China Food

Ten billion hot money poured into the coffee track, and the supplier’s revenue doubled five times

follow Ruixing’s new coffee to “eat meat”?
Young Chinese consumers are addicted to a bitter liquid with rich aroma.
In the first half of this year alone, they drank more than 60000 tons of coffee beans, many of which came from Brazil, a South American country.
The Arabica coffee beans used in Ruixing, which is rising rapidly in the coffee track, are produced here. The coffee prepared by this company, which has only been established for four years, is sweeter than Starbucks. At first, some senior coffee lovers scoff at the taste, but they never thought that it was this “impure” taste that hit the taste buds of Chinese people, and then it got out of control.
“Crazy” can be used to describe China’s coffee market: almost every month, at least 20 coffee shops are newly opened; in only nine months, venture capitalists injected 4.6 billion yuan into the track; a coffee bean manufacturer produced the last batch of beans in April this year, but sold out in early May.
This is an unprecedented speed.
The boom is spreading along the industrial chain, and workers have to work three shifts to meet the expanding market demand. This abnormal work and rest brings them not only the red blood in their eyes, but also thousands of one-time bonuses. This is equivalent to their salary of more than a month.
Coffee beans are washed, baked and packaged by them, and then transported to coffee shops in big cities, enriching people’s taste buds and filling the wallet of the supply chain. Finally, supply chain manufacturers taste the taste of making money earlier than capital and brands.
As for how much he made, it’s a secret that can’t be inquired into.
“Doubling is perfectly normal.”
“Business has been good these two years, hasn’t it?”
“It’s OK,” Lao Li replied in an almost flat tone.
At the age of nearly 40, Lao Li is well aware of the truth that money does not leak out. He runs a raw material factory for drinks and is a supplier of many well-known drinks such as Ruixing and “Yidian”.
Lao Li is a loyal supporter of Ruixing coffee. Last year, Ruixing’s financial fraud shocked the whole capital market, but Lao Li was calm: he firmly believed that Ruixing would not fall. The reason is that coffee is a profiteering business, and relying on providing Ruixing with pearls, fruits and other raw materials, he made tens of millions in just one year.
How many times did he earn? “A lot anyway.” Lao Li was unwilling to give specific figures.
Not surprisingly, his business will be more prosperous this year. According to the International Coffee Organization in London, compared with the global average growth rate of 2%, China’s coffee consumption is growing at an alarming rate of 15% a year.
Capital has shown unprecedented enthusiasm for coffee brands. Almost all the famous coffee brands have obtained high valuations: manner, who has been financed for four rounds in half a year, has reached 18 billion; three meals and a half for five rounds in two and a half years, has reached 4.5 billion; similarly, when it has been financed for five rounds in two and a half years, the valuation has also reached 5 billion.
Almost all players in the industrial chain smell the smell of hot money.
In China, Yunnan is the concentrated origin of coffee, but due to the limited quantity, the supply of raw beans of coffee brands depends more on imports. From January to June 2021, the import volume of coffee beans increased by 104.3% year-on-year to 61.77 million kg, with a total import volume of US $238 million, a year-on-year increase of 76%.
A shopkeeper lamented that after four years of opening the shop, he received the news of the rise in the price of coffee beans for the first time. This is the double impact of the surge in demand and the decline in Brazil’s production. An industry person said that the price of raw beans has increased by about 34% this year.
However, this did not affect the enthusiasm of the market. A coffee bean manufacturer produced the last batch of beans in April this year and sold out in early May.
With the rapid increase of demand, the KPI of grass-roots salespeople has risen. A salesperson told tech planet that his KPI sales this year is to achieve more than 100 million sales, which is more than twice that of last year. In order to achieve his business objectives, he flew to eight cities in the past month.
“Doubling is normal,” said a coffee bean supplier. They have obtained the cooperation of more than a dozen international and domestic famous brands in 2020, and their revenue has doubled five times this year.
In order to complete upstream orders, the staff has increased by about 60%. The company implements a two shift system, but it still can not meet the needs of the market.
“There are too many lists. In the past, our current production capacity can work 4000 tons on three shifts a day. Because of power restriction and shortage of raw beans, we can’t do it at all.” the above suppliers admitted to tech planet that it’s like a duck flying away.
Eat bigger cakes  
In order to avoid the recurrence of this pity, the manufacturer’s solution is to expand production capacity.
A supply chain manufacturer is building its own phase II plant. At first, their plan was that the annual capacity of phase II would be 6000 tons, and then the number would double directly.
Any enterprise wants to take all upstream and downstream, so as to maximize profits. A supplier originally had only raw bean processing production line, and next year they plan to add baking production line and coconut powder production line.
One of the hidden dangers of expansion is that once the market demand is not so large, the invested time, resources and funds are at risk of rapid depreciation. In particular, Ruixing coffee, China’s largest new coffee brand, has built two baking factories, one in Pingnan and the other in Xiamen, with an annual production capacity of 30000 tons.
“The coffee industry is a big category in the world, but it is a small category in China.” skyline coffee Li Peng told tech planet, “most of the domestic coffee supply is still concentrated in some leading enterprises, such as Shunda, skyline, Liyu, Qiaosheng and development.”
The capacity of 30000 tons is almost astronomical for domestic coffee suppliers. “In China, there are only a few factories with a capacity of 1000 tons,” Li Peng said. The annual output of Shunda baking mentioned above exceeds 10000 tons.
Liu Yun, founder of the largest soybean meal e-commerce platform in China, said that a coffee chain brand with 200 stores can consume 200 tons of beans a year. According to this calculation, Ruixing, with a total of 5259 stores, consumes 5259 tons of coffee a year, which is far lower than the current capacity of its own factories.
A reasonable guess is that Ruixing is likely to provide raw bean processing services for other brands.
This eats away part of the supply chain business.
But many suppliers said there was no need to worry too much. According to the data of London International Coffee Organization, the scale of China’s coffee market will exceed 300 billion yuan in 2020 and is expected to reach 1 trillion yuan in 2025.
In the first half of this year, the import of coffee beans increased by 104.3% year-on-year to 61.77 million kg. If it remains unchanged in the second half of this year, the import of coffee beans in the whole year will exceed 120000 tons. Except Ruixing baking factory, there is still a huge gap.
At the same time, it takes 8-9 links from raw beans to consumers, and Ruixing is only involved in baking.
The cake is still big. The only problem is how to eat it. Therefore, expanding production capacity is the first priority of most factories today.
Rapid expansion tests personnel, management and capital. “In fact, production and quality management are not our biggest headache. Our biggest pressure is the uncertainty of capital,” said a manufacturer in charge.
During the financing boom in the past nine months, it is rare to hear that any coffee supplier has completed financing.
Investing in supply chain enterprises is a thorough long-term doctrine. This is an untouchable business for venture capital institutions seeking to maximize profits in the short term.
A leading domestic supplier told tech planet that they started financing in March this year and have not closed yet.
Big fish eat small fish, small fish eat shrimp game
The coffee business looks vibrant, but not everyone can make hot money.
Industry insiders shared a case with tech Planet: a factory in Yunnan sold eared coffee live, which exploded and sold 50000 boxes at once. However, in the later stage, due to the unstable production capacity of the factory, the delivery of goods was delayed.
This is the current situation of most small and medium-sized factories in China.
In China, manufacturers need to prepare a lot of goods, all kinds of beans. When there are not enough orders in the market, whether there are enough funds to prepare goods is the first test.
Secondly, in the production process, due to the different needs of each family and the different proportion of mixed beans, some raw materials will cause backlog. If there are not enough brands, the result of the backlog can only be thrown away, a vicious circle.
Another test is capacity. When the degree of enterprise automation is not high, the production efficiency is low. Only with great capacity can we improve production efficiency and scale.
So these all point to one element: resources.
The first is capital. A coffee baking factory with a capacity of 1000 tons often covers dozens of mu.
The second is contacts. A rich and free boss set foot in the coffee business a few years ago. Because he couldn’t find a knowledgeable person, the factory was on the verge of bankruptcy. This year, they brought in industry insiders with more than 10 years of experience in the beverage industry, and finally took a breath. In order to keep him, the boss gave him some shares.
But in the coffee boom, big factories eat meat and small factories can drink soup.
“Some small factories may also make money, but they mostly make a price difference. Wanghong store bakes more than 20 kilograms of beans a month, and more than 30 kilograms of beans are great,” said an industry insider. “Big brands won’t choose them.”
The final result is that resources are concentrated to the head manufacturers. This is a game in which big fish eat small fish and small fish eat shrimp.
Author: Wang Lin; Source: Tech planet (ID: tech618), reprint authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246);
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