Think deeply: why did Starbucks become a money printer?

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Starbucks has a ten-fold chance to make money from technological innovation in mobile payments. Good business model + replicability = high valuation premium. Today, we think more about the special features of Starbucks from the perspective of business model, which can also enlighten the research of our catering industry.

Starbucks is a money printing machine.

Let's start with a brief comparison between Starbucks and McDonald's, the world's two largest catering chains.

As of October 2016, Starbucks had 12711 self-operated coffee shops and 12374 affiliated coffee shops worldwide, generating net income of US $21.3 billion and net profit of US $2.8 billion in fiscal year 2016. Since there are external factors for net profit growth, we look at Starbucks growth through simpler revenue. The company's revenue grew from $13.2 billion in 2012 to $21.3 billion in four years. Let's take a look at the giant McDonald's, which has 5669 self-owned restaurants and 31230 franchised restaurants around the world, bringing the company $24.6 billion in revenue and $4.6 billion in net profit in 2016. McDonald's revenue has declined over the past few years, from 27.4 billion in 2014 to 24.6 billion in 2016.

Starbucks, which relies on 25085 coffee shops, is not much different from McDonald's, which has 36899 restaurants, while Starbucks currently has a market capitalization of $93.5 billion and McDonald's $125.3 billion.

If we feel intuitively, we can also find the power of Starbucks. Last year my good friend Larry. Ray "wrote an article: the second-level dog party Holy Land International Gold Costa closed down. In fact, Lu Jiazui closed not only the national gold Costa, but also Jinmao's Kopi Luwak.

Only Starbucks, which is opening more and more, seems to be the only coffee shop that can make money. So what does Starbucks rely on to become a money printer?

The core of catering business model: efficiency

I think the core of the catering business model is efficiency, the efficiency of turf efficiency and the efficiency of time. Let's talk about time efficiency first. Most of the time, I often find that restaurants that have been waiting in line on weekends have closed down in a few years. Later, an in-depth study found that many restaurants only have business on Friday evenings and weekends, and no one goes there at ordinary times. Well, from the time period of the week, the time efficiency of many restaurants is not high.

We found that most restaurants could not meet the needs of office workers and family and friends at the same time. Salad shops in office buildings, for example, often line up at noon to buy, but there is little business on the weekend that begins on Friday night. There are also many restaurants in big shopping malls, which are full on weekends, but there are usually few people. And many restaurants rely on fast turnaround rates to turn users around.

So how to fill up the time and increase the turnaround rate of the restaurant has become particularly important. We see that many restaurants offer afternoon tea packages to increase the worst flow period after lunch and before dinner. There are also some restaurants that rely on relatively high turnaround rates to improve their efficiency. The most typical is Haidilao hot pot, which can turn the stage four times a night on average, and you have to wait in line even if you go at 11:00.

Another efficiency is the efficiency of turf efficiency, that is, to achieve the maximum revenue with the smallest area. If the same revenue of 4 million yuan, through 30 square meters of revenue, it is far more efficient than 100 square meters of restaurants. For example, Zhou's Black Duck, which we recommended before, can still make an annual income of 30-4 million through small shops of about 10 square meters, which is the average level of KFC in China. And the recently popular happy tea. If the annual income can reach more than 10 million, this kind of turf efficiency is very high, which can lead to Xicha renting storefronts in places with higher rent and higher flow.

A few days ago, Zhang Lufang, a retail analyst at Tianfeng, estimated that according to the annual income of 27 million of the single store, the flat efficiency reached 270000 per square meter, and the cost could be recovered in 3-4 months. This efficiency is much higher than that of the stores in Laifu.

Starbucks: born with good business

In terms of product category, Starbucks coffee is a naturally good business, and of course it has something to do with the innovation of its founder Howard Schultz.

The earliest coffee was a cheap drink sold in McDonald's, Dunkin Donuts. Howard Schultz pioneered the concept of "third space", turning Starbucks coffee into a high-pressure drink by building a Starbucks physical store. Starbucks is very efficient both in terms of time efficiency and flat efficiency. The average price of a cup of coffee is between 25 and 30 yuan, which is equivalent to the price of a McDonald's set meal. But Starbucks stores are much smaller and more frequent than McDonald's. And Starbucks is basically full of time, no matter in the morning, noon, afternoon will be bought.

Although Starbucks stores have comfortable seats, they mainly take out. This is also one of the core models of many catering cattle stocks: Take Out. Only by increasing the take-out business can the efficiency of the restaurant be greatly improved.

History of those large market capitalization catering enterprises, on the one hand is a global chain, on the other hand has a strong Take Out attribute. These include the three major American hamburger companies McDonald's and Burger King,Wendy's, American pizza giant Pizza Hut, Domino's pizza, and Mexican chicken burrito company Chipotle's Mexican chicken burrito. At the same time, we saw the collapse of Costa Coffee downstairs last year, that is, the efficiency of the ping was too poor. Although there are a lot of people sitting in it most of the time, very few people Take Out. Larry Ray's article at that time even said that there were many "second-class dogs" like the author, who could drink some water in a bear market. Another closed Jinmao downstairs Kopi Luwak is also, every time there is almost no one to go, let alone take out. But the area of the store is much larger than Starbucks on the second floor of Jinmao, and the flat efficiency is far from that of the latter.

On the other hand, coffee itself is a good drink. Catering is very important is the frequency of consumption, if there is a high-frequency consumption attribute, even if we rely on the original consumer groups, we can maintain a good cash flow. Many people are addicted to coffee and drink one cup every day. Some things are seasonal, or can not be consumed too frequently. Such as crayfish, spicy hot pot and so on. Based on the frequency of coffee consumption, Starbucks has taken Loyalty Program to the extreme by increasing user stickiness through Starbucks cards and mobile payments.

In fact, in the past few years, many restaurants in the United States have made great efforts to cut into the mobile payment model. At its peak, Starbucks accounted for more than 90% of all payments in the United States. Panera Bread and Domino Pizza both get more accurate user data through mobile payments and solve the problem of users waiting. Because these companies' mobile payments are done in their proprietary APP, the data quality is higher. Unlike most of the domestic mobile payments are completed in Alipay and WeChat Pay.

The necessary conditions for becoming a giant: chaining, standardization, branding

In fact, chaining, standardization and branding are one. For any catering giant, if the product can not be standardized, there is no way to chain promotion.

We see many delicious restaurants with a strong craftsman spirit, but there is no way to standardize them. All rely on the craftsmanship of the master to pass down from generation to generation. Such as Japanese sushi restaurant, barbecue restaurant, some domestic snack bars and so on. At the same time, many ultra-high-end restaurants are not standardized and chained at all, focusing on serving minority groups as their business model. These can live well, but they will never become catering giants.

For example, Starbucks standardizes coffee and McDonald's standardizes hamburgers. Anywhere in the world, you drink coffee and eat hamburgers with the same taste. Today, more and more people around us attach importance to this standardized food and beverage. In the past, when we went on business trips to third-and fourth-tier cities, we often wanted to try local snacks. Later, it was found that eating McDonald's has the highest safety index, because many local snacks are also "eating father". Even today, when we go out to eat with our wife on weekends, we prefer to go to restaurants that have eaten countless times, because we have full expectations for the food and service inside.

Especially in China, the chain model will be a mainstream, and the time window is getting smaller and smaller. We saw the rise of a number of restaurant chains in the United States in the 1980s (Starbucks also rose at that time). Today, the barriers to these restaurant chains are still deep. After the decline in nominal GDP growth, it will be more and more difficult to build a restaurant chain in the future, and people's consumption and eating habits will not change as much as they did in the past 20 years. The chain built now will become the leader in the subdivision field in the future.

Finally, of course, the brand. Why do you think Starbucks tastes better than Costa? What's the difference between McDonald's hamburger and Burger King? Even what is the real difference between Coca-Cola and Pepsi?

The premium brought by the brand will be very important. Of course, a strong brand is based on excellent products, standardized and chained models, and a range of attentive customer service. With regard to Starbucks, we see that decaffeination has begun and the company will gradually transform from a coffee roaster to a healthy catering company.

Investment revelation: where is the next Starbucks?

China is entering the era of the rise of chain catering, flat effect, time efficiency, consumption frequency have become important factors to shape the future of Starbucks. Personally, I think milk tea is still a good business in China, the consumption frequency can be very high, the efficiency is very good, and the unit price is actually higher than that of many restaurants.

This is also why everyone is talking about tea, a little bit. And the milk tea industry has established a certain brand, we often see a little bit overcrowded, while the Coco milk tea next to it is empty. This is also one of the reasons why Xi Cha is valued at more than 1 billion yuan, and a little bit is not open to join at all.

In other aspects, Chinese fast food, noodle chains also have more room for growth, the problem is that the time period is difficult to smooth, basically depends on lunch and dinner time. Zhou's Black Duck's current market capitalization space, also has a lot of growth, turf efficiency and time period efficiency is very good, category SKU is less, easy to manage.

In the next five years, Chinese restaurant chains will emerge from many giants, just like the 1980s in the United States, laying the foundation for the next wave of consumption.