The competition in the coffee track continues to intensify.
This article was originally published by Red Meal Network (ID: hongcan18), author: Jian Yuhao, editor: Jing Xue.
The battle for the scale of the coffee track is intensifying.
Recently, Luckin Coffee officially announced that the number of brand stores has exceeded 20,000. According to the brand's official official account, Luckin's 20,000th store is located in Zhongguancun No. 5 Shopping Plaza, and the store is opened in the form of a flagship store. And Luckin has also become the first coffee brand in China to unlock 20,000 stores.
At the same time, Starbucks China and Cudi Coffee are also playing catch-up. According to the latest statistics of Red Meal Big Data, up to now, the number of stores in both Cudi and Starbucks China has exceeded 5,000.
Li Yingbo, chief operating officer of Cudi Coffee, said in an interview in June this year that Cudi is moving towards the goal of tens of thousands of stores, and is expected to reach the goal of 20,000 stores worldwide by 2025. Starbucks China, on the other hand, has begun to attack the sinking market, and the total number of stores is expected to reach 9,000 by 2025.
An invisible war has begun.
The battle for the point began,
Shop-in-shops and special spots are becoming sought-after
More and more coffee brands are expanding their store networks by opening shop-in-shops and special locations.
Luckin has opened up the mode of directional point joining. To put it simply, this model hopes to use the advantages of franchisees to allow Luckin to open stores in special scenes such as office lobbies, schools, hospitals, transportation hubs, and scenic spots;
Tims has successively cooperated with KA customers such as Sinopec EasyJet, 21st Century Real Estate and BESTORE to launch "Express Fusion Store", trying to use the resources of partners to open stores in more places;
Cudi has created a "1 square meter" convenient store type. It is understood that the 1-square-meter store has greatly reduced the area of the coffee counter, and the smallest counter is only 1.5 meters * 0.75 meters, which is just enough to put down the coffee machine, drain machine and water purification system. Cudi also revealed that these stores are mainly opened in convenience stores, chain restaurants and hotels, and operate in the form of "shop-in-shop".
△ Image source: Cudi Coffee's official Weibo
The reason why coffee brands have changed their store opening methods and point layouts is not unrelated to the fierce competition in the entire industry.
In 2023, various coffee brands are working hard to open stores, and official brand data shows that in 2023, Luckin will open 8,000+ new stores, Cudi will open 6,000+ new stores, and Starbucks will add 800+ stores.
At the same time, coffee brands are no longer content to open their stores in big cities. Starbucks, Luckin, and Tims Tianhao Coffee have all set their sights on the sinking market, going head-to-head with a number of independent coffee shops in the county.
With a comprehensive layout, market competition continues to intensify, high-quality points in the market have become more and more scarce, and there are fewer and fewer regular stores that brands can open. The collective slowdown in the opening of coffee brands this year is a good proof of this.
According to the statistics of One View Business, 20 chain coffee brands opened 884 new stores in June, a decrease of 43.3% year-on-year in June 2023 and a decrease of 11.07% month-on-month in May 2024, with a total of 42,820 stores. In the previous months, the number of store openings also decreased compared to last year. Brands such as Luckin and Cudi are no exception.
In addition, brands such as Pacific Coffee and Lavasa Coffee did not open new stores in March and April this year; Although several brands such as Tims Tianhao Coffee and COSTA COFFEE have been opening new stores, the stock of stores has not risen but declined.
It is worth noting that when the points that can be opened are becoming more and more scarce, the competition between brands is becoming more and more fierce, coupled with the continuous expansion of Luckin, Cudi, Starbucks China and other heads, the living space of small and medium-sized brands, single stores and small stores will be further squeezed.
The price war continues to escalate, and it is becoming more and more difficult to make money
While accelerating the rush to grab points, the price war of coffee brands is also intensifying.
In April this year, Li Yingbo, chief operating officer of Cudi Coffee, publicly stated that Cudi hopes to continue the 9.9 yuan strategy for another three years. On June 6th, Lucky Coffee launched the "66 Lucky Day" - 6 pieces of coffee in the whole field, and the whole drink in the store except the lucky ice series was capped at 6.6 yuan; at the end of June, KFC's brand "Kenyue Coffee" launched a freshly ground coffee for 9.9 yuan, and even launched a coffee monthly card of 8.8 yuan/30 days in some stores......
△ Image source: Screenshot of Kenyatt's coffee mini program
Starbucks, which once claimed that it had no intention of fighting a price war, in the first half of the year, by launching secondary cards and issuing coupons, the average price of a cup of coffee with an original price of more than 30 yuan dropped to about 20 yuan. After stacking coupons and membership discounts, you can have a glass of Starbucks for as little as 9.9 yuan. Starbucks China's financial report for the first fiscal quarter of 2024 also mentioned that the average average order value of Chinese stores in the first quarter decreased by 9% year-on-year.
In addition, some specialty coffees have also begun to bow to the price war. Since the beginning of this year, Seesaw has successively put up coffee tasting coupons of 6.9 yuan to 9.9 yuan on the takeaway platform, while Manner has issued full discount coupons in the live broadcast room, and a cup of Manner of about 17 yuan can be further reduced to about 10 yuan.
From 20 yuan, to 9.9 yuan, and then to 6.6 yuan now, behind the continuous lowering of the posture of brands, it is more about exchanging price for volume.
Luckin mentioned in the second quarter of 2023 that the "9.9 yuan thanksgiving feedback activity" has further accelerated user growth. The number of monthly trading customers of Luckin reached more than 40 million in the fiscal quarter, which was more than double the number of the same period in previous years. But this may still not be enough to compensate for the impact of the price war on its profits.
Luckin's financial report for the first quarter of 2024 shows that its revenue in the first quarter was 6.28 billion yuan, a year-on-year increase of 41.5%, but it had a net loss of 83.2 million yuan, compared with a net profit of 564 million yuan in the same period last year. Same-store sales at self-operated stores declined, down 20.3% during the period. Starbucks disclosed its results for the second fiscal quarter of 2024 (i.e., January 1 to March 31, 2024), showing that Starbucks China's revenue in the second fiscal quarter fell by 8% year-on-year, and same-store sales plummeted by 11% year-on-year, which was lower than market expectations overall.
△ Image source: Starbucks China's official Weibo
Although no one in the earnings report explicitly pointed out that the decline in revenue was due to the price war, some of the brand's actions have betrayed their true ideas. Otherwise, Luckin's 9.9 yuan series of activities will not "shrink", and Li Yingbo, chief operating officer of Cudi Coffee, will not say ambiguously: "Cudi may appropriately extend the 9.9 strategy for three years, but it may also end early." ”
The knockout round is white-hot, and a number of stores have fallen
Under the pressure of the price war and the head of the big chains, the knockout game of the coffee track has already begun. In the first half of the year, a number of coffee brands have collapsed, and among them, most of them are fruit coffee specialty stores.
The coffee brand Kung Fu Coffee · China Coffee (hereinafter referred to as Kung Fu Coffee) Shenzhen Huangting Plaza Store has ceased business on June 30. Judging from the operating hours, the store only opened for about half a year before closing.
It is understood that the brand is actually a new project incubated by the fruit coffee brand "should not have been". And "it shouldn't have been" has not been going well this year.
At the end of February, the self-proclaimed co-founder of "Shouldn't Have Been" posted a video saying that "it shouldn't have been" closed a large number of stores, and the number of stores fell from 725 stores at its peak to more than 300 stores, a sharp drop of nearly 6%.
△ Image source: Photo by Red Meal Network
Founded in 2022, the new fresh fruit coffee brand "Monster Sleepy · Coffee" has opened 9 stores in Shenzhen, Guizhou and other places in about half a year. At the time, its founders also said they planned to open 200 stores in 2023. But today, only five of the brand's stores in Shenzhen are still open.
The main fruit coffee "Coffee Can't Stop" has opened 4 stores in Guangzhou and Foshan, and all of them have been closed this year. Ji Xu Fresh Fruit Coffee once opened more than 12 stores in Xi'an, but now only one store is shown on Dianping.
It's not just these fruit coffee shops that have fallen, more small cafes are surviving in the cracks, and the day is precarious.
This is the truest side of the industry at the moment.
Cover image source: Picture Worm Creative.