The reshuffle of China's coffee shop industry is accelerating, and the market shock is far from over.

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The shock intensified, the reshuffle accelerated, and even the "imitated" Starbucks returned to the same starting line as local cafe entrepreneurs.

Coffee shop start-up prime crisis

After years of being bullish, China's coffee shop business seems to have fallen short overnight.

Statistics are rampant in the diving phase of the roller coaster: the total number of cafes in China once exceeded the 100000 + mark at the beginning of 2016, according to "Meituan-Dianping" and coffee industry media "Ka Men". However, the good times did not last long, and there was a tide of shop closures in the second half of the year, with a total of 14000 stores closed for the whole year.

After entering 2017, this situation has not been improved: the parent companies of coffee on both sides of the strait are in urgent need of medical treatment and have started the beauty industry; Korean coffee brands accompany you and the founder of Hollis is constantly losing ground in the Chinese market, and so on. Embarked on the road of suicide.

As an imported product, cafes have never encountered such an unbalanced and rapidly iterative market ecology.

Some of the three forces of Chinese brands, Korean brands, and European and American brands have been suppressed by giants and become small and scattered; some aim at the rise of leisure catering and expand lightning, only to encounter internal and external attacks and stall to death; and some are complacent. Shouted out the slogan of 5000 stores, but hidden behind the crisis of being abandoned by consumers.

All these upheavals make people wonder, as the giants grow old, can coffee shop entrepreneurs take up a new gap? Can new species grow by expanding market segments? Even, besides feelings, is there any chance for this business in China?

Scene +

It is also Western-style food. In the field of fast food, the native Dexter already has enough strength to challenge KFC and McDonald's, while in the coffee shop industry, where China's Starbucks and COSTA are still unknown.

The lack of coffee culture is considered to be the crux of the problem. Starbucks has become popular not because of its product success, but because it has accurately created a "third space" for Chinese white-collar workers outside their offices and homes. Such being the case, there is no need to worry about how to educate consumers. Scene innovation may be the key to doing this business well in China.

On July 17, 2017, Hanbang Hi-Tech, a manufacturer of intelligent security equipment, held a new product launch at the 3W Cafe in Zhongguancun, Beijing.

Even in this era of press conferences, it is surprising that a company has chosen to hold a press conference in a cafe, not to mention that Hanbang Hi-Tech is not a small company, but an A-share listed company.

However, for 3W, undertaking all kinds of meetings has long been familiar with it, and it is one of its important ways to make profits.

For a long time, 3W caffeine has investors such as Xu Xiaoping and Shen Nanpeng among its shareholders, and has also participated in the construction of incubators and equity investments, which is considered to be the representative of start-up cafes.

But founder Xu has never been so positioned. He believes that in addition to Beijing, Shenzhen, other cities do not have a strong entrepreneurial atmosphere, emphasizing the entrepreneurial theme will only limit its outward replication. In fact, most of the start-up cafes all over the country are losing money.

Therefore, the positioning of 3W is the theme of the Internet, and the scene is recreated based on the needs of Internet people. The specific approach is that behind the cafe is actually a media company that undertakes product conferences, industry training and community activities of various pan-Internet enterprises in the 3W physical space.

Compared with the entrepreneurial theme, the new scenario covers a wider range of consumers, meets their rigid needs, and brings traffic to 3W. This is why 3W, as a cafe, can make a profit by itself.

In fact, from the perspective of brand competition, there is no monopoly in the domestic coffee shop market. Even though Starbucks currently has 2800 stores, its market share is only 3.3 per cent.

Therefore, instead of becoming the next Starbucks, it is better to recreate a scene like 3W, or even give up the possibility of large-scale replication and innovate in a more subdivided scene, the Nuggets long tail market. For example, based on existing resources or customer base, focus on vertical scenes of the coffee shop brand HOODOGCAFE, Sunflower House and so on.

Nowadays, more and more petty-bourgeois young people are keen on keeping pets, which has given rise to social needs. And this kind of people have a great degree of overlap with coffee consumers.

Therefore, aiming at this kind of people, HOODOGCAFE in Shanghai uses the founder's own French bulldog as its spokesman, and through Internet marketing, it has gathered a large number of dog lovers to come to the store to spend money with their pets.

As a result, HOODOGCAFE has become a well-known gathering platform for Shanghai pet fans, sharing pet experiences and enjoying coffee in this relaxing scene, far more than basking in the sun and rain in squares and parks. Therefore, even if the price per customer is as high as 70 or 80 yuan, HOODOGCAFE business is still booming.

On the other hand, the Sunflower House Cafe in Xiamen has designed a scene of a buyer's shop based on its location advantage.

Sunflower House is located in Xiamen University Art District, surrounded by many university students, teachers and artists stationed. There is no shortage of cafes here with a strong artistic flavor, but the homogenization is serious. On the other hand, Sunflower House takes a different approach and locates itself in a coffee shop with a version of the buyer's shop.

Different from the social scenes of other cafes, Sunflower House is filled with groceries and designer works bought by shopkeepers from all over the world, providing consumers with the experience of drinking coffee and Taobao at the same time. At present, Sunflower House has not only made a profit, but also become a business card for Xiamen University Art District to attract foreign tourists.

The unique scene can form the brand distinction immediately, which is the most realistic choice for small and medium-sized entrepreneurs. However, coffee + scene is not a panacea, good use can bring passenger flow, not good use will consume too much energy. The premise is that the scene should serve the coffee, otherwise the allocation of resources will become chaotic and difficult to control.

Slow business can't get up fast.

On July 26, 2017, a news that cast a shadow over the coffee industry came from South Korea when Kang Hun, a representative of South Korea's KH company known as the "king of coffee", committed suicide.

The curtain of Jiang Xun's life is slowly coming down, and the famous chain brand "Hollis", "Coffee with you" and "MangoSix", which he built, has long since disappeared from the public opinion field since it fell into the "store closure crisis" in China around 2015.

Life for other Korean coffee chains in China is also difficult. ZooCoffee has been completely taken over by Chinese investors, while the speed of coffee shop closure in recent years is about to catch up with the pace of opening stores.

For China's ambitious entrepreneurs, the loneliness of Korean cafes is a cause for concern. This is a typical misvaluation of the market, blind expansion led to failure.

If you have ever visited a Korean cafe, you will find that it is a completely different space from Starbucks. They often 500 square meters, multi-cloth art, leather furniture, some still have floor-to-ceiling windows, plush toys, the atmosphere is young, leisure, warm. Waffles and other foods are also famous for their delicacy, and coffee is mainly freshly ground.

Xin Zixiang, founder of Man Coffee, once said that unlike Starbucks to encourage takeout, Korean Coffee wants customers to stay in the store, and they are bound to "call friends" and bring more consumers. Their target consumers are couples, friends or families who get together and chat.

However, a realistic problem is that Korean coffee shops have entered first-tier cities relatively late, urban resources have been preempted by Starbucks, and high rents have a small range of options for the demand for large space. rental costs in urban areas will also squeeze profits too much.

Therefore, they have to target the suburbs of first-tier cities and the markets of second-and third-tier cities. Statistics show that in first-tier cities, suburban locations of Korean coffee shop brands account for as high as 69%, which is much higher than that of European and American coffee shop brands.

This leads to the problem-Korean cafes overestimate the demand for coffee from consumers in these places.

It turns out that although China's coffee consumption market has been growing rapidly, instant coffee accounts for 70%, bottled coffee accounts for nearly 28%, while Starbucks, COSTA and Korean cafes are all competing for only 2% of the freshly ground coffee market. In the freshly ground coffee market, the core consumer group is still business people, not leisure people.

And after the cafe became casual, although it avoided European and American brands, it collided with other rising street drink brands, which is a more crowded market.

These are only external causes, what really makes Korean coffee go high and low is actually its much-criticized joining model.

At its peak, Coffee had more than 600 stores in China, under the banner of "catching up with Starbucks". "Coffee accompanies you with clear plans for the future," wrote on its Chinese website. No matter where you are in China, whether it is a first-tier city or a third-and fourth-tier town, as long as you want to drink coffee, there will be a coffee house waiting for you. "

In order to achieve this goal as soon as possible, Coffee accompany you did not choose a regional agent, but adopted an individual joining model, with a maximum of 200 stores per year.

Then, as a result of this rapid expansion, the control of coffee with your headquarters has been weakened. Membership cards cannot be used, the service quality of different stores is different, and even the situation of franchisees fighting on their own is becoming more and more serious, all these have seriously dragged down the reputation of coffee to accompany you to do business in China.

This is not just a problem for coffee to accompany you. Korean coffee brands are mainly joined or co-operated, of which South Korean KH stores in China account for only 10% of ZooCoffee and only 4%.

Korean Coffee wanted to capture the seemingly optimistic Chinese cafe market as quickly as possible. However, it not only misjudged the situation, but also chose the wrong way.

In fact, not long ago, Starbucks announced that it had acquired the remaining 50 per cent of Starbucks' joint venture in East China for about $1.3 billion. Through the acquisition, Starbucks acquired 100 per cent ownership of about 1300 stores. Its future plan is to achieve full direct operation in China, with a total of 5000.

The industry seems to have realized that intensive farming is the right way to build a lasting coffee chain brand. As Zhao Kedong, CEO of the old domestic cafe brand "carving time", said, "Cafe is a slow business, and people who want to make quick money in this industry will smash the brand."

Starbucks' rival.

Entrepreneurs are still trying to figure out whether "scene +" can become a universal business model. Another path, "joining mode", encounters periodic twists and turns. Looking around, the boutique of coffee seems to be an opportunity to surface.

This is one of the important directions of the entrepreneurial craze of individual cafes in recent years.

For countless entrepreneurs, opening a coffee shop is a passionate thing. In their eyes, "Starbucks fast food model, is a desecration of coffee, boutique coffee is the real coffee"whether to make money is not important, the spread of coffee culture is more important."

Unfortunately, however, "Meituan-Dianping" and coffee industry media "Ka Men" statistics found that the current wave of shop closures is also the main force of these non-business-driven individual entrepreneurs.

In the coffee industry, there is a "4321 theory" for making boutique coffee: 40% variety, planting, and processing methods, 30% roasting, 20% equipment, and 10% brewing technology. Each of these links is sufficient to eliminate a large number of "ticket players".

Therefore, the really successful boutique cafe does not talk about feelings, but ploughs every link.

In July 2017, Shanghai Seesaw Coffee received round A financing from Hony Capital Investment of 45 million yuan, which is the first boutique coffee chain brand in China to receive mainstream capital investment. The reason why Seesaw can attract the favor of capital has something to do with its efforts to improve the product supply chain.

Different from the mode that individual entrepreneurs purchase goods from wholesalers, Seesaw ensures product quality and profit margins by buying coffee beans directly, among which Seesaw and Yunnan have the most in-depth cooperation.

Seesaw has established a set of standards to control the quality of Yunnan coffee purchased every year and maintain a stable cooperative relationship with farmers to help them cultivate coffee seedlings and regulate the picking and handling of coffee beans.

To do this, we not only need a huge amount of capital investment, but also need time to run-in. Seesaw has invested tens of millions of yuan and five years' time cost.

Quality Coffee, an online celebrity in boutique cafes, also adopts this direct supply of raw materials. And it makes full use of the advantages of this model to promote the transparency of the whole production process. This is also its biggest service features and marketing means.

The library has all the information about the raw materials, including tree species, tree age, cultivation methods and so on. In addition to the subsequent baking and brewing methods, the quality library made an identity form for each product and printed it out and placed it on the tray.

In addition, based on the familiarity with the quality of direct mining raw materials, professional product appraisers with CQI certification also score the flavor, acidity, dry and wet aroma and aftertaste of each product, which are also printed on the tray pad after drawing a coordinate system chart.

With this information, layman consumers can also taste boutique coffee. Considering that they may doubt the authenticity of this information, the quality library finally did not forget to let the product speak:

After the coffee is served, the quality library will provide 3 cups. Two cups of hot and cold to show the different flavors of coffee at two temperatures. The other small cup is used to taste the coffee powder. In this way, consumers can directly feel the quality of raw materials, as well as the impact of brewing process on the flavor of coffee.

Due to the transparency of the whole process, the threshold for consumers to drink boutique coffee in quality restaurants has been lowered. This makes the quality library face the public and embark on the road of small profits and quick turnover. At present, the price of the boutique coffee in the quality Museum is only comparable to that of Starbucks. And in the "Meituan-Dianping" and "Ka Men" statistics of the flow of domestic coffee shops, the quality Hall ranks first.

Although such successful boutique cafes are in the minority in China, the losers are not without contribution, and together with the winners, they are subtly upgrading consumers' tastes.

Business-sensitive Starbucks is clearly aware that Chinese consumers will sooner or later jump over the stage of drinking fast-food coffee. That is why it has fallen back in the Australian market in recent years.

So at the end of 2016, Starbucks founder Schultz announced that he would devote himself to developing the high-end coffee business and expanding the "Starbucks selection" brand and stores around the world. And China, as its largest market, is bound to be the key layout object.

Starbucks is promoting a comprehensive direct marketing strategy, in a sense, to prepare for this kind of boutique transformation. On the supply side, Starbucks has promoted the integration of single product production bases in Kenya, Colombia, Sumatra, Yunnan, China, and so on.

In the Chinese cafe business, there are more people talking about values than methodology. Now, even the "imitated" Starbucks is on the same starting line as local entrepreneurs, and everyone is looking for new possibilities. This round of market volatility is far from over.