimize the operation efficiency of existing stores.
In addition, some new projects and exploration of new business models such as “unmanned retail” have also pressed the pause button.
In this process, the digital middle station, operation management and control system and mature SOP system, which have been built with heavy investment, have played an important role in ensuring the stable operation, so that the product and service experience at the consumer side has not been compromised due to the turbulence at the company level.
Consumers’ recognition and continuous purchase is an important reason why Lucky didn’t fall down as quickly as dominoes. This also proves that its early brand cognition and management methods have certain merits.
2. Increase investment in product R & D and quality improvement, and gradually increase customer price.
This year, lucky launched many breakthrough and even “out of the circle” new products, and the investment in product R & D has increased significantly compared with previous years.
Take the star series as an example, the “little black cup” of Ethiopia’s yegacheffe mentioned above is the first time that Ruixing has set foot in the boutique coffee beans from a single origin, and at the same time, it has comprehensively upgraded from the overall packaging to the conceptual design, which is rare among the freshly ground coffee brands at the same price.
The newly launched thick milk series products won the new consumer product award of titanium media in 2020, and also opened a new cognitive space of “latte” depending on the difference of raw materials.
The light milk good tea series is a traditional tea soup milk tea with the characteristics of “health 0 addition”, which is in line with the current health fashion. It has cross-border cooperation with artists and won the annual national style tea award of Lobo selection.
In addition, the conventional Rina ice, meteorite, taro mud and other products are constantly bringing forth new ones with various patterns. It can be seen that lucky’s development in product research and development and supply chain is very smooth, and it has indeed made great efforts in the pursuit of quality and professionalism.
At the same time, lucky is constantly exploring the price range that consumers can accept, and gradually increasing the unit price of customers to achieve a new balance.
Many people can feel that this year, the strength and distribution frequency of lucky coupons have decreased a little, the prices of some new products have increased, and the delivery fee has also been adjusted.
But the price sensitivity of consumers is not as high as expected. In other words, even in the crisis, lucky’s user stickiness has been well verified.
3. Change the marketing strategy and promotion strategy, and adopt more accurate private domain traffic operation.
The decrease in the frequency of issuing coupons is also related to the change of lucky’s promotion strategy.
Large scale brand advertising with high marketing cost and coffee coupon fission are no longer the first choice for enterprises in crisis. In recent months, lucky has gradually turned to a more accurate way of community private domain traffic operation.
Now go to the entrance of some lucky stores, and you will find many signboards that “join the” welfare group “to get coupons”. In the app store and app page, there are also tips to guide you to add “welfare officer” wechat.
After clicking to join, lucky will automatically identify the nearby stores to classify users into groups, and then launch coupons and new product push at a specific time point to reach consumers more accurately.
After some self-help, Ruixing not only kept the basic disk, but also made further development in the case of the epidemic.
Since April 2020, its store level profitability has increased steadily; in July, it achieved the overall break even at the store level; in November, more than 60% of its self operated stores achieved profitability.
Some investors even sighed in the circle of friends: “what a good business model it must be for the business to stand still and even grow so much even when the company is experiencing chaos.”.
In the ups and downs of 2020, lucky can get the current stable situation from the perspectives of operation, product, supply chain and marketing.
Reflect on the value of lucky,
Back on the right track, the road ahead can be expected
After self innovation, Ruixing may be slightly different from the original one.
Less “mode” and more “product”; less “speed” and more “efficiency” With a combination of increasing revenue and reducing expenditure, Ruixing is gradually returning to the essence of “selling good products” as a consumer enterprise.
The signing of high-quality soybean orders in Ethiopia and the launch of “little black cup” can be regarded as a landmark node for Ruixing to return to the right track of development.
Looking back at the present time, to sum up, Ruixing’s success can not be separated from four aspects
1. On the consumer side, lucky does have a first mover advantage and has established a certain brand awareness.
Although Ruixing is facing financial fraud crisis in 2020, the rapid development of stores in the first two years and the integrated consumption experience of online and offline, self delivery and in-depth integration created by Internet technology have indeed cultivated consumers’ consumption habit of “ordering in advance + self delivery in store”.
Moreover, the penetration of the sinking market and the price close to the people have indeed occupied the first experience of young consumers in the second and third tier cities.
Ruixing’s rapid expansion before, objectively has a certain first mover advantage, in the consumer group to establish a rare brand awareness.
2. Fraud is related to the financial level, not the product and service level.
Similarly, lucky financial fraud has not affected the quality of products and services consumers get.
For consumers, what they really buy is a “15 yuan cost-effective and convenient coffee”, and the shopping and consumption experience is smooth and convenient.
This makes a large number of consumers still maintain the consumption habit of buying lucky coffee after the fraud incident, which does not make lucky’s cash flow suffer a greater short-term impact.
3. “Convenient” features and in-depth to the office store outlets, Ruixing is still a unique competitive advantage.
Different consumers do have different acceptance and sensitivity in the price range of freshly ground coffee, but “convenience” is the product feature that all consumers care about.
In the short term, lucky is still the first choice for urban white-collar workers to pursue “convenient” coffee due to the rapid production speed after high standardization, the delivery speed of on-site pick-up and delivery, and the online + offline integrated ordering experience.
4. The early investment in digital Zhongtai, multi store operation management and control system and SOP system helped Ruixing survive the short-term turmoil.
Fortunately, lucky’s early emphasis on digitalization, highly standardized product features of the coffee industry, and mature operation management and control system all made the production, operation and delivery of its grassroots outlets not affected by financial fraud.
In this regard, lucky has indeed achieved a major innovation in the chain consumer industry, reducing the uncontrollable human factors to the minimum.
In August 2020, the news from lucky mid year meeting shows that lucky coffee has achieved positive cash flow in a single store in July, which may prove that lucky mode can run through in a positive way.
After the stage of user education, the user stickiness brought by its convenience property also makes its products more flexible in the pricing range, and has the space to adjust and thicken profits upward.
But in the past few years, Ruixing really deviated from the right direction of development. The concept of Ruixing was more and more mysterious, and the front line was more and more extensive. Ruixing wanted to do a lot of things, but in the end, it was often too fast to achieve.
And truly successful consumer enterprises have never been able to “accelerate maturity”.
Blindfolded rush, sooner or later will usher in the adjustment; consumers are not fools, and then a variety of model innovation, the final landing is to deliver products and services.
Lucky also paid a price for this. Fortunately, from the perspective of business strategy in recent months, the management realized this and made new breakthroughs in product level.
It is undeniable that lucky is still one of the enterprises with the highest number of stores and user recognition in China’s coffee industry. It is also one of the consumer start-up brands that use information technology and standardized chain system most skillfully.
By using the existing store assets and brand awareness, and by focusing on product development and high-quality strategy, we can further enhance the user experience, and shift the focus of business from expansion speed to store efficiency and profit promotion. After a while, Ruixing may still have a lot of room to play in China’s freshly ground coffee market.
For today’s consumer entrepreneurs who continue to go to the new wave, they should also reflect on themselves through Ruixing’s case, learn from each other’s strong points and make up for their weaknesses.
Once lucky only regarded coffee as the “flow entrance” in the business model, which is just the starting point of a grand story. It is the most important proposition in the growth of all consumer enterprises to do a good job in product service and make differentiation.
Author: Zhiqi; source: Inspur new consumption (ID: lcxinxiaofei), reprint has been authorized. Reprint or join the community: Cherry (wechat: 15240428449); business cooperation: Amy (wechat: 13701559246). A week’s hot news of high quality original selection column | innovation interview – lingting | new Xiu brand | trend insight | packaging outpost food people are “watching”
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