Image source @ Visual China
Wen 丨 砺石 Business Review, author 丨 Tian Shanshan
You sang our debut, this sentence is a good depiction of the financing of the coffee market in 2021.
The coffee market can be divided into two tracks, instant coffee and freshly ground coffee, and multiple brands in the two tracks have raised funds continuously in the first half of this year (including July), with at least 17 financings according to public reports. For example, in the instant coffee track, three and a half tons of quality instant coffee as the main product and the main online sales channel 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, while last year, three and a half meals just got sequoia Capital China Fund led by Fengrui Capital's B round of investment; another local boutique instant coffee brand Yongpu Coffee also got millions of financing.
The financing of the freshly ground coffee track is even more popular, such as the "fast coffee" scene, emphasizing convenience and high cost performance, china's local specialty coffee brand MANNER has raised 4 times and received hundreds of millions of dollars in financing; Canada's national coffee brand Tim Hortons China has received investment from Sequoia and Tencent in February; M Stand, a specialty coffee brand that focuses on creative coffee drinks and offline space experience, has raised 2 times in half a year, with an amount of more than 600 million yuan; another specialty coffee brand that will open more than 100 stores "Algebraics" got an exclusive strategic investment from Tencent... Even Luckin Coffee is "coming back to life", with its third-quarter earnings report showing that profitability is improving and it has also received new financing in April.
The coffee market is hot, but the most rapidly growing this year is MANNER and Tims China. At present, the two have the highest valuation and the fastest opening speed, and are regarded by the market as a new generation of coffee upstarts.
<h2>
First, the flowing coffee upstart, the iron Starbucks? not necessarily
</h2>
"Net red" specialty coffee brand MANNER has attracted attention this year, raising four times in six months, and receiving hundreds of millions of dollars in financing from Meituan and ByteDance in May and June, respectively. At present, it has opened more than 200 stores in 7 cities such as Shanghai, Beijing and Shenzhen, and the number of stores is expected to reach 400-500 by the end of 2021.
Tims China, backed by Tim Hortons, the world's second-largest coffee chain brand, although it only entered China in 2019, has opened 388 stores so far, ranking third after Starbucks and Luckin. Tims China claims to open 2,750 stores in China by 2026, and the rate of opening stores will reach one every 36 hours.
Although the momentum of the two is very strong, it is Starbucks that is still the first in the Chinese coffee market today.
Starbucks has been in China for 22 years, relying on a strong and complete global supply chain and a strong financial base, it has opened 5,100 stores. It has strong brand bargaining power, can easily win the golden position in the national urban business district, and only need to pay much lower than the industry level rent. This is starbucks's "moat", the more stores are opened, 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 that Starbucks has been firmly in the first place, although competitors have constantly appeared, such as foreign costa, man coffee, and domestic carving time, island coffee, etc., the only thing that has really threatened Starbucks is the "blindfolded" and "bloody listing" in the previous two years, and now it has lost its sharp edge.
In the past 22 years, the Chinese market has not yet emerged a coffee brand that can really challenge Starbucks, and the market pattern has always been "the new upstart of flowing coffee, the starbucks of iron".
Will today's coffee upstarts MANNER and Tims China break this pattern?
At a cursory level, this possibility exists.
The first is "good foundation". These two coffee upstart brands are based on the realization of store profitability, and then rapidly expand with the help of capital power. This "correct running posture" lays a "muscle" foundation for changing the market landscape.
The second is that the capital market is optimistic. At present, THE MANNER is valued at $2 billion, and the average single store valuation is as high as $13 million, which is 3 times the valuation of Starbucks's single store. Tims China has Tencent's strategic investment, and its strength should not be underestimated. Tims China is currently valued at approximately US$1.688 billion and plans to list on the NASDAQ in the fourth quarter of 2021 through SPAC (Special Purpose Acquisition Company) to secure additional funding for rapid expansion.
So how likely is it to break the traditional market pattern?
Thinking about this, we may wish to put aside the largest uncertainty variable of time and look at the deterministic variables: the core capabilities and development potential of MANNER and Tims China (subjective initiative), and the future growth space of the entire coffee market (macro background).
To this end, the following will analyze the two coffee brands from five dimensions: differentiation positioning, store location strategy, business model (including profitability), growth rhythm and major challenges that may be encountered in the future growth.
Second, MANNER: take the advantages of differentiation to the extreme
Differentiated positioning: Affordable specialty coffee
FOUNDED IN 2015, MANNER is positioned as an "affordable specialty coffee", taking the cost-effective route, and the concept is "making coffee a part of life".
A cup of American or latte in MANNER only costs 15-20 yuan, and if you bring your own cup, you can also reduce 5 yuan, which is equivalent to 10-15 yuan a cup of specialty coffee. The specialty coffee market with a cup of coffee at this price of 30-50 yuan is definitely an invincible "big killer". Compared with Starbucks, MANNER's American, latte-like coffee products are at least 50% cheaper and more delicious (specialty coffee is more picky about green coffee, more exquisite about roasting techniques, and the pursuit of freshness).
This allows MANNER to avoid fierce competition with other specialty coffee brands at the price of specialty coffee, and can also attract a wider user base with the label of "cheap and delicious coffee, strong coffee", who are accustomed to drinking coffee but do not know much about specialty coffee, and also want "cheap and delicious coffee", thus breaking through the niche circle that specialty coffee brands have always been.
It's hard to stick to "affordable specialty coffee." The purchase cost of green beans of specialty coffee is higher than that of commodity coffee, and the manufacturing cost is also higher, especially in order to pursue fresh and delicious quality, many specialty coffee brands mostly use the method of fresh roasting within 3-7 days. Therefore, there is a saying in the offline coffee market, "ten stores nine lose one flat", which means that 9 of the 10 coffee shops lose money, and the remaining stores can only maintain the balance of payments and do not lose money.
MANNER, on the other hand, has achieved a single-store profitability without high subsidies or online orders. Why? The reason is that it has built a minimalist business model.
Minimalist business model: 10-15 yuan of single products, 2 square meters of small shop
If offline chain coffee shops want to make a profit, on the one hand, they must continue to increase the number of cups per day (there are data showing that the daily cup output of 100-200 is expected to break even), on the other hand, they must try to control and reduce costs, especially the "burden" expenditure that does not bring any income such as the rent that accounts for the majority.
MANNER did both of these things right from the start.
First, MANNER insists on using high-quality coffee quality to attract and retain coffee consumers in order to increase the amount of cups produced. As a specialty coffee brand, high-quality coffee beans, flavor, roasting techniques and freshness are a must, otherwise it is not a specialty coffee.
Before founding MANNER, Han Yulong, founder of MANNER, worked as a coffee bean roaster for one of the leading brands of Shanghai specialty coffee roasting, Café Del Volcán, and mastered the high-level specialty coffee making process. The high quality of the coffee is the basis for MANNER's continuous breaking of the circle. Huang Junhao, the international referee of China's first COE coffee appraisal cup competition, spoke highly of MANNER, "There are only a few window stores in the Shanghai specialty coffee industry, and MANNER is the best coffee in it."
While maintaining the high quality of the coffee, MANNER features a popular coffee dish: a latte. For most coffee drinkers, compared with pure black coffee such as American and espresso, espresso with milk latte is more easily accepted, which is a high-frequency coffee item.
Other peer lattes are generally priced at more than 30 yuan, MANNER's latte "OriBai" has a very high cost performance, only 15 yuan a cup (in the case of its own cup), at least 50% cheaper than Starbucks latte products, or specialty coffee. Many people are aiming at this cup of 15 yuan to become a MANNER user. As a result, MANNER's average daily coffee sales soon exceeded 100 cups.
MANNER also has a careful machine in product design, and the cup type is small. Starbucks, Luckin Coffee, etc. use a medium cup capacity of 360ml, large cup capacity of 480ml, while MANNER's medium cup is only 240ml, and the large cup is 360ml. Some people have simply compared that the MOCHA sold for 25 yuan by MANNER is only 360ml, while the Mocha sold by Luckin for 19 yuan has 480ml. In this way, MANNER can also save a fortune on ingredients such as milk.
Today, MANNER can easily sell thousands of cups of coffee in its bustling business districts. The author has bought coffee many times at the MANNER store in Beijing's Wangfujing business district, when it was lunchtime on weekdays, many people were queuing up to buy coffee, and the call indicator showed that the store had sold nearly 1,000 cups of coffee.
MANNER has always insisted on not doing takeout delivery, and the purpose is also to maintain the quality of coffee. At present, this inconvenience has not affected the number of cups produced by MANNER's stores.
In terms of the cost structure of opening a store, MANNER minimizes the rent expenditure, and the store is a window store with an area of only 2 square meters. MANNER prefers to spend money on the "blade", such as core resources such as coffee bean roasting equipment, coffee machines and baristas. These are the key elements of continuously ensuring high-quality coffee, which in turn attracts more users and increases the number of cups produced.
On the one hand, through high-quality and low-cost products to do more cups, on the other hand, to control the cost of rent, so it is not surprising that MANNER can achieve a single store profit. According to Late Post, MANNER's net profit margin is over 10%. If you include rent, utilities, personnel costs and other expenses, the same capital investment, MANNER is actually more profitable than Starbucks.
However, IFMANNER's business model can run through, there is another very key point: choose the right place.
Site selection strategy: Start from 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, MANNER can achieve a single store profit, and there is a key choice: choose the right market environment.
Han Yulong, the founder of MANNER, opened an offline coffee shop in his hometown of Nantong for 8 years, but he could not make ends meet and eventually closed. He then came to Shanghai and founded MANNER.
Shanghai is the most mature and fastest growing coffee market in China, ranking first in the country in terms of coffee consumption scale, number of coffee stores, and coffee industry development.
According to the "Shanghai Coffee Consumption Index" report released by First Finance, the per capita coffee consumption in Shanghai is about 20 cups per year, the national per capita is only 4 cups, the total number of coffee shops in Shanghai exceeds 7,000, and the number of cafes per 10,000 people is 2.85, reaching the average level of london, New York, Tokyo and other global coffee consumption cities, and there are many specialty coffee stores. Among the business structure of Shanghai cafes, 55.88% of the cafes are specialty coffee or independent cafes. This shows that Shanghai has entered the third wave of the coffee industry era - the pursuit of specialty coffee, like winemaking with fine craftsmanship to make coffee.
Although the competition is fierce, the coffee market in Shanghai still has huge room for growth. Most of the specialty coffee stores have a price of 30-50 yuan, and there are very few specialty coffee brands with a price of less than 30 yuan.
Even after twenty years in Shanghai, Starbucks, which has many coffee stores and a huge brand appeal, still cannot meet people's demand for "cheap and delicious coffee". Starbucks represents the second wave of the coffee industry - espresso as the representative of the heavy roasted coffee products, and is a global coffee chain brand, relying on scale, standardization to win, can not meet the new generation of coffee consumers to pursue cost-effective, relatively niche fine craftsmanship to make fresh and high-quality specialty coffee.
In addition to choosing the right market, MANNER's store location strategy is also precise: open near Starbucks.
There are Starbucks stores, indicating that people in the neighborhood have a need for coffee. Starbucks stores are often overcrowded, and many people order a cup of coffee and stay in the store for most of the day, resulting in some customers who want to drink coffee can only choose to take it out, or leave to go to other coffee shops. At this time, MANNER, which chooses to open a store near Starbucks, can easily obtain the coffee consumer groups that Starbucks "overflows" and cannot be satisfied in time, and win word of mouth through "cheap and delicious specialty coffee" and bring user conversion.
In this way, MANNER with a 2-square-meter window store model, the main price of 10-15 yuan of specialty coffee, has become the "king of cost performance" in Shanghai's mature coffee market.
Growth rhythm: After steady and steady, then borrow capital to seek rapid growth
When offline coffee stores reach a certain number, they have scale effects and network effects. Some insiders commented that the number of key stores to open offline coffee shops in China has 3 stages:
• From 1 store to 10 stores, it is to grasp the cost and quality control
• From 10 stores to 100 stores, it is in the size and model of running through
• More than 100 stores, are in the card their own ecological niche, and play with the capital
Since its establishment, MANNER has gone through 3 similar stages.
In the first three years of entrepreneurship, MANNER was steady and steady, and one store was profitable before opening another store. In 2018, when receiving a financing of 80 million yuan from Today Capital, MANNER had only 8 window stores in Shanghai, which was in the early stages of controlling quality and cost. Even with an investment of 80 million yuan, MANNER only added 5 new stores at the end of that year, cautiously controlled the speed of opening stores, honestly ran through the business model first, and strived for each store to be profitable.
MANNER's real acceleration of store openings will be from the second half of 2020 to the first half of 2021. After the domestic new crown epidemic was controlled, new consumer markets such as new milk tea were sought after by the capital market, and the coffee track that also belonged to the new consumer market was also warmly welcomed by capital.
From the end of 2020 to the first half of 2021, MANNER began to go out of Shanghai and expand to first- and second-tier cities across the country, and there are currently more than 200 stores nationwide. The MANNER business model has been verified in first- and second-tier cities, and capital has also entered the market. MANNER also needs to use capital to accelerate the construction of its own ecological niche in the market, accelerate the opening of stores, and is expected to increase its storefronts to 400-500 by the end of 2021.
MANNER also has a layout of online channels, officially settled in Tmall in August 2020, mainly selling specialty coffee beans, ear-hanging coffee, coffee maker and brand peripheral products. In terms of products, MANNER also launched a whole industry chain product including portable coffee bags, fine green beans, oat milk, peripheral products and other products in the "weareMANNER flagship store" Tmall store and the "MANNER coffee factory" Taobao store.
If all goes well, MANNER will most likely be China's local specialty coffee brand No.1, which is bound to have an impact on Starbucks, especially for Starbucks' specialty coffee store, Starbucks Reserve. After all, for most Chinese consumers who are still "new to coffee", cost performance is an invincible "big killer".
Similarly, the cost performance is also the "big killer" of Tims China's rapid market development.
Tims China: Between Starbucks and specialty coffee, build an "affordable Starbucks"
Tim Hortons is a Canadian coffee chain brand (hereinafter referred to as Tims), founded in 1964, is the world's second largest coffee chain brand after Starbucks, with more than 5,000 stores worldwide, but 80% of the stores are in Canada, known as the "North American Legendary Coffee Brand". Tims' positioning is an affordable, easy-to-buy coffee.
Tim Hortons is part of Restaurant Brands International Limited (RBI), which also owns two brands, Burger King and Popeyes. In 2019, Tim Hortons officially entered China, opening its first store in Shanghai. Tims China is a joint venture between RBI and Cartesian Capital Group.
Differentiated positioning: a coffee brand that is 50% cheaper than Starbucks and a younger generation
From the perspective of coffee pricing, Tims China's coffee pricing is between Starbucks and specialty coffee brands, mostly in the range of 15-30 yuan, about 50% cheaper than Starbucks, more like a "cheap version of Starbucks". This pricing anchors the current mainstream coffee consumer base, which is also starbucks' core user base, but Tims China is 50% cheaper than Starbucks and can avoid the "frontal hard shoulder" with Starbucks.
In terms of store style, because Tims China takes the "coffee + dessert + light food" route, the products mainly include mixed coffee and espresso-based hot and cold specialty drinks, as well as fresh baked goods such as donuts and grilled sandwiches, so compared to Starbucks' "third space" scene concept, Tims China creates a "relaxed party" atmosphere. Warmth and ease 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, so Tims China is more proactive in catering to the preferences of the young generation in China, with the help of a variety of scenes to create the brand's young attributes, such as creating an "e-sports" theme store, cooperating with Bilibili to "full-time master" theme café, and co-branding environmental protection theme stores with Hungry Mo, etc., with different theme stores as the contact points for linking the young generation of consumer groups.
Site selection strategy: Around Starbucks, quickly attack new first-tier cities
Tims China's store location strategy is the same as MANNER, the stores in first- and second-tier cities are near Starbucks stores, attracting Starbucks users, especially the coffee consumers that Starbucks stores cannot meet.
I've been to several Tims stores in Beijing, most of which are near Starbucks stores. Because of cheaper coffee, donuts and light food, it has attracted many Starbucks customers. The author also found a detail that the overall tone of the Tims store is softer, brighter, more vibrant than the Starbucks store, giving people a warmer feeling, for customers who just want to find a café for a cup of coffee, or simply talk about things, Tims store may be a more suitable choice.
By June 2021, Tims coffee stores have been located in 12 cities. From the overall layout point of view, Tims China's stores present a trend of "taking root in Shanghai and spreading the whole country", which is the conventional way for foreign coffee brands to open stores in China. However, Tims China is also targeting new first- and second-tier cities with low coffee shop density, such as Dalian, Zhengzhou, Fuzhou, Ningbo and other places, through dislocation competition, to improve the efficiency of store expansion and avoid head-on competition with industry rivals such as Starbucks.
At present, Tims China has 388 stores in China, including flagship stores, classic stores and Tims Go (mainly for delivery) stores, the number of stores ranks behind Starbucks and Luckin, but more than 4,000 fewer than Luckin.
However, this pattern will certainly change in the future, because Tims China is developing very fast.
Growth rhythm: After entering China for 2 years, it plans to go public, and the speed of opening stores is comparable to that of Luckin in that year
Tims entered the Chinese market in 2019, at the stage of fierce competition in China's coffee industry, important offline coffee brands are rapidly expanding stores, especially Luckin Coffee, which has opened more than 4,000 stores in a year, "sword pointing" starbucks.
In this market context, Tims, as a newcomer to the market but an ambitious newbie, must invest heavily to keep up with the competition. Therefore, tims said at the beginning of his entry into China that he would open 1500 stores in China in 10 years or less. In May 2020, Tims China, which has opened nearly 50 stores, received an exclusive 100 million yuan strategic investment from Tencent. In February 2021, Tims China received the second round of financing, led by Sequoia Capital China Fund, increased by Tencent, and followed by Zhong Ding Capital.
This year Tims set up a bigger Flag: building "premier" coffee shops and roasteries in China, and a profitable chain network of more than 2,750 stores by 2026. Tims China CEO Lu Yongchen said that this year's store opening speed will reach 1 store every 36 hours.
To achieve its goal of 2750 stores in 5 years, Tims needs more capital. Tims China announced on Aug. 16 that it will list on the NASDAQ through SPAC, valuing its China operations at approximately $1.688 billion, with transactions expected to close in the fourth quarter of this year.
5 years to open 2750 stores, 2 years to enter China will be listed, this "wild running" style is inevitably not reminiscent of Luckin coffee.
But Tims China is not Luckin.
Business model: focus on digital operation, the store has been profitable
Unlike Luckin Coffee's "loss run" in 2018 and 2019, Tims China said its expansion was "expansion on a profitable basis."
In November 2020, Tims China CEO Lu Yongchen said that Tims Coffee has achieved overall profitability in the stores it has opened. At that time, tims China had nearly 2 million members, more than 80% of the sales were from members, the monthly repurchase rate was 40%, and the proportion of offline and online was closer to 5:5 from the original 8:2 or 7:3.
Compared with Luckin's previous crazy currency and coupons to pull new growth, Tims China pays more attention to refined and data-based operations to improve the repurchase rate and obtain profits.
"From startups to Starbucks, a lot of people see opportunities [in the Chinese coffee market]." Lu Yongchen, CEO of Tims China, said: "I think our key comparative advantage is digitalization. ”
This has to do with Tims China's financing background and timing of expansion.
After accepting Tencent's strategic investment in May 2020, Tims began to explore digital innovation in depth with the help of the WeChat ecosystem. With the help of Tencent's online resources, digitalization and smart retail capabilities, through applications such as Mini Programs, it is more convenient for customers to place orders to take orders, and at the same time accurately collect consumption data. In addition, Tims carries out refined operations, including private domain operations, by opening up offline and online links. For example, stores will invite regular customers to join the enterprise WeChat group through various channels, and regularly promote relevant new products, offers or activities according to the characteristics of the community to complete the construction of user community links. Tims Coffee's operation team can also see the consumer's conversion path, consumption preferences and other attributes, and through the consumption behavior data in the operation, targeted push different coupons to improve the user's repurchase rate.
Peter Yu, chairman of Tims China, said in August that in the first quarter of 2021, Tims China achieved more than 40% growth in same-store sales; at the store level, the EBITDA (EBITDA before tax, depreciation and amortization, which is widely used to calculate the company's operating results) for each month over the past 15 months is positive. "We plan to grow sales to more than 7 billion yuan by 2026 and take advantage of network effects, economies of scale and synergies to expand our profit margins to more than 19 percent in the same year," he said. ”
Predicting 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?
2-MANNER and Tims China are likely to break this pattern?
On the first question, the author boldly makes a prejudgment, leaving time to test:
The existing pattern will definitely be broken.
The climax of the world's third wave of coffee specialty coffee will be in China. China's coffee market will not be "one big", one brand "eats meat", other brands "drink porridge" pattern, more likely to be "a hundred flowers blooming" and "a hundred schools of thought".
This prejudgment is based on the following two judgments:
First, China's coffee market is in an incremental market with great potential, strong demand and diversification.
The "2021 Youth Coffee Life Consumption Trend Insight" released by the CBNData Data Center (CBNData) shows that the scale of domestic coffee consumption has expanded year by year, and coffee has become a just demand for 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 approached 70%, which is almost equivalent to that of tea drinks.
For people in first- and second-tier cities who have developed a daily coffee drinking, the number of coffee drinks per year can reach 300 cups, gradually approaching the mature coffee market standard. Coffee has also gradually changed from Starbucks' advertised "social currency" to "everyday drink". The coffee needs of the new generation of young people are diverse, the pursuit of better quality, more convenient, cost-effective coffee, consumption scenarios are more diverse, they want to drink delicious coffee at home, in the office and even in travel.
Judging from the amount of coffee per capita, China's growth space is huge. The average person in Finland is 1200 cups per person per year, Switzerland 800 cups, and the United States and Canada are about 300-400 cups. Considering factors such as food culture and consumption stage, we do not use the per capita coffee consumption of European and American countries as a benchmark, but choose South Korea and Japan, which are also East Asia, to compare. Japan and South Korea are 180 cups per capita per year, while China's northern, Shanghai and Guangzhou regions are 15 cups per capita, and the annual per capita coffee consumption in the country is only 6 cups. Therefore, China's coffee consumption market still has a lot of room for growth.
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 most critical part of the coffee industry, "roasting", is that there are more and more roasting factories of different sizes across China. And now people buy freshly roasted coffee beans within 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 yunnan specialty coffee beans are not inferior to coffee beans in Brazil, Colombia and other large coffee-producing regions.
According to the London International Coffee Organisation, the average annual growth rate of coffee consumption in China is 15%, which is much higher than the world's 2% growth rate. By 2025, the size of China's coffee consumption market is expected to reach 1 trillion.
Under the background of strong demand and the gradual improvement of the industrial chain, the Chinese market has given birth to a large number of local specialty coffee, chain coffee brands, quality instant coffee and other vertical track coffee new brands in recent years, instant, freshly ground, ready-to-drink, ear-hanging and other categories have been brought to fire, and some more convenient and innovative coffee products such as instant freeze-dried powder have emerged. The variety of coffee products, the abundance of marketing methods, and the rapid growth rate are unmatched by no other country in the world. So, MANNER and Tims China are in time.
Based on the above, the author boldly predicts that the climax of the world's third wave of coffee specialty 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 tapped. Even Starbucks, which is firmly at number one, needs to work hard to cultivate this part of the market.
People in cities below the third tier have not yet formed the daily habit of drinking coffee, and are more accustomed to drinking tea, milk tea or tea products. When people face the new category of coffee, cost-effective is definitely the first thought, price and delicious (bitter or not bitter) is more likely to drive consumer behavior, as for the quality, which type of specialty coffee and other "exquisite" level of thinking, is not the primary problem.
When brands such as Starbucks, Luckin Coffee, MANNER and Tims China Coffee entered the sinking market, they faced competitors such as new consumer brands such as milk tea such as Xicha and Tea Yanyue, as well as coffee brands derived from convenience stores such as McDonald's, KFC, Convenience Bee, 711, and even Sinopec's convenience stores. Because the price of convenience store coffee is lower, the store network is strong, which can form a strong network effect and scale effect.
Developing the coffee markets in these cities will require time, continuous healthy cash flow, and differentiated products and services to meet the unique needs of users in these markets.
Although a brand like Starbucks has the first two advantages, it does not mean that it can have a third advantage, which is the breakthrough point of some new coffee brands. Therefore, the pattern of "iron Starbucks, flowing coffee upstart" will definitely be broken, it is only a matter of time.
The current slowdown in Starbucks may be a testament to that. Starbucks' fiscal third quarter 2021 financial report shows that in the Chinese market, Starbucks showed a slowdown in growth: revenue of about $910 million, an increase of about 45% year-on-year, the average customer consumption unit price fell by about 9% year-on-year; same-store sales, although up about 19% year-on-year, were not as good as expected.
As for the second question, MANNER and Tims China, will it be the "young David" who defeated the "giant Goliath"?
This largely depends on whether the two can play their own differentiated advantages to the extreme, use their own advantages to counter Starbucks' disadvantages, and use "asymmetrical structure" to seek growth.
Here, I borrow the concept of "asymmetrical structure" in the book "Growth Structure" to make a superficial analysis.
The so-called asymmetrical structure refers to the industry novice challenger who is in the differentiation but does not avoid the industry leader, looks for the weak point in the competitive advantage of the competitor, makes it difficult for the opponent to fight back, and achieves overtaking growth in the corner of a specific market segment.
The business models of MANNER and Tims China are both in the markets of first- and second-tier cities, anchoring Starbucks to attract passenger flow and gain growth through differentiated positioning and cost-effective products. The common advantages of the two are: cost-effective products and widely loved by a new generation of young consumers, which is precisely what Starbucks cannot quickly adjust and change because of its brand positioning.
In the rapid expansion, whether MANNER and Tims China can always adhere to their own differentiated advantages to break the "iron Starbucks" pattern depends on whether they can withstand the following two challenges:
• In the market of first- and second-tier cities, can MANNER and Tims China insist on balancing key factors such as quality control, cost-effectiveness and profitability in the large-scale expansion of stores, so that with the more stores, the more brand influence and bargaining power can be formed;
• In the market of third-tier cities and below, can we establish alliance cooperation with channels (such as gas stations or convenience stores) that have store networks but lack good products through cooperation, and quickly open and seize the market first. Or, whether it is possible to use capital power to open stores quickly at low costs, form a strong scale effect, and maintain the profitability of stores.
Overall, the coffee track is a track to make friends with time, people's consumption habits need to be formed, and good products and brands are needed to be "domesticated". At present, from the perspective of the current development trend, MANNER and Tims China are aware of one point: listing does not represent anything, rapid store opening does not represent anything, whether it can play the differentiated advantages to the extreme, to achieve sustained profitability, live longer and better, is the key to the matter.
Resources:
1. 2021 Youth Coffee Consumption Insights: Nearly 60% of white-collar workers drink 3 cups a week, and Shanghai has become the capital of coffee | CBNData report
2. "Coffee Aroma" under the Epidemic Situation — 2020 Coffee Consumption Market Insight Report
3. "Who Stole Starbucks' Business", by Wang Hui, Source: Brand Observer
4. New coffee forces, encircling and suppressing Starbucks
5. Coffee New Brand Roll, Starbucks or YYDS?
6. When China's 300 billion coffee market breaks out, how can specialty coffee come out of the circle?
7. THE PROFIT OF MANNER COFFEE "CAREFUL MACHINE" Public account "Future Education APP", author: Zhao Xiaomi
8. MANNER coffee: 300 meters near Starbucks, 50% low price, do not do Luckin to win
9. Achieve a valuation of 10 billion yuan in 5 years: in-depth analysis of the national market layout of MANNER coffee
10. Coffee chain Tims China welcomes a new CFO
11. Ready to go public after 2 years of entering China, Tims Coffee will be the "premier" coffee shop in China
12. Interview with TIMS Coffee China CEO: More than 200 stores opened in 2 years, how does the brand overtake in a corner?
13. 2 years 200 stores, how can the late Tims coffee run wild? 丨 Store password