China Food

Observation on the change of coffee consumption: from the supporting role of the scene to the protagonist of consumption

the trend of coffee consumption in China has changed.
In the 1980s and 1990s, a large number of foreign consumer brands such as P & G and L’Oreal began to enter China. They led the consumption trend of that era. At that time, consumers were more in pursuit of social attributes attached to product functions, and they were in pursuit of “showing face”. Coffee was the most representative category. Starbucks entered Chinese mainland in 1999, the first generation coffee brand represented by Starbucks, the core value lies in providing social space for work, and coffee itself is more like a supporting role. So I positioned coffee consumption in that era. Coffee was a social accessory.
Now, more than 20 years later, coffee, a foreign beverage, has not only taken root in China with extremely developed tea culture, but also entered a new era.
Whether it is Ruixing, which has risen because of reshaping the coffee consumption experience with internet thinking, or small-scale boutique chain coffee such as manner and seesaw, or coffee brands such as Santon and half and yongpu, which mainly focus on instant retail products. In the process of accelerating the penetration of coffee in the Chinese market, it is increasingly showing the characteristics of “de spatialization”. Coffee itself is more and more like an actor who has been suffering for many years. Finally, it can take the lead alone. Without relying on the value of space, it can also make a brand by relying on the coffee product itself.  
With these observations, we would like to further explore the following issues in this article:
  • Why did China’s coffee consumption change like this?
  • What kind of consumer demand does the rise of these new coffee brands meet?
  • Where will the biggest increment of China’s coffee market come from in the next decade?
  • In the process of accelerating the penetration of coffee in China, who will take over the baton of market education?
Unmet coffee demand
The popularity of coffee culture must be accompanied by the emergence of a large number of new mental workers. This Law applies not only to the successful rise of Starbucks in China, but also to the global coffee market, such as France, the United States, Japan, South Korea and Singapore.
In the late 19th century, with the help of the French Revolution and industrial revolution, many literary giants, philosophers and new middle class supported exquisite French coffee. In the 1980s, the vigorous development of the information industry gave birth to new people such as yuppies and it elites in the United States. Starbucks gradually moved to the world based on Seattle (Seattle is the gathering place of American it and Internet companies, and the headquarters of new generation Internet companies such as Microsoft, Amazon and T-Mobile are all here). In the 1990s, coffee had completely penetrated and entered the elimination period in Japan. Starbucks was able to earn its own day here because it grasped a large number of working women under the change of social structure. In 1985, the Japanese parliament passed the law on equal employment opportunities for men and women, more white-collar women held important positions outside administration in enterprises, and their consumption ability was improved.
China’s coffee market also has this feature. Starbucks came to China in 1990 not by chance, because after China’s reform and opening up, the emergence of the first batch of large-scale mental workers began in the 1980s and 1990s. At that time, top foreign-funded enterprises in various industries such as P & G, L’Oreal, KFC, Nestle, general electric, Microsoft, McKinsey, KPMG and Ogilvy & Mather successively entered China to set up companies. These foreign-funded enterprises not only brought modern enterprise management and technology, but also brought coffee consumption habits into China. The coffee consumption habits of that generation were educated by Starbucks in the same period.
With the development of China’s economy, Chinese consumers are also changing. At present, the two major sources of mental labor in China, white-collar workers and students, have unmet coffee consumption demand.
For white-collar workers, when there is coffee consumption demand in scenes other than business and social networking, such as offices, homes and commuter roads, they just want to pay for the coffee itself. They need coffee brands with higher cost performance. The freshly ground coffee market monopolized by Starbucks is empty. For a large number of student parties, on the one hand, the refreshing effect of coffee is just needed. On the other hand, the improvement of living standards also makes them have stronger consumption power in leisure drinks than the previous generation. They have higher requirements for the taste and refreshing effect of coffee as a beverage, and there is a gap in the instant coffee market monopolized by Nestle.
Generation Z
In the next decade, the largest incremental source of China’s coffee market
Among the above two mental workers, the white-collar workers and students entering the workplace, namely generation Z, will be the largest incremental source of China’s coffee market in the next decade.
In the mid-2021 consumption report: definition and characteristics of generation Z released by Castle Peak capital, after rigorous research and measurement, the following conclusions are drawn: generation Z in China should have been born from 1998 to 2014, with a total population of 280 million, most of which are concentrated in emerging markets outside Beijing, Shanghai, Guangzhou and Shenzhen. One third have reached adulthood and nearly a quarter have entered high school. Generation Z has not really entered the society. They have entered their career since last year and will become the most important backbone in the society in the next 10 years.
This large-scale Z generation presents many new characteristics: personalization, pleasing consumption, higher consumption ability, network aborigines, diversified aesthetics, circle differentiation and so on. What does this mean for coffee brands?
First, the consumption of generation Z is more rational. Their consumption decisions are based on fully transparent information. They are also the smartest generation of consumers who have experienced the baptism of a large number of business routines since childhood. They can spend a lot of money for their favorite brands and devote the same enthusiasm as chasing stars; But for the goods they don’t recognize and don’t need, they will also pay nothing. In many consumption scenarios, whether coffee is used as a refreshing functional beverage or a leisure beverage to satisfy cravings, and no matter how much the brand story is exaggerated by coffee enterprises, generation Z only wants to pay for the value of coffee itself, such as taste, appearance, effect, etc.
Second, the value orientation of generation Z is more diverse. It is difficult to label generation Z with the aesthetic and value orientation of the previous generation: women in the workplace are not only light familiar; Men in the workplace do not have to wear suits. Sweet, light cooked, yuppie looks good, but the trend and neutral style are also cool; Work is not only for money, but also for spiritual satisfaction; Life can not only work or must stand out. It’s also good to enjoy life and be an ordinary person; Men showing softness and warmth is not cowardice. Women showing strength and talent can also be beautiful… The diversification of these value orientations will enable generation Z to examine the brand’s design more three-dimensional, ranging from the model image on posters, the language style in advertising films, to the choice of spokesmen, the direction of product innovation, etc, Generation Z will perceive the brand image and whether the brand is a passer-by through large and small contacts, and then decide whether to like the coffee brand.
Third, it is difficult to find generation Z in one place. The diversification of interest circles and the development of social media mean that if the coffee brand still relies on traditional marketing methods and media channels, it may not reach too many generation Z at all. If you want to do business with more generation Z, you can’t just rely on the offline world. The online world accounts for a large part of their attention. Coffee brands need to take the initiative to enter their online world and talk about their brand concept with their discourse system. And the brand must have its own value while communicating with them in good faith, otherwise they will think you have no attitude and are too cheap.
Why Ruixing?  
China’s coffee market is still in the stage of attracting more people to accept the first cup of coffee. It also needs continuous market education. It must be large chain coffee brands that play a major role in market education. At present, among the chain coffee brands with more than 5000 stores, Ruixing is the first and Starbucks is the second. The number of their stores has dropped several times from the third.
Over the past two decades, Starbucks has assumed the role of market education. In the next ten years, I think Ruixing will take over the baton of Starbucks and continue to educate younger generation Z coffee consumers in China. This is not only because Ruixing is the coffee brand with the largest number of stores at present. China Urban chain coffee consumption report recently released by first finance also shows that Ruixing has younger users (especially students) and a higher share in the new first and second tier cities, which is highly consistent with the demographic characteristics of generation Z in China.
How does Ruixing win young consumers? I think Ruixing has done the following things right:
First, meet the needs of convenience. As a generation Z growing up with the mobile Internet, they pay more attention to the “convenience” of services than the previous generation. Ruixing has transformed the coffee consumption experience with internet thinking, such as making efforts to realize “online point, on-site pick-up”; Provide takeout service at the beginning of its establishment; Scientific site selection and opening a shop in the area where young people live, work and study, meeting the convenience of 5-minute coffee there.
Take Ruixing’s store strategy in Shanghai as an example. The above report released by first finance also shows that 50% of Ruixing’s stores in Shanghai are opened in areas not covered by Starbucks. For a large part of this, compared with the downtown with higher cost of living, it is also an area where more young people are willing to choose and live.
Second, boldly “de spatialization” to reduce the threshold of coffee consumption, so that the majority of students and young people entering the workplace can often afford it. Ruixing’s store types include Youxiang store, brand store and cache store. The first two account for a relatively low proportion. The core store type is a small-area cache store that does not provide Hall Food and focuses on “self delivery + delivery”. Ruixing’s financial report for the third quarter of 2021 shows that among 4206 self operated stores, there are 4077 cache stores. Small stores can greatly reduce labor and rental costs, which is the core reason why Ruixing can provide cost-effective coffee.
Third, solve the maladjustment of new users to the bitter and sour taste of coffee through product innovation. The bitter and sour taste of coffee itself and the stomach discomfort caused by caffeine improving metabolism and promoting gastrointestinal peristalsis are important reasons why it is difficult for many new users to take coffee as a daily drink. Ruixing has insight into this pain point and continues to develop coffee products that are more friendly to novices, such as milk coffee and tea coffee series, so that they can slowly adapt to the unique taste of coffee. Ruixing can make a phenomenal explosion every year, which also proves the correctness of this strategy, such as thick milk latte in 2020 and raw coconut latte in 2021.
Fourth, it is in line with young people’s aesthetic preference, entertainment preference and value orientation. For example, more “trendy” and “cool” brand vision. Taking the materials published on the official microblog as an example, Starbucks’s style is more traditional business style, while Ruixing’s are generally more fashionable young people. And choose younger and more popular spokesmen, self-conscious and rational anti roll fighter Li Lushou, young skiing champion Gu ailing representing the power of new women, etc.
Starbucks has not been eliminated by the times,
Ruixing also grasped the new era
Relying on the hard work of the past two decades, Starbucks is still the leader of China’s chain coffee, but now it will become one of them. In recent years, Starbucks China has successively opened conceptual stores such as “baking workshop”, “XIANGLV workshop” (i.e. environmental protection experimental store), “intangible cultural heritage experience store” and “shared space concept store”, which are farther and farther along the road of scene story. This is the brand heritage of Starbucks and will make Starbucks an irreplaceable chain coffee brand in this field.
But obviously, the development of the coffee market must make coffee return to the essence of drinks, and the increment here is the largest. From the supporting role of the scene to the protagonist of consumption, coffee has changed in the process of Chinese consumption.
Any form of consumption has the possibility of survival in China. Starbucks will not be abandoned by the times. However, relying on younger products, younger brands and younger strategies, Ruixing will lead the first coffee experience of young people in the future and the continuous demand of young people after they grow up, It can be said that relying on this strategy, Ruixing will also become a leader in the next era.
Author: Zhang Yi; Source: paidongshangye (ID: paidongshangye), reprint has been authorized. Reprint authorization and media business cooperation: Amy (wechat: 13701559246); for the sixth consecutive year, foodaily released the annual business hot spot of the food industry – exploring the development law of categories from 200000 new products around the world, studying the changes of global consumption, studying the changes of new consumers and consumption demand in combination with the in-depth insight into the Chinese market, and exploring the new value brought by the two new consumption drivers of technology reconstruction and brand popularity, Focus on the prospective discovery of category cracks / innovative products to assist new consumer entrants in anchoring market segments and category fission opportunities, and provide inspiration and decision-making reference for product innovation in the next year. (click the picture to view the detailed introduction) related reading

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