China Food

There are not so many Starbucks in China


Google is basically doing nothing there. McDonald’s has agreed to sell its business there and authorize others to use its own brand. Coca Cola invested a lot of money there, but sold its bottled business. Where is that? China, of course. But Starbucks has achieved enviable success in China. “
In 2017, New York Times issued such a feeling that Starbucks was pulling out 1 billion 300 million dollars from Unifi Inc to recover its joint venture shares, thus achieving a comprehensive direct operation in the Chinese mainland market.

At that time, Starbucks opened more than 500 stores a year in China. Howard Schultz, founder of Starbucks, was full of expectations in an interview

“When asked how much we can grow in China, I don’t know the answer, but I really think Starbucks will have a bigger business in China than in the United States.”
If you go back 18 years, Starbucks has just opened its first store in the mainland, Hong Kong and Macao in Beijing international trade. Most people may not have thought that this enterprise can achieve such success in China where tea culture is popular.
By the end of April 23, Starbucks had a market value of $138.4 billion, and China was one of its biggest performance increments in recent years. Over the past few years, with its performance in China getting better and its market value rising, domestic investors are ready to ask: who is the next Starbucks?
Starbucks share price performance (March 31, 1998 to present)
Entrepreneurs and capital together, with money to build a long list of “China Starbucks”. Among them are Rui Xing, the representative of new tea, Xi Cha and Naixue, as well as Helens, the so-called “night Starbucks”.
But even when lucky was the most dazzling, its market value was only 13 billion US dollars, less than a fraction of Starbucks, not to mention all kinds of tea companies still growing in the primary market.
There are enough “Chinese Starbucks”, but so far there is no organization even half as well matched, whether it is tea, milk tea, coffee or beer. Or is it just a fantasy of the capital market?
What does Starbucks sell

People need informal public places.
In the 1990s, coffee became an important place for people to socialize, because they needed a place to get together without harassment, a third space beyond work and family, wrote sociology professor ray oldenberg in the book “third space”.
Oldenberg believes that people need informal public places where they can chat and get together, put aside their worries about work and family for a while, relax and chat. These places provide a kind of middle ground for people.
In many cases, the “third space” consumption scenario is the key factor for Starbucks to rise. Therefore, almost all “China Starbucks” attach great importance to space building.
Peng Xin, founder of Naixue, believes that the core of the emergence of new tea drinks is to break through two things. The first is to let young people drink tea (product upgrading and innovation). The second is to let people get used to drinking tea as a new social life style (spatial experience).
It is based on this business concept that Peng Xin tries to make space the second product of Naixue, which is also the core component of its brand core: the social space culture of shaping tea brand.
In fact, in China, the so-called third space has appeared for a long time. Lao She’s teahouse depicts this scene: in the late Qing Dynasty and the early Republic of China, teahouses were everywhere in China. All kinds of people bring outside information and communicate with each other. Every time there is a war, everyone will go out to the teahouse to ask for some news. It’s a lively Chinese coffee shop.
However, most of the teahouses are disappearing because they can’t find a combination with modern life style, and now only some of them remain in Sichuan, Chongqing and other places. As a business, teahouses have proved unsuitable for modern Chinese society.
The underlying reason why Starbucks has such a high degree of public acceptance is that almost all modern lifestyles are built by Westerners – China is also learning and adapting to such lifestyles. The fast-paced urban life is very harmonious with fast-food culture. Compared with brand output, cultural output is the deep reason for the rise of Starbucks.
For example, although Maotai has won the champion of liquor market value, its internationalization has not been smooth. Diageo is the wine company recognized by consumers all over the world, because Maotai is not drunk in bars.

In the eyes of most Chinese consumers, Starbucks has become an important carrier of coffee culture, which can be equated with each other.

To some extent, the situation of bottom fishing is similar. When consumers want to eat hot pot, Haidilao is probably the first brand in their mind. Even if they can’t choose, it will become one of the options. This brand recognition is extremely precious.
According to the conventional understanding, this means that the enterprise is profitable. But does Starbucks really make money selling coffee? After carefully splitting the revenue, we did not get the subconscious answer.
In recent two years, the Asia Pacific region and the rest of Europe have been merged into “international departments”, so it can only be estimated based on the data of 2018. Starbucks China’s revenue is US $1.22 billion, and its profit is US $220 million. After excluding the income from equity investment, its profit margin is about 15.9%.
It seems to be a good data, but if we compare the single store model of traditional coffee shop, it is not difficult to find that part of the excess revenue of Starbucks is not from products, but from rent bargaining.
For the brand side, there are two ways to reduce the rent cost: it has been pressing down the rent price, especially for the newly opened shopping center. For the purpose of attracting people, the property often gives the strong brand a longer rent free period and a lower price; The second is the mode of division, which is generally about 8% of the running water.
Starbucks does not directly disclose the operating data of China in its financial report, so we use the tripartite data as an example.
Take the research data of Danjie entrepreneurship as an example. For the same store, ordinary small brands may need 12-15 yuan per square meter per day, while Starbucks can do 3.5 yuan per day per square meter. Small brands can control the rent cost at 25%, so Starbucks can reduce the rent cost by at least 15%.
As evidence, when Haidilao disclosed its prospectus in 2018, only 3.9% of the rental cost also shocked the industry: the original super brand never made excessive profits by selling products.

In the final analysis, the core premise for the establishment of the third space advocated by Starbucks is to use its strong brand advantage to reduce the rental cost, so as to create positive cash flow.

Behind this, there is an opportunity of the times. When Starbucks opened its first store in China, China had not yet formed a coffee market. There were only Taiwan coffee brands like Shangdao coffee. Starbucks enjoyed the first wave of dividends, and the rent dividend was one of them.
But even Howard Schultz’s attempt to build a new Starbucks is unlikely to succeed at a time of soaring labor and rental costs. Just as Starbucks announced its acquisition of teavana brand in 2012, it announced that it would close all its tea shops five years later.
Among the competitors, the rental cost of Naixue is basically 15% – 18%, which is much higher than that of Haidilao and Taier. Of course, there are some reasons behind this. However, the more important reason is that tea is highly reproducible and the industry is highly competitive.
Ruixing tried to open up the situation in another way, that is, to create the fourth space of “app + takeout”, hoping to create a chain coffee mode under the new scene.
However, the problem with this business model is that even if it breaks through the critical point of a certain scale, it will not be able to successfully defeat the competitors, because the competitors can do the same thing. The difference between brands is not big, take away mode is to eliminate the store advantage.
In the end, Ruixing’s radical money burning strategy did not bring moat and long-term value, and the era of coffee dividend proved to be gone forever.

Looking back, Starbucks’ internationalization strategy was not smooth sailing.

In Brazil, because of the unique coffee culture and football culture, the cafe has the function of a bar, so that people can enjoy the game while tasting coffee on the match day. This is quite different from the “third space” culture of Starbucks, which is more leisure in the United States and more business in China.
In the end, Starbucks is hard to develop in Brazil. In 2008, 113 stores in 17 cities were sold as a whole.
In other words, it is more important to adapt the strategy to the local market. In China, the biggest feature of the market is that consumption is deep enough and broad enough.
A year ago, when Beijing was still shrouded by the epidemic, almost all of the newly opened four or five milk tea shops in Anqing County, Anhui Province, were overcrowded. Super wenheyou in Changsha has quietly released thousands of numbers
But most entrepreneurs still focus on what they want to see.
There are too many mid and high-end ready-made drinks. Almost every company is attracting the attention of capital with stories of high growth, high gross profit and Z generation, trying to tell Starbucks about its market value of 100 billion US dollars.
But there is more creativity than scale.
Undeniably, with the help of China’s cultural rise, at least in the field of new tea, one or two giant companies (or have already run out) will surely emerge. But after the dividend subsides, most people will question whether these companies can grow up to Starbucks in the fierce competition.
What’s more, with so many “China Starbucks” starting businesses together, the market simply can’t accommodate them, and consumers don’t need so much third space.
In the huge catering industry, Zhengxin chicken chops, Wallace, Juewei duck neck and miyue ice city have the largest number of stores.
The common feature of these brands is to build on the basic needs of consumers, solve the problem of cost performance, and reduce the cost by taking out or a small amount of hall food.
In fact, Ruixing should have been the most likely one to get through this road, but now manager has become a typical example of this way of playing. A popular saying is that if you open a manager opposite Starbucks, the passenger flow of Starbucks will drop by 30%.
Write at the end of

Huashan, the founder of huayuhua, once called hicha in the circle of friends, saying that “even if there are more than 400 stores, it is only one twentieth of the head brand. Even if they all line up, they can’t do much business. They put themselves on the creative awards, but they can’t get off the stage. The higher the cost, the more they bring a lot of imitative brands into the ditch. “

On reflection, this comment may not be unreasonable. If you want to take the market value of Starbucks, it is a question whether you want to do “big business in big country market” like Starbucks.
Reference article
Run a coffee shop and lose money? Starbucks, lucky, self service coffee, coffee with you
Why can’t Starbucks come out of China, IC Lab
Head picture source: Starbucks China official micro blog author: Dong Erqian; Source: ID: Kantar worldpanel, reprint authorized. Joining the community: Cherry (wechat: 15240428449); Business cooperation: Amy (wechat: 13701559246). Recommended reading sugar crisis   |  100 billion light food|   2021 the most innovative company in the world   | | |  |  |  Collagen Peptide  |  Daily new walnut stew: Isee trend  |  Editor’s  |  Reader’s   Foodaily daily food works with global business and industry partners to plan foodaily   Fbic2021 global food and beverage Innovation Conference, with the theme of “new food era – digital reconstruction, open incubation and new brand wave”, deeply discusses the “crisis” and “opportunity” of new consumer brand market through three dimensions of “stage of innovative products”, “food Developers Conference” and “top product social circle”, and interprets the innovation opportunities and paths in the next five years, May 19-21, 2021 in Shanghai, we invite you to witness together( Click on the picture to see the details.     
Read the original
There are not so many Starbucks in China


代糖危机 | 卤味新篇章 | 千亿轻食 | 儿童零食 2021全球最具创新力公司 醋的行情 | 植物蛋白饮料 NMN 外卖包装 | 牌永葆生机的秘密 | 胶原蛋白肽 | 核桃元素
每日新品烩:iSEE小趋势 | Editor’s | Reader’s 
一周热闻 | 创新访谈-玲听 新XIU品牌 | 趋势洞察 | 包装前哨

FBIC 2021

Foodaily每日食品携手全球商业与产业合作伙伴,策划Foodaily FBIC2021全球食品饮料创新大会,并以“新食品时代——数字化重构·开放式孵化·新品牌浪潮”为主题,通过「创新产品的舞台」X「食品开发者大会」X「顶层产品社交圈」三大维度深度探讨新消费品牌市场的“危”与“机”,解读未来5年内的创新机遇与路径,2021年5月19日-21日在上海,我们邀您共同见证。(点击图片查看相关详细介绍)。    


Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *