At the end of May 2022, Ruixing coffee announced its first quarter earnings of this year.
Surprisingly, against the backdrop of the serious impact of the epidemic on the offline economy and the general decline in the income of the catering and retail industry, Ruixing’s number of stores is still growing and its revenue is still rising.
According to the financial report, the number of Ruixing stores increased by 556 in the first quarter, with a total of 6580. The revenue in a single quarter was 2.4 billion yuan, an increase of 89.5% year-on-year, and realized the first positive quarterly profit since the establishment of the company.
The shadow of “Thunderstorm” seems to have gradually dissipated.
It is also noteworthy that Ruixing announced in April that its popular raw coconut latte sold 100million cups on the first anniversary of its listing. Ruixing also launched another popular item, Yeyun latte, in April. The sales volume of a single store on the first day exceeded 130 cups. It is said that the OKR of Yeyun latte formulated internally is still 100million cups.
Ruixing is probably the company with the most popular and sustainable manufacturing capacity in the beverage industry at present. Since 2020, Ruixing has listed meteorite latte, thick milk latte, raw coconut latte and coconut cloud latte, and launched new products at the pace of 1-2 single products every year.
In the past, the private marketing story of Ruixing’s vigorous issuance of securities has been told a lot. In addition, Ruixing’s product strategy of coffee beverage and the sinking market strategy of introducing franchisees also support Ruixing to get out of the storm.
Among Ruixing’s new stores this year, self operated stores and franchise stores have accounted for half of the total. People close to Ruixing told 36 krypton that in the future, the proportion of franchise stores in Ruixing’s new stores will increase year by year. By 2024, the proportion of self operated stores to franchise stores in the new stores will reach 3:7.
“In the future, Ruixing will be a tob company.” The person close to Ruixing told 36 krypton.
Whether it’s the marketing side, the systematization and process of product research and development, or the automation and intelligence of store management, Ruixing’s digital capability is supported behind it, and the marginal cost of digital capability replication is extremely low.
At the beginning of its establishment, Ruixing invested heavily in the construction of digital infrastructure. Digital capability is the magic of Ruixing to ensure the taste and quality of products under the early high-speed store opening strategy. Now this magic is applied to franchisees, and ruixingde achieves the goal of continuous expansion at a lower cost.
People close to Ruixing told 36 krypton that the number target of Ruixing stores in 2025 is tens of thousands. Judging from the speed of opening the store, Ruixing is really back.
Digital gene: stepping on the shoulder of China
Ruixing’s founding team comes from Shenzhou Youche, which was founded in 2007. Before the establishment of Ruixing, it took several years for Shenzhou Youche to transform from handwritten bookkeeping to the fact that all transactions were completed on the mobile terminal. The end point of the long transformation of Shenzhou Youche is the starting point of Ruixing’s establishment.
Compared with China, the market environment faced by Ruixing birth is the full popularization of mobile payment, the highly mature delivery service, and the optimization of AI algorithm makes the ability of big data processing stronger and stronger.
At the beginning of its establishment, Ruixing set up a technical team of about 400 people, developed apps by itself, and made digital related technical reserves in store location, operation, supply chain and other links, finally realizing the self-development and connection of the company’s front, middle and back office systems.
The former Ruixing relevant person in charge told 36 krypton that Ruixing’s early software and hardware R & D investment was close to 200-300 million yuan.
“Almost all of Ruixing’s business and management are data-driven.” Liushaoqiang, director of Ruixing and executive director of Dazheng capital, once said in an interview.
People close to Ruixing told 36 krypton that Ruixing’s technical team had nearly a thousand people when it was the largest. Because it attached great importance to the accumulation of digital technology, Ruixing still invested tens of millions of yuan in technology every year.
Ruixing determined the data-driven development path at the beginning of its establishment. The key to data-driven is to master data sovereignty.
At the beginning of its establishment, all transactions of Ruixing were limited to app, so that every piece of data can be used by itself. More than half a year after its establishment, Ruixing introduced wechat apps and later linked to the takeout platform, which increased the channel of interaction with users for Ruixing. These are the prerequisites for Ruixing to establish contact with consumers.
However, it is not enough to have tools to connect with users. We should implement the data-driven strategy and let as many consumers use this system as possible. Ruixing’s approach is to issue overwhelming social marketing and advertising to promote innovation. According to Ruixing’s early propaganda, the funds used to expand stores and education market reached 1billion yuan.
At the initial stage of promotion, Ruixing achieved efficient customer acquisition by “giving friends a cup of coffee for free”, inviting friends to drink coffee in the app and enjoying the discount of buying more and increasing more.
In addition, Ruixing also launched effect advertisements and brand advertisements with the help of wechat lbs fixed investment advertisements, wechat scheduled brand advertisements, focus media elevator advertisements and flash roadshows.
The effect of money distribution marketing is remarkable. According to public data, Ruixing’s net income in 2018 was about 840million yuan, which means 56 million cups were sold at an average of 15 yuan per cup of coffee.
In order to undertake the overwhelming marketing transformation, Ruixing opened its stores at a rocket speed:
- The first store opened in Beijing in October 2017, and Ruixing’s 2000 store opened on December 25, 2018;
- By the end of 2019, the total number of Ruixing stores soared to 4789;
- In 2021, the total number of Ruixing stores exceeded 6000, of which franchise stores increased significantly;
- According to the financial report of the first quarter of 2022, the number of Ruixing stores reached 6580.
Liu Shaoqiang once said in the interview that once Ruixing’s self-developed integrated system runs through, the backstage investment of operating 2000 stores is almost the same as that of operating 10000 stores.
The more consumers, the greater the amount of data accumulated, the more accurate the algorithm of Ruixing backstage will be trained, which is of greater value to promote Ruixing product development, store operation and supply chain management.
“Ruixing, based on mobile payment, takeout, big data, cloud computing and other technologies, is a new species spawned by new infrastructure” – said Liu Erhai, an investor of Ruixing coffee and executive partner of pleasure capital.
2018-2021 Ruixing financial report data, figure source: Netease digital reading
The fraud of financial statements in 2020 cast a shadow on Ruixing, but it also threw off the heavy burden of history.
The “money burning” marketing method is difficult to sustain, but Ruixing’s user taste data, store location data, operation data and supply chain management data since its establishment are real gold mines.
After putting aside the data shackles of “must grow”, Ruixing stopped the crazy pace of money burning and expansion, returned to being down-to-earth, and successively created popular items such as meteorite latte and raw coconut latte through in-depth mining of market data.
Under the data-driven strategy, Ruixing, which has been established for five years, achieved positive annual net profit for the first time in 2021. In the first quarter of 2022, Ruixing’s single quarter revenue was 2.4 billion yuan, an increase of 89.5% year-on-year, and completed the first quarterly profit confirmation since its establishment.
There are 113 new products throughout the year, with an average of one in three days
What saved Ruixing from the edge of “death” was the hot milk coffee.
Before 2020, Ruixing mainly made master coffee, aiming at the workplace scene. Aside from the achievements of money distribution marketing, the loyalty of the market to the product itself is not high.
After 2020, Ruixing will target young consumers, do product research and development with data-driven thinking, and vigorously develop “milk coffee” that is more acceptable to young people.
Subsequently, Ruixing successively launched popular single products of meteorite latte, thick milk latte, raw coconut latte, and coconut cloud latte, almost each of which will attract a burst of attention on social platforms.
On April 6 this year, on the first anniversary of shengyena Tiemian, Ruixing announced that it had sold more than 100 million cups a year.
Yeyun latte, which was also launched in April this year, sold more than 1.3 million cups in a single store on the first day, and exceeded 4.95 million cups in a single product one week after its launch. Within a week of listing, Ruixing reported that “OKR is the same as raw coconut latte, 100million cups.” Rumors.
Ruixing’s popular items are updated at the pace of one or two items a year. Compared with the beverage brands developed in the same period, Ruixing’s ability to continuously produce popular products is significantly better.
Behind the popular models, there are frequent new product launches. According to Ruixing’s financial year 2021 report, Ruixing launched a total of 113 new on-site drinks in 2021, with an average of 3 to 4 days to launch a new product.
And behind the launch of hundreds of new products in, what is less known is that Ruixing has saved thousands of new product formulas in its product library, and these products are waiting for the right time to market.
Why does Ruixing start to have the manufacturing capacity of popular products after 2020? How does digital capability drive Ruixing to make popular products? With thousands of new products in stock, which ones will be the next hot ones?
A person close to Ruixing told 36 krypton that Ruixing made a major personnel adjustment to the product group in 2019. Prior to this, most of the members of Ruixing’s product department came from finance, Internet, consulting, automotive and other industries. Since then, more product people from the retail industry have joined in.
In the past, although Ruixing’s digital system has been built, the granularity of the product team using this system is very coarse, “waiting for professionals to come in, Ruixing will know how to use data to maximize value.”
With the participation of people in the retail industry who are more closely related to beverages, the R & D process of Ruixing’s product department is also becoming more and more perfect.
It is also this set of R & D system that makes it inevitable for Ruixing to have a hot money.
Raw coconut latte is “calculated” with data
In Ruixing, the life process of each product incubation involves five product departments:
1. Analysis Department
2. Menu management department
3. Product R & D department
4. Product testing department
5. Product optimization Department
Based on the data of Ruixing’s internal system and external procurement, the product analysis department will compare the trends of competitive products in the industry, changes in catering tastes, preferences of major consumer groups and other information, and locate the geographical distribution and taste preferences of consumers.
Take the research and development of raw coconut latte as an example.
Through a large number of market research, the product analysis department found that the taste of raw coconut is popular in the market. Next, the analysis department will confirm whether there are giants of raw coconut related products in the market, popular products with raw coconut flavor, and relevant information such as China’s raw coconut output and product structure in recent years, so as to ensure that if the product is listed, there will be no weakness in the supply chain.
At this time, the project approval of raw coconut products can be carried out.
After the product was approved, the R & D team went to the market to find similar flavors, formulas and modulation methods according to the information obtained by the product analysis team.
At this time, three teams will participate in the internal horse racing of the research and development of raw coconut products. A total of more than ten kinds of raw coconut products will compete on the same stage at the weekly new product meeting, and face the scrutiny of Ruixing marketing and operation personnel – when raw coconut latte is still in the research and development stage, its marketing plan and operation plan have begun to be customized synchronously.
The menu management team will design the menu according to the relevant conclusions of the product analysis department, accurately display the position of different products on the app and applet side, and ensure that the jump interface is smooth when consumers order.
After making the products, the R & D team will hand over the products to the testing department for internal testing in different ranges, and then further promote them to the external testing of the city dimension.
A relevant person told 36 krypton that the most important test method of Ruixing at present is the weekly repurchase rate of new products.
Finally, the products that pass the test department will enter the product optimization department. Ruixing will run in with the SOP of existing stores in the operation of product formula to ensure that the employees of terminal stores can operate more conveniently and the stability of product taste is higher.
Through the above steps, the new products developed by Ruixing will enter the product pool. At this time, “raw coconut latte” and several other “relatives” products can be stored in the product library, waiting for a specific time node to be released.
Therefore, Ruixing will accumulate several new product formulas in one product development and launch hundreds of new products a year.
If the store can’t be opened, take out food should be tested first
With product capabilities, where and how to operate the stores in the next step is another problem to be solved by digitalization. From site selection to operation, digitalization is always the core for Ruixing store, which is the front desk of the factory.
Despite the spread of store closures, Ruixing coffee bucked the trend and opened 556 new stores in the first quarter of this year, a speed that has far exceeded that of most of its peers.
The financial report shows that by the end of the first quarter of 2022, the number of Ruixing coffee stores has increased to 6580, including 4675 self operated stores and 1905 associated stores.
Ruixing seems to have become the largest coffee chain brand in China. At least in terms of the number of stores, it has overtaken the old Starbucks, which has entered China for 23 years and has 5557 stores in China.
Number and growth rate of Ruixing stores from 2018 to 2021, source: fuel Finance
Guo Jinyi, chairman and CEO of Ruixing, once said that Ruixing’s scientific and technological capabilities cover the whole business chain, including business links from data-based store location, algorithm driven supply chain procurement, user marketing automation, and store equipment IOT management.
Taking the location of Tuodian as an example, before entering a new city, Ruixing will first consider the dimensions of the city, such as population density, GDP, education level, income level, urban development trend, urbanization process, and then decide whether to enter the city.
After determining the city, through the analysis of residential areas, CBD, core business districts, whether there are offices of top 500 enterprises, and tracking the trend of Starbucks, Ruixing will find three to four core areas of the city where mainstream people flow, and do media advertising in these places to track the exposure rate of offline advertising.
Ruixing doesn’t let customers find stores, but let stores find customers.
Before opening the store, Ruixing will build a “kitchen store”, that is, it will only display the store on the takeout platform, and at the same time, a large number of subsidies and coupons will be issued. Combined with internal and external data, the takeout heat map will be generated to confirm that the nearby people have the need to drink coffee and improve the site selection quality.
After 2020, in order to grasp the store data more accurately and reduce the closing rate, Ruixing has added an assessment index – if the traffic data shows that the store can sell more than 200 cups a day, it can open a store here.
After opening a store, verify other stores in the same way and gradually expand outward.
According to the self owned data of more than 6000 stores and more than 10000 stores that have been opened and closed in total, the accuracy of Ruixing location selection model has also been continuously improved.
At the beginning of 2021, Ruixing restarted its franchise business again. Using this big data and AI system, Ruixing can also evaluate and calculate the location submitted by franchisees in multiple data dimensions, so as to improve the effectiveness of the location of franchised stores.
The results show that in terms of the survival rate of new stores, the survival rate of Ruixing’s new stores after 12 months in 2019 accounted for only 63%, while in 2021, this index increased to 93%.
At the same time, the digital location model also effectively improves the franchise store’s revenue capacity.
“Intelligent location” allows Ruixing to replace “occupying pit crazy store opening” with “point effectiveness” after the adjustment of closing the store during the storm. With the continuous increase of the store base, it improves the blood circulation ability of the store.
The different store models of direct sales and franchisees can also flexibly cope with the different characteristics of different cities. Direct sales stores mainly focus on the first and second tier cities, while franchisees cover low tier cities. In the epidemic environment, the density and location of coverage take the lead, and the store matrix that constantly layout the sinking market allows ruixingde to withstand the impact of the epidemic to a certain extent.
Among Ruixing’s current Direct stores, about 48% of self operated stores are office stores and about 12% are university stores.
Guo Jinyi, chairman and CEO of Ruixing coffee, explained at the financial performance communication meeting, “these nearly closed scenes can basically maintain normal operations except for the most serious situations such as city closure.”
Digital reconstruction of store operation
Digitalization also supports Ruixing’s store operation efficiency.
“People” and “market” have always been inseparable in retail. Yang Fei, co-founder and chief growth officer of Ruixing coffee, said that Ruixing would conduct some user stratification research based on “field” rules.
For example, the touch form of online consumers is organically combined with the geographical information of stores.
Ruixing will recommend different coffee products and promotion forms to consumers according to the influence of temperature and weather in different cities on the same day. Cold coffee is recommended in places with higher temperature, and hot coffee is recommended in places with lower temperature.
On rainy days, when it is inconvenient for many users to go out, Ruixing found that many users like to buy coffee together, so they will invest more takeout configurations and more sharing vouchers, and at the same time, some delivery fees will be appropriately exempted.
After opening a store, the attributes and operation rules of the store as a “field” also depend on data. For stores in different scenarios such as office buildings and shopping malls, if the headquarters finds that the store is more in line with the consumption model of other scenarios through the attribution analysis of consumer data, it will adjust the operation strategy for the store.
These refined marketing actions are all automated in Ruixing’s digital system.
Returning to the physical store scenario, Ruixing’s most powerful differentiation lies in the degree of the Internet of things.
Quality is the core element of chain beverage brands. To ensure that every cup of coffee has the same taste and quality all over the country, we need to spend a lot of money to cultivate a large number of stable and experienced baristas.
The people who produce coffee are uncontrollable, but the machines that produce coffee are controllable.
Therefore, Ruixing chose to cooperate with Swiss coffee machine suppliers, build customized equipment according to Ruixing’s needs, and integrate its data into Ruixing’s entire digital system by adding IOT intelligent monitoring of abnormal automatic alarm systems for coffee machines, refrigerators and other equipment.
The background can remotely monitor the production, sales, maintenance and other operation status of the coffee machine, monitor whether there is a lack of beans, water shortage, whether the water storage tray is installed, whether the status of various sensors of the coffee machine is normal, and monitor the extraction intensity, flow rate, liquid weight, etc. of the machine;
At the same time, the system also provides sales records, beverage production records, equipment failure records, etc. to query according to conditions, so that the store manager can know in real time how many cups are made every day, cost, income, etc.
It can be observed from the production scene of Ruixing store that the clerk only needs to click the corresponding product on the screen to extract coffee according to the background order, and then add other ingredients according to the SOP. The production steps of coffee itself are completely entrusted to standardized technology.
The Internet of things is not only the automation of production, but also the remote monitoring and management of equipment in thousands of stores across the country. All this does not need the store staff to start by themselves.
In traditional stores, clerks need to manually count raw materials after closing every day, quickly count the sales and consumption of the day, and then make planned replenishment and orders according to the situation.
Ruixing gives this type of work that depends on experience and proficiency to the algorithm. The system can automatically predict the purchase quantity according to the daily data, export it quickly, and automatically recheck it, so as to help the raw material management more refined.
Compared with the way that other chain beverage brands calculate raw materials by weekly and monthly cycles, the high-frequency updated data can better support the supply efficiency of new products and reduce the learning difficulty of clerks.
In terms of food safety, the system will automatically alert and prompt scrapping when the material expires; Through the store video monitoring system, you can also check whether the store operation meets the standards.
The highly intelligent store management system enables Ruixing to adopt a more intensive and efficient rent and labor cost structure.
Richardo is a small self-supporting store and cooperates with office property to reduce store rent and other fixed costs.
In terms of manpower, in the past, traditional chain stores needed to be equipped with positions such as regional head, city head and store manager, while all Ruixing stores were under the unified management of the central system. Employees only needed to make coffee and drinks, and the labor cost at the store end could be greatly controlled. This is also the antecedent reason why Ruixing has been able to reduce store costs by recruiting a large number of part-time jobs since the epidemic.
For franchisees, such a fully standardized “hands off shopkeeper” model is the most cost-effective.
The franchisee’s app can see the overall data of the store. From arrival inventory to financial settlement, even if the franchisee doesn’t go to the store for a month, he can directly withdraw the income of the current month on the app. Ruixing’s secondary market investors believe that this is also one of the core reasons why Ruixing can expand rapidly in the sinking market.
The financial report shows that in the growth of Ruixing coffee, the contribution proportion of franchise stores continues to increase.
Among the 6580 stores at present, the number of franchise stores has increased to 1905. In the first quarter of 2022, franchise stores also contributed 550million yuan of revenue, an increase of 239.3% year-on-year, accounting for about a quarter of the total revenue of Ruixing coffee.
In the future, the proportion of new stores opened by Direct stores and franchise stores will also gradually tilt to franchise stores, forming a 3:7 pattern, with franchise as the main and direct sales as the auxiliary, and becoming a tob company.
epilogue
Ruixing of nirvana is becoming a brand-new enterprise.
In the C-end business, the app used by consumers has long been the Internet infrastructure, and the system of product research and development, stores and supply chain is Ruixing’s strong hand in breaking through.
In the early stage, Ruixing introduced the franchise model and empowered the franchise stores with a digital management system after seizing a good revenue position in the fast-growing incremental coffee market through direct stores. In the future, Ruixing’s business focus may change from C-end consumer business to b-end franchise business and consumer business.
At the performance communication meeting, Guo Jinyi, chairman and CEO of Ruixing coffee, said, “technological advantages are one of the most important advantages of Ruixing different from general traditional catering enterprises… Digital genes enable Ruixing to quickly respond to consumer demand, improve the efficiency of the supply chain and stores, drive research and development with technology, and strengthen quality control with technology.”
Ruixing overcame the epidemic in the two years after the financial scandal, achieved a year-on-year growth of nearly 90% in the most difficult first quarter of this year and made its first full profit, and set a new high in the number of stores in the case of physical shrinkage. Digital capability is one of the important reasons that cannot be ignored.
In the long run, after the digital infrastructure with heavy investment in the early stage is built, the marginal cost will decrease in the future, and the brand will be more competitive.
reference material
“Is Ruixing coffee a radical company after 18 months’ IPO?”- Finance and Economics
Ruixing coffee caowenbao: how to build an efficient Internet operation system? | entrepreneurship theory – Dazheng capital
Ruixing coffee Yang Fei: from Gu ailing to Yeyun latte, Ruixing’s growth methodology | entrepreneurship theory – Dazheng capital
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