China Food

Running coffee upstart, iron Starbucks?

“  
from the current development trend, both man and tims China are aware of one thing: listing does not mean anything, and opening stores quickly does not mean anything. The key to the matter is whether we can give full play to the advantages of differentiation, make continuous profits and live longer and better.
 ”
After you sing our debut, this sentence well describes the hot financing of the coffee market in 2021.
 
The coffee market can be divided into two tracks: instant coffee and freshly ground coffee. Many brands of the two tracks were sold in the first half of this year (including July) Financing continues, and there are at least 17 financing cases according to public reports. For example, in the instant coffee track, three and a half tons of high-quality instant coffee products and main online sales channels received hundreds of millions of yuan of financing from CPE Yuanfeng capital and IDG in June, and the post investment valuation reached 4.5 billion yuan. Last year, three and a half tons just got the b-round investment led by Sequoia Capital China fund and Fengrui capital; the other one Yongpu coffee, a local boutique instant coffee brand, also received millions of financing.
 
The financing of freshly ground coffee track is even more popular, such as the main “fast coffee” Scene, the convenience oriented and cost-effective Chinese local boutique coffee brand maner has raised funds for four times and received hundreds of millions of dollars; the Canadian national coffee brand Tim Hortons China received investment from Sequoia and Tencent in February; the boutique coffee brand m stand, which focuses on creative coffee drinks and offline space experience, raised two funds within half a year, with an amount of more than 600 million yuan; another store is about to open 100 boutique coffee brands “algebra experts” have obtained Tencent’s exclusive strategic investment… Even Ruixing coffee is “Reviving”. Its third quarter financial report shows that its profitability is improving, and it also obtained new financing in April.  
 
 
The coffee market is booming, but it should be said that man and tims China have the fastest development this year. At present, they have the highest valuation and the fastest opening speed. They are regarded by the market as a new generation of coffee upstarts.
running coffee upstart, iron Starbucks? Not necessarily
“Wanghong” boutique coffee brand maner has attracted much attention this year. It has raised funds four times in six months. In May and June, it received hundreds of millions of dollars of financing from meituan and byte beating respectively. At present, it has opened more than 200 stores in seven cities such as Shanghai, Beijing and Shenzhen. It is expected that the number of stores will reach 400-500 by the end of 2021.
 
Tims China, backed by Tim Hortons, the world’s second Dalian lock coffee brand, has opened 388 stores in China until 2019. The number of stores ranks third after Starbucks and Ruixing. Tims China claims to open 2750 stores in China by 2026, and the speed of opening stores will reach one every 36 hours.
 
Although the two have a strong momentum, Starbucks still ranks first in China’s coffee market.
 
Starbucks has been in China for 22 years. Relying on its strong and relatively complete global supply chain and strong capital base, it has opened 5100 stores. It has strong brand bargaining power, can easily win the golden position in the national urban business circle, and only need to pay rent far lower than the industry level. This is Starbucks’s “moat” , the more stores you open, the stronger the scale effect, the stronger the bargaining power of the brand, the lower the rent in the cost structure, and the greater the profitable space.
 
During the 22 years when Starbucks was firmly in the first place, although competitors continued to appear, such as Costa and man coffee abroad, as well as carving time and island coffee in China, the only real threat to Starbucks was Ruixing coffee, which had lost all its vigor in the past two years.
 
In the past 22 years, there has not been a coffee brand that can really challenge Starbucks in the Chinese market. The market pattern has always been “running coffee upstart, iron Starbucks”.
 
Will today’s coffee upstarts man and tims China break this pattern?
 
At a superficial level, this possibility exists.
 
The first is “good foundation”. These two new coffee brands expanded rapidly with the help of capital on the basis of realizing the profitability of their stores. This “correct running posture” has laid a “muscle” foundation for changing the market pattern.
 
Secondly, the capital market is optimistic. At present, the valuation of man is US $2 billion, and the average single store valuation is US $13 million, which is three times that of Starbucks. Tims China has Tencent’s strategic investment, and its strength can not be underestimated. At present, the business valuation of tims China is about US $1.688 billion, and it is planned to pass the special purpose acquisition company (SPAC) in the fourth quarter of 2021 “Special purpose M & a company”) is listed on NASDAQ to obtain more funds for rapid expansion.
 
So how likely will it be to break the traditional market pattern?
 
Considering this problem, we might as well put aside the biggest uncertain variable of time and look at the deterministic variables: the core competence and development potential (subjective initiative) of man and tims China, as well as the growth space of the whole coffee market in the future (macro background).
 
Therefore, the following will analyze the two coffee brands from five dimensions: differentiated positioning, store location strategy, business model (including profitability), growth rhythm and major challenges that may be encountered in future growth.
man: take advantage of differentiation to the extreme
Differentiated positioning: affordable boutique coffee
 
Founded in 2015, man is positioned as “affordable boutique coffee”, takes the cost-effective route, and the concept is “make coffee a part of life”.
 
A cup of American or latte from man costs only 15-20 yuan. If you bring your own cup, you can reduce 5 yuan, which is equivalent to 10-15 yuan for a cup of fine coffee. This price is placed in the boutique coffee market of 30-50 yuan a cup of coffee, which is absolutely an invincible “big killer”. Compared with Starbucks, man’s American and latte coffee products are at least 50% cheaper and better to drink (boutique coffee is more picky about raw coffee beans, pays more attention to baking methods and pursues freshness).
 
This not only makes man avoid the fierce competition with other boutique coffee brands in the price of boutique coffee, but also attracts a wider user base with the label of “cheap and delicious coffee with strong coffee”. These people are used to drinking coffee, but they don’t know much about boutique coffee, and also want “cheap and delicious coffee”, so as to break through the niche of boutique coffee brands.  
 
 
It is difficult to insist on “affordable boutique coffee”. The purchase cost of raw beans of boutique coffee is higher than that of bulk commodity coffee, and the manufacturing cost is also higher. In particular, in order to pursue fresh and delicious quality, many boutique coffee brands mostly adopt the method of fresh baking within 3-7 days. Therefore, there is a saying in the offline coffee market that “nine out of ten stores lose and one flat”, which means that nine out of ten coffee stores lose money, and the rest can only maintain a balance of revenue and expenditure without losing money.
 
However, under the condition of neither high subsidies nor online orders, man has realized the profit of single store. For what? The reason is that it has established a minimalist business model.
 
Minimalist business model: a single product of 10-15 yuan and a small store of 2 square meters
 
If offline chain coffee shops want to make a profit, on the one hand, they should constantly increase the daily cup output (according to some data, the daily cup output of 100-200 is expected to break even), on the other hand, they should try to control and reduce costs, especially the “burden” expenses such as rent, which accounts for the majority, and will not bring any income.
 
Man did these two things right from the beginning.
 
First of all, man insists on attracting and retaining coffee consumers with high-quality coffee quality to increase the amount of cups. As a boutique coffee brand, high-quality coffee beans, flavor, baking techniques and freshness are necessary, otherwise it is not boutique coffee.
 
Han Yulong, founder of maner, worked as a coffee bean roaster for one year in caf é del volc á n, one of the leading brands of fine coffee baking in Shanghai, and mastered the high-level fine coffee making process. High quality coffee is the basis for man to break the circle continuously. Huang Junhao, the international referee of China’s first COE coffee cup competition, spoke highly of man. “There are only a few window stores in Shanghai boutique coffee industry, and man is the best coffee maker in it.”.
 
While maintaining the high quality of coffee, man focuses on a popular coffee item: latte. For most coffee drinkers, espresso latte with milk is more acceptable than pure black coffee such as American and Italian espresso. It is a high-frequency coffee product.
 
Lattes of other peers are generally priced at more than 30 yuan. The “aoruibai” latte of man has a very high cost performance. It only needs 15 yuan a cup (with a cup), which is at least 50% cheaper than Starbucks latte products. It is still a boutique coffee. Many people become human users for this cup of 15 yuan aoruibai. Therefore, the average daily sales of coffee of man soon exceeded 100 cups.
 
Man also has a careful machine in product design, with a small cup shape. Starbucks, Ruixing coffee, etc. adopt a medium cup with a capacity of 360ml and a large cup with a capacity of 480ml, while the medium cup of man is only 240ml and the large cup is 360ml. Some people have simply compared that the Mocha sold by man for 25 yuan is only 360ml, while the Mocha sold by Ruixing for 19 yuan is 480ml. In this way, man can also save money from ingredients such as milk.
 
Today, man can easily sell thousands of cups of coffee in the stores in the prosperous business district. The author bought coffee many times in the man store of Wangfujing business district in Beijing. At that time, it was lunch time on weekdays. Many people were lining up to buy coffee. The call indicator showed that the store had sold nearly 1000 cups of coffee.
 
Man has always insisted on not making takeout delivery in order to maintain the quality of coffee. At present, this inconvenience has not affected the cup output of man’s store.
 
In terms of the cost structure of opening a store, man minimizes the rent expenditure. The store is a window store with an area of only 2 square meters. Man prefers to spend money on “blades”, such as core resources such as coffee bean baking equipment, coffee machine and Barista. These are the key elements to continuously ensure high-quality coffee, so as to attract more users and increase the number of cups.
 
On the one hand, we can make more cups through high-quality and low-cost products, and on the other hand, we can control the rent cost, so it is not surprising that man can make a single store profit. According to latepost, the net profit margin of man exceeds 10%. If the expenses such as rent, utilities and personnel costs are included, under the same capital investment, man actually makes more money than Starbucks.
 
However, there is another key point for the success of the business model of man: choose the right place.
 
Location strategy: start in Shanghai and anchor Starbucks to open a store
 
In addition to “practicing internal skills” to do a good job in quality control and control the cost of opening a store, man can make a single store profit. There is another key choice: choose the right market environment.
 
Han Yulong, founder of man, once opened an offline coffee shop in his hometown Nantong for 8 years. He couldn’t make ends meet and finally closed it. Then he came to Shanghai and founded man.
 
Shanghai is the most mature and fastest-growing coffee market in China, ranking first in terms of coffee consumption scale, number of coffee stores and development of coffee industry.
 
According to the report of Shanghai coffee consumption index released by China first finance and economics, the per capita coffee consumption in Shanghai is about 20 cups per year, but only 4 cups per capita in China. The total number of coffee shops in Shanghai exceeds 7000, with 2.85 cafes per 10000 people, which has reached the average level of global coffee consumption cities such as London, New York and Tokyo, and there are many boutique coffee stores. In the business structure of Shanghai cafes, 55.88% of cafes are boutique cafes or independent cafes. This shows that Shanghai has entered the third wave era of the coffee industry – pursuing high-quality coffee and making coffee with fine technology like brewing.
 
Although the competition is fierce, the growth space of Shanghai’s coffee market is still huge. Most boutique coffee stores are priced at 30-50 yuan, and few boutique coffee brands focus on the price below 30 yuan.
 
Even after entering Shanghai for 20 years, Starbucks, which has many coffee stores and great brand appeal, still can not meet people’s demand for “cheap and delicious coffee”. Starbucks represents the heavy roasted coffee products represented by the second wave of coffee industry – Espresso. It is also a global coffee chain brand. Relying on large-scale and standardization, Starbucks can not meet the new generation of coffee consumers’ pursuit of fresh and high-quality high-quality coffee produced by high-cost and relatively small-scale fine technology.  
 
 
In addition to choosing the right market, man’s store location strategy is also accurate: it is opened near Starbucks.
 
There are Starbucks stores, indicating that people nearby need to drink coffee. Starbucks stores are often overcrowded. Many people stay in the store for most of the day after ordering a cup of coffee, resulting in some customers who want to drink coffee can only choose to take it out or leave for another coffee shop. At this time, the man who chooses to open a shop near Starbucks can easily obtain the coffee consumer groups that Starbucks “overflows” and can not be satisfied in time, win public praise through “cheap and delicious boutique coffee” and bring user transformation.
 
In this way, with a window store model of 2 square meters and focusing on high-quality coffee at the price of 10-15 yuan, man has become the “king of cost performance” in Shanghai, a mature coffee market.
 
Growth rhythm: after steady growth, make use of capital to seek rapid growth
 
When there are a certain number of offline coffee stores, they have scale effect and network effect. Insiders commented that there are three key stages in opening offline coffee shops in China:
•   From 1 store to 10 stores, we are grasping the cost and quality control
•   From 10 stores to 100 stores, it is running through the scale and mode
• more than 100 stores are in their own niche and play a game with capital
 
Since its establishment, man has experienced three similar stages.
 
In the first three years of entrepreneurship, man made steady progress and opened another store only after one store was profitable. In 2018, when receiving the financing of 80 million yuan from today’s capital, man had only eight window stores in Shanghai, which was in the early stage of controlling quality and cost. Even with an investment of 80 million yuan, man only added five stores at the end of that year. He carefully controlled the speed of opening stores, honestly ran through the business model first, and strive for the profitability of each store.
 
Man’s real acceleration of opening stores is from the second half of 2020 to the first half of 2021. After the control of COVID-19 in China, the new consumer market of new milk tea was sought after by the capital market, and the coffee track belonging to the new consumer market was also well received by the capital.
From the end of 2020 to the first half of 2021, man began to go out of Shanghai and expand to the first and second tier cities in China. At present, there are more than 200 stores in China. Man’s business model has been verified in the first and second tier cities, and capital has entered the market one after another. Man also needs to use its capital to speed up the construction of its own niche in the market and speed up the opening of stores. It is expected that its stores will increase to 400-500 by the end of 2021.
 
Man also has online channels. It officially settled in tmall in August 2020 and mainly sells high-quality coffee beans, ear hanging coffee, coffee equipment and brand peripheral products. In terms of products, man has also launched the whole industry chain products including portable coffee bags, high-quality raw beans, oat milk, peripheral products and so on at tmall store, the “wearman flagship store” and Taobao store, the “man’s coffee factory”.
 
If everything goes well, man is likely to be the local boutique coffee brand No.1 in China, which is bound to have an impact on Starbucks, especially Starbucks Zhenxuan store, the boutique coffee store of Starbucks. After all, for most Chinese consumers who are still “novice coffee”, cost performance is an invincible “big killer”.
 
Similarly, cost performance is also a “big killer” for tims to quickly explore the market in China.
tims China: build a “cheap Starbucks”

between Starbucks and boutique coffee

Tim Hortons is a Canadian coffee chain brand (hereinafter referred to as TIMS), founded in 1964. It is the second Dalian lock coffee brand in the world after Starbucks. There are more than 5000 stores worldwide, but 80% of the stores are in Canada, which is known as the “legendary coffee brand in North America”. Tims is positioned as a cheap, ready to go convenience coffee.
 
Tim Hortons is subordinate to catering brand international Co., Ltd. (hereinafter referred to as RBI), which also owns two major brands: Burger King and PoPeyes. In 2019, Tim Hortons officially entered China and opened its first store in Shanghai. Tims China is a joint venture between RBI and Cartesian capital group.
 
Differentiated positioning: coffee brands that are 50% cheaper than Starbucks and younger generation
 
From the perspective of coffee pricing, TIMS China’s coffee pricing is between Starbucks and boutique coffee brands, mostly in the range of 15-30 yuan, about 50% cheaper than Starbucks, which is more like a “affordable Starbucks”. This pricing has anchored the current mainstream customer group of coffee consumption, which is also the core user group of Starbucks. However, TIMS China is 50% cheaper than Starbucks and can avoid the “positive hard shoulder” with Starbucks.
 
 
In terms of store style, TIMS China follows the route of “coffee + dessert + light food”, and its products mainly include mixed coffee and cold and hot specialty drinks based on espresso, as well as fresh baked foods such as doughnuts and baked sandwiches. Therefore, compared with Starbucks’ scene concept of “third space”, TIMS China creates an atmosphere of “relaxed gathering”. Warm and relaxed is the emotional value it wants to provide to its customers.
 
In terms of brand positioning, TIMS China hopes to become a coffee brand consumed by the younger generation and make coffee a daily behavior of young people. Therefore, TIMS China takes the initiative to cater to the preferences of the younger generation in China and creates the young attribute of the brand with the help of a variety of scenes, such as building a “E-sports” theme store, cooperating with BiliBili “full-time expert” theme cafe Jointly sign environmental protection theme stores with hungry Yao, and use different theme stores as contacts to link the younger generation of consumer groups.
 
Location strategy: fast attack new first tier cities around Starbucks
 
Tims China’s store location strategy is the same as that of man. Stores in the first and second tier cities are near Starbucks stores to attract Starbucks users, especially coffee consumers who can’t be satisfied by Starbucks stores.
 
The author has been to several stores of tims in Beijing, most of which are near Starbucks stores. Because cheaper coffee, doughnuts and light foods have attracted many Starbucks customers. The author also found that the overall tone of tims store is softer, brighter, more energetic and more warm than Starbucks store. Tims store may be a more suitable choice for customers who just want to find a cafe for a cup of coffee or simply talk and chat.
 
By June 2021, TIMS coffee stores have settled in 12 cities. From the overall layout, TIMS China’s stores show a trend of “taking root in Shanghai and spreading across the country”, which is a conventional way for foreign coffee brands to open stores in China. However, TIMS China also aims at the new first and second tier cities with low Cafe density, such as Dalian, Zhengzhou, Fuzhou, Ningbo and other places. Through dislocation competition, TIMS China can improve the efficiency of store expansion and avoid direct competition with Starbucks and other industrial competitors.
  
At present, TIMS China has 388 stores in China, including flagship stores, classic stores and tims go (mainly for delivery). The number of stores ranks behind Starbucks and Ruixing, but there are more than 4000 fewer than Ruixing.
 
However, this pattern will certainly change in the future, because tims China is developing very fast.
 
Growth rhythm: it is planned to be listed two years after entering China, and the speed of opening stores is comparable to that of Ruixing in that year
 
When tims enters the Chinese market in 2019, it is at the stage of fierce competition in China’s coffee industry. Important offline coffee brands are rapidly expanding stores, especially Ruixing coffee, which has opened more than 4000 stores a year, “sword finger” Starbucks.
In this market context, TIMS, as an ambitious novice who has just entered the market, must invest heavily to keep up with the competition. Therefore, TIMS said at the beginning of entering China that he would open 1500 stores in China in 10 years or even less. In May 2020, TIMS China, which has opened nearly 50 stores, won Tencent’s exclusive 100 million yuan strategic investment. In February 2021, TIMS China obtained the second round of financing, led by Sequoia Capital China fund, increased holdings by Tencent and followed by Zhongding capital.
 
This year, TIMS set up a bigger flag: establish “second to none” coffee shops and bakeries in China, and establish a profitable chain network composed of more than 2750 stores by 2026. Tims China CEO Lu Yongchen said that this year’s store opening speed will reach one store every 36 hours.
 
Tims needs more capital to achieve the goal of 2750 stores in five years. Tims China announced on August 16 that it would be listed on NASDAQ through spac. The valuation of its China business is about US $1.688 billion, and the transaction is expected to be completed in the fourth quarter of this year.
 
2750 stores will be opened in five years and will be listed in China in two years. This “rush” style inevitably doesn’t remind people of Ruixing coffee.
 
But tims China is not Ruixing.
 
Business model: focus on digital operation, and the store has been profitable
 
Unlike Ruixing coffee’s “loss run” in 2018 and 2019, TIMS China said its expansion was “expansion on the basis of profit”.
 
In November 2020, Lu Yongchen, CEO of tims China, said that tims coffee has achieved overall profitability in its stores. At that time, TIMS China had nearly 2 million members, more than 80% of the sales came from members, the monthly repurchase rate was 40%, and the proportion of offline and online increased from 8:2 or 7:3 to 5:5.
 
Compared with Ruixing’s previous practice of crazy throwing coins and coupons to promote growth, TIMS China pays more attention to refined and digital operation, so as to improve the repurchase rate and make profits.
 
“From start-ups to Starbucks, many people see opportunities,” said Lu Yongchen, CEO of tims China. “I think our key comparative advantage is digitization.”
 
This is related to tims China’s financing background and expansion timing.
 
After accepting Tencent’s strategic investment in May 2020, TIMS began to conduct in-depth exploration on digital innovation with the help of wechat ecology. With the help of Tencent’s online resources, digital and smart retail capabilities, through applications such as applets, it makes it more convenient for customers to place orders and get orders, and accurately collect consumption data at the same time. In addition, TIMS conducts fine operations, including private domain operations, by opening the link on the offline line. For example, the store will invite regular customers to join the enterprise wechat group through various channels, and regularly promote relevant new products, discounts or activities according to the characteristics of the community to complete the construction of user community links. The operation team of tims coffee can also see the transformation path, consumption preference and other attributes of consumers, and push different coupons through consumption behavior data to improve the repurchase rate of users.
 
Peter Yu, chairman of tims China, said in August this year that tims China achieved more than 40% same store sales growth in the first quarter of 2021; At the store level, the EBITDA (EBITDA, which is widely used to calculate the company’s operating performance) of each month in the past 15 months is positive. He said, “we plan to increase our sales to more than 7 billion yuan by 2026, and use the network effect, economies of scale and synergy to expand our profit margin to more than 19% in the same year.”
forecasting the future: opportunities and challenges in incremental markets
Let’s return to the two questions raised at the beginning:
1 – will the pattern of “iron Starbucks, flowing coffee upstart” be broken?
How likely are 2-man and tims China to break this pattern?
 
On the first question, the author boldly made a prediction and left it to be tested in time:
The existing pattern will be broken.
The climax of the world’s third coffee wave, boutique coffee, will be in China. China’s coffee market will not be “dominated by one”, one brand will “eat meat” and other brands will “drink porridge”, but it is more likely to be “a hundred flowers bloom” and “a hundred schools of thought contend”.
 
This prediction is based on the following two judgments:
 
First, China’s coffee market is an incremental market with great potential, strong demand and diversification.
According to the insight into the trend of youth coffee consumption in 2021 released by cbndata, the scale of domestic coffee consumption has expanded year by year, and coffee has become the just demand of residents in first and second tier cities. According to the white paper on China’s freshly ground coffee industry, the penetration rate of coffee in China’s first and second tier cities has been close to 70%, almost equal to that of tea drinks.
 
For those who have developed a daily habit of drinking coffee in the first and second tier cities, the annual number of coffee can reach 300 cups, gradually approaching the mature coffee market standard. Coffee has gradually changed from “social currency” advertised by Starbucks to “daily drink”. The demand for coffee of the new generation of young people is diverse. They pursue better quality, more convenient and cost-effective coffee, and more diversified consumption scenarios. They want to drink delicious coffee at home, in the office and even during travel.
 
In terms of per capita coffee consumption, China has huge growth space. Finland has an average of 1200 cups per person per year, Switzerland has 800 cups, and the United States and Canada have about 300-400 cups. Considering the factors such as food culture and consumption stage, we do not use the per capita coffee consumption in European and American countries as the benchmark, but choose South Korea and Japan in East Asia for comparison. Japan and South Korea have 180 cups per capita per year, while China’s north, Shanghai and Guangzhou have 15 cups per capita, and the country’s annual per capita coffee consumption is only 6 cups. Therefore, there is still much room for growth in China’s coffee consumption market.
 
From the perspective of industrial layout, China’s coffee industry is becoming more and more complete and refined, and the supply chain is becoming more and more complete and fast. For example, the key link in the coffee industry is “baking”. There are more and more baking factories of different sizes in China. And now people buy fresh roasted coffee beans in 3-7 days, which can be delivered to all parts of the country in 2-3 days. The quality of coffee beans is also getting better and better. For example, the quality of small coffee beans in Yunnan, China in recent years is very good. As a hand brewed coffee fan, the author believes that the flavor and quality of hand brewed coffee made from high-quality coffee beans in Yunnan are not inferior to those in coffee producing areas such as Brazil and Colombia.
 
According to the data of London International Coffee Organization, the average annual growth rate of coffee consumption in China is 15%, much higher than the world’s growth rate of 2%. By 2025, the scale of China’s coffee consumption market is expected to reach 1 trillion.
 
Under the background of strong demand and gradual improvement of the industrial chain, a large number of new coffee brands from multiple vertical tracks such as local boutique coffee, chain coffee brands and high-quality instant coffee have been born in the Chinese market in recent years. Various categories such as instant, freshly ground, ready to drink and ear hanging have been brought to fire, and some more convenient innovative coffee products such as instant freeze-dried powder have also appeared. There are many types of coffee products, rich marketing methods and fast growth rate, which can not be compared with the market of other countries in the world. Therefore, man and tims China are at the right time.
 
Based on the above, the author boldly predicts that the climax of the world’s third coffee wave, high-quality coffee, will occur in China.  
 
Second, from the perspective of China as a whole, China’s coffee market is still in the early stage of development, because cities below the third tier are still immature markets to be explored. Even Starbucks, which is firmly in the first place, needs to strive to cultivate this part of the market.
 
People in cities below the third tier have not formed the daily habit of drinking coffee, but are more used to drinking tea, milk tea or tea and other products. When people face the new category of coffee, high cost performance must be the first consideration. Price and good drinking (bitter or not) are easier to drive consumption behavior. As for the “exquisite” thinking of quality and which type of boutique coffee, it is not the primary problem.
 
When Starbucks, Ruixing coffee, man and tims China coffee and other brands enter the sinking market, they face not only new consumer brands of milk tea such as Xicha and chayan Yuese, but also coffee brands derived from convenience stores such as McDonald’s, KFC, convenience bee, 711 and even Sinopec’s convenience stores. Because the price of coffee in convenience stores is lower and the store network is strong, it can form a strong network effect and scale effect.
 
If you want to develop the coffee market in these cities, you need time, continuous healthy cash flow, and differentiated products and services to meet the unique needs of users in these markets.
 
Although brands like Starbucks have the first two advantages, it does not mean that they can have the third advantage, which is the breakthrough point of some new coffee brands. Therefore, it is only a matter of time before the pattern of “iron Starbucks and flowing coffee upstarts” will be broken.
 
The current slowdown of Starbucks may be a proof. According to the financial report of Starbucks in the third quarter of fiscal year 2021, the growth of Starbucks in the Chinese market is slowing down: the revenue is about US $910 million, a year-on-year increase of about 45%, and the average consumer unit price per customer is about 9% lower than that of the same period of the same period of the same period of the same period of the same period of the same period of the same period of the same period of the; Although the same store sales increased by about 19% year-on-year, it was not as expected.
 
As for the second question, will man and tims China be the “young David” who defeated the “giant Goliath”?
 
To a large extent, it depends on whether they can give full play to their differentiated advantages, use their advantages to resist Starbucks’ disadvantages and seek growth with “asymmetric structure”.
 
The author here borrows the concept of “asymmetric structure” in the book “growth structure” to make a simple analysis.
 
The so-called asymmetric structure refers to the industry novice challengers who are in the process of differentiation but do not avoid the industry leaders, look for the weak points in the competitive advantage of competitors, make a hole, make it difficult for competitors to fight back, and realize the curve overtaking growth in specific market segments.
 
Both man and tims China’s business models are in the markets of the first and second tier cities. They anchor Starbucks to attract passenger flow and achieve growth through differentiated positioning and cost-effective products. The common advantages of the two are: cost-effective products are widely loved by the new generation of young consumer groups, which is precisely what Starbucks cannot quickly adjust and change because of its brand positioning.
 
In the process of rapid expansion, whether man and tims China can always adhere to their differentiated advantages to break the pattern of “iron Starbucks” depends on whether they can withstand the following two challenges:
 
•   In the market of the first and second tier cities, whether man and tims China can insist on balancing key factors such as quality control, high cost performance and profitability in the large-scale expansion of stores, so as to form brand influence and bargaining power with more stores;
•   In the market of cities below the third tier, can we establish alliance cooperation with channels with store network but lack of good products (such as gas stations or convenience stores) through cooperation, so as to quickly open and seize the market first. Or, can we use the power of capital to open stores quickly at low cost, form a strong scale effect, and maintain the profitability of stores at the same time.
 
On the whole, the coffee track is a track to make friends with time. People’s consumption habits need to be developed and good products and brands need to be “domesticated”. In terms of the current development trend, both man and tims China are aware of one thing: listing does not mean anything, nor does fast opening a store mean anything. The key to the matter is whether we can give full play to the advantages of differentiation, make continuous profits and live longer and better.

reference material:

[1] Insight into youth coffee consumption in 2021: nearly 60% of white-collar workers drink three cups a week, and Shanghai has become the capital of coffee | cbndata Report

[2] “Coffee fragrance” under the epidemic situation — an insight report on 2020 coffee consumption market

[3] “Who stole the business of Starbucks”, author: Wang Hui, source: brand observer

[4] Coffee new forces, encircle Starbucks

[5]   New coffee brand, Starbucks or yyds?

[6] China’s 300 billion coffee market broke out at that time. How did boutique coffee come out of the circle?

[7] Man coffee’s profit “careful machine”    The official account of “future education APP”, author: Zhao Xiaomi

[8] Man coffee: 300 meters near Starbucks, 50% lower price, won without Ruixing

[9] Achieve 10 billion valuation in 5 years: in-depth analysis of the national market layout of man coffee

[10] Coffee chain brand tims China welcomes a new CFO

[11] After entering China for two years, TIMS coffee is ready to be listed. Tims coffee should be the “second to none” coffee shop in China

[12] Interview with CEO of tims Coffee China: how does the brand overtake in the corner when it has opened more than 200 stores in two years?

[13] 200 stores in 2 years, why did the late tims coffee rush? Store password

Author: Tian Shanshan; Source: Lishi Business Review (ID: LiBusiness), reprint has been authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246);
join the community: Cherry (micro signal: 15240428449). Fbic2022 foodaily daily food cooperates with the world’s top commercial and industrial partners to build foodaily   Fbic222 global food and beverage Innovation Conference & the first Food Expo “new food era – brand ecology” will be held in Shanghai from May 31 to June 2, 2022. We invite you to witness it together. (click the picture to view the detailed introduction).

food people are “watching”

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