Analysis of the current situation of China's coffee market in 2018-who will be the winner of the new wave of coffee?

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From the dimensions of brief history of Chinese coffee, industrial chain, capital, close-up of players, and trends, ID:pintu360 tries to spy on the trend of the coffee market in 2018 through the past and present. Please pay attention to the special plan "Life and death of Chinese Coffee".

The heroes competed with each other, and there was smoke everywhere. Who is the next king?

There is wine in foreign countries. There is also black wine, which is drunk after dinner, and this wine can be consumed. "--Guangdong Tongzhi, Volume 95

During the Daoguang period of the Qing Dynasty (circa 1836), Guangzhou, as the only trading port, gave birth to the first coffee shop in China.

At that time, coffee, as an accessory to the lives of foreign missionaries and businessmen, was not really well known under the tide of "banning foreign countries" by the government. Until after the Opium War, the "five-port trade" opened the door to China. With the development of trade, the rising comprador class became the first batch of Chinese to drink coffee.

In 1866, the book of making foreign rice compiled by Mrs. Gopidi, an American missionary, recorded the method of making this foreign meal called "fattening": "roast and fatten with fierce fire, shovel and move diligently, so as not to scorch it black." Bake well, add a little cream while hot, put it in a covered bottle and cover it. When you want to use it, roll it. "

As an imported product, coffee has really taken root in China for Guang Xu for ten years. In 1884, the British successfully introduced coffee to Taiwan. Eight years later, a French missionary planted the first coffee seedling of Chinese mainland in Yunnan. Since then, two major coffee producers in China have been born.

Although the introduction of Western learning to the east from the late Qing Dynasty to the early years of the Republic of China made a large number of new young people understand and accept coffee, since the Opium War, the war for more than a hundred years has suffered an almost devastating blow to China's economy. as well as the antagonistic sentiment between socialism and capitalism for more than 30 years, coffee has no room for foothold and development in China.

Cognitive Revolution-Nestle-Maxwell's Instant Coffee Age

Entering the market for the first time

The coffee memory of most Chinese people began in the 1980s, and the long-blank Chinese coffee market finally ushered in a development opportunity after the reform and opening up. In 1984, American McCoffee (renamed Maxwell in 1997) entered the Chinese market and fired the first shot in China's instant coffee market. Four years later, in 1988, Nestle Coffee established a joint venture with Dongguan Nestle Co., Ltd. "since ancient times red and blue out of CP", these two companies are no exception to open the Chinese coffee market for 30 years of entanglement.

The instant coffee that first entered the Chinese market is not as strong as imagined. Backed by Kraft, the world's second-largest food company, McCoffee, once praised by US President Roosevelt, has replaced its high-end positioning in the United States into the Chinese market, believing that the middle class and intellectuals are the main consumers of coffee.

With a large number of advertisements, cafes at the gate of Peking University, and beautiful gift boxes displayed in department stores, high-profile market educators have created a deep gap between coffee and the general public. The undeveloped middle class and aloof but effortless intellectuals did not surprise McCoffee.

After three years, a dominant McCoffee suffered a multimillion-yuan loss, while Nestl é, the largest foreign food company in Taiwan, came to Chinese mainland with its instant coffee.

The results of market research are very different from those of McCoffee. Through a survey of female college students, Nestl é found that as one of the elite intellectuals in a million, they most wanted to marry taxi drivers because the average income of taxi drivers at that time was more than ten times that of other industries. As a result, they believe that in the case of "mismatch" between consumption power and social status, people who have the willingness and ability to consume coffee should be ordinary consumers.

In addition, they also found that after drinking coffee, people would leave the cans for use as a show-off. As a result, Nestl é made two responses: first, with a very popular slogan-"delicious!" Quickly seize the minds of consumers; followed by efforts in packaging, exquisite canned and boxed products, as well as the classic red cup in the hands of consumers to generate a second scene spread.

Popular, all you need is "the time of a song"

But this is far from enough. The real popularity of coffee culture stems from a popular song "Walking through the Coffee Shop" in 1989.

This golden song, composed by Lin Ziyuan and sung by Qian Qianhui, stems from a failed cooperation. It turned out that Nestl é found Lin Ziyuan, hoping to cooperate with a coffee-related song to be played in shopping malls to stimulate consumption. Lin Ziyuan rejected the proposal, but looked back and wrote his own song "Walking through the Coffee Shop", which became an instant hit. With the help of this song, coffee has become the spokesman of trendy culture, and Nestl é and McCoffee have benefited and made a lot of money.

Hot sales have brought huge pressure on the supply chain, and the two giants have adopted completely different strategies at this time: McCoffee chooses to buy from overseas, with a 20% increase in cost while maintaining stable quality. Nestl é chose to purchase raw materials from Yunnan. Considering the instability of yield and quality, Nestl é began to cultivate new hybrid varieties and assist local farmers to plant and increase coffee production.

At this time, McCoffee still has a first-mover advantage, with sales almost twice that of Nestl é and 20% more profitable than Nestl é.

In the era of hypermarkets, the winner is the king.

In this way, in 1996, Carrefour, Wal-Mart and Metro opened one after another, and the era of retail hypermarkets began. In order to get more channel terminals, McCoffee and Nestle Coffee began a battle. McCoffee takes the form of signing a direct supply agreement with the store in order to obtain first-hand market data, but the disadvantage is that the account period is long and the cost is high, while Nestle Coffee chooses a more "money-saving" dealer model. Spot cash brings good cash flow and rapid expansion of terminals.

The account period and financial pressure eventually became a stumbling line for McCoffee, and the lack of liquidity limited the speed of expansion. at the same time, Nestl é attacked the city under the "assists" of dealers, and promotions emerged one after another, and played with McCoffee.

If the channel is a ground war, then the supply chain war directly brings leap "wings" to Nestle Coffee. In 1997, Dongguan Nestle Coffee Factory was able to purchase all the small seeds of coffee beans directly from Yunnan, and gradually established a good cooperative relationship with local farmers.

The drought of 2002-2003 reduced production and soared prices of coffee beans in places such as Brazil. Maxwell, which buys coffee beans overseas, has tightened profits and further restricted its business. With years of hard work in Yunnan, Nestl é has obtained a stable supply of raw materials, which has become the key point for Nestl é to dominate China's instant coffee market.

As of 2004, Nestl é had an absolute advantage with 70% of the market share of instant coffee.

Consumption Revolution-- the rise of Shangdao Coffee chain Empire

Business + coffee = crazy expansion

At a time when the instant coffee market is in a fierce battle, coffee shop chains specializing in freshly ground coffee are quietly on the rise. Aimed at business people and urban petty bourgeoisie, the "Taiwan Cafe", which entered the market in the mode of coffee plus simple meals, has become a forerunner.

Shangdao Coffee, which began in Taiwan, opened its first store in the mainland in 1997, and expanded rapidly by virtue of the joining model. At its peak, there were more than 3000 stores in the mainland, making it a well-deserved "chain giant".

High-end decoration, private private rooms, coupled with moderately priced business packages, in the 1990s, when social places were scarce, going to the island for coffee and business quickly became the first choice for business people. Also thanks to the expansive expansion of Shangdao Coffee, the close combination of coffee and business attributes continues to this day, and enables coffee to enter a stage of rapid growth with the take-off of China's commercial economy.

During the same period, European and American cafes also saw potential opportunities in China's consumer market. Compared with Taiwanese cafes, European and American cafes basically provide no meals, only coffee and simple desserts, the environment is also cleaner, the area is smaller than hundreds of square meters of Taiwanese cafes, and has both restaurant food and takeout, which is more popular with foreigners.

In 1999, Starbucks opened its first store in China and became the founder of European and American cafes. By comparison, Taiwanese cafes are more in line with Chinese consumption habits and expand faster.

A dike of a thousand miles is destroyed by an ant's nest.

But the aggressive expansion also laid a hidden danger for the collapse of Shangdao Coffee. In the early days, in order to seize the market, the board of directors of Shangdao decided to divide China into eight regions, which were operated by the company's eight major shareholders by drawing lots.

In fact, the eight shareholders have become a "mountain king" in the process of development. not only is the phenomenon of regional division extremely serious, but they even use the brand foundation of Shangdao Coffee to create their own new brands-- public data show that there are nearly 30 sub-brands of the "Shangdao system".

In addition, Shangdao Coffee, which blindly attaches importance to speed and revenue, is a complete mess in terms of franchise management, and lacks a standardized plan for store location, furnishings, operation, and business system, and there is no guidance and training for franchisees at all. "chain disconnection" has turned into "a thousand stores and a thousand noodles." Relying solely on the quick money of "selling signboards", the brand image has been greatly affected.

Until 2003, due to internal conflicts, Hangzhou Shangdao, founded by Chen Wenmin, one of the co-founders of Shangdao Coffee, and Shanghai Shangdao, founded by another co-founder, you Changsheng, launched a "trademark dispute", a two-year tug of war. Finally, the trademark remained valid and Chen Wenmin was arrested on suspicion of forging the company seal.

From then on, the coffee on the island began to collapse all over the island, and although the mass still existed, it was no longer brilliant.

European and American cafes that come from behind

On the other hand, European and American cafes, which entered late, did not really break out until around 2012. Pacific Coffee, which entered the mainland market in 2011, is already a latecomer in European and American cafes, while Starbucks and British coffee brand costa, which entered the market earlier, have begun to expand comprehensively.

According to data, from 2011 to 2015, Starbucks opened more than 1300 new stores in China, with a total of 1811 stores, an average of 260 stores per year. By comparison, Starbucks has opened an average of about 50 stores a year over the past decade.

With the warning of Shangdao Coffee, European and American cafes are much more robust in their expansion strategy. Starbucks adopts a regional franchise system, but it is now completely self-owned, while costa raises the barriers to partner entry in the form of regional agents for large enterprises.

Standardized chain stores and coffee culture have won the recognition of consumers. European and American cafes that come from behind have become the spokesman of coffee chain brands. By the end of 2017, Starbucks alone accounted for 51% of China's chain coffee market, reaching 3124, according to data.

Late entry, innate advantage

Basically synchronized with European and American cafes, Korean cafes also ushered in a full-scale outbreak around 2011. In 2011, Xin Zixiang, a South Korean living in Wangjing, opened his first coffee shop. The following year, two major Korean chain brands of coffee accompanied you and zoo coffee into the Chinese market and began to expand crazily.

Different from European and American cafes and Taiwan cafes, Korean cafes have a stronger flavor of life. In the spacious space of hundreds or even thousands of square meters, the environment is transparent and bright, and the atmosphere is casual and warm. This environment is intended to enable consumers to stay in the store for longer, thus completing more consumption content.

Although as a latecomer, in the face of fierce market competition, Korean cafes seem to have natural advantages-the popularity of South Korean dramas such as "you from the Star" and "King Shizi of the Tower Room" in China have made free flow advertisements for Korean cafes. The endorsements of popular stars are the icing on the cake.

With its innate brand advantages, Korean cafes are rapidly spread out relying on the loose franchise system. The most typical coffee accompanies you with many female consumers who rely on Kim Soo-Hyun 's endorsement circle, who once shouted out the heroic words of "opening 5000 stores in three years".

Xin Zixiang, founder of Man Coffee, has said that Korean cafes have become so popular because "there is no place in China to sit down and chat with friends." He believes that even if there is no diffuse coffee, there will be other cafes to provide such a place called the "third space".

The attraction of coffee combined with other attributes other than business is obvious. Juice, milkshakes, ice cream and bread West Point, which are more favored by female consumers, have become a must-have category in Korean cafes, while beautiful platters and color matches have become the preferred selfie and party places for women under the development of the "beauty economy". These representative Korean coffee shops opened more than 800 stores in China between 2014 and 2015, the fastest expansion.

"three noes" is easy to collapse.

As the scale expands, problems follow, first of all, changes in the general environment. The subtlety of the relationship between China and South Korea has weakened the export of South Korea's cultural industry. at the same time, the accelerated development of China's local catering industry and entertainment industry has also further compressed the development space of Korean cafes. The combination of coffee and other functional attributes is increasingly refined, with cat cafes, book cafes, coffee restaurants and even Internet cafes all over the streets. Consumers have a more diversified choice, and the relationship between supply and demand has been reversed.

As a target user, the number of "God" is also pitifully small. Statistics show that in China's coffee market, which is still dominated by instant coffee, nearly 10,000 cafes compete for only 2% of the total number of customers-and the vast majority of these 2% are deep-rooted business coffee people.

The fatal blow comes from chaotic management. Korean cafes, just like Shangdao Coffee, suffered great losses in franchise management. According to the "Research report on the Development trend of Korean Coffee Shop in China" released by RET Rui Yide in 2014, Korean coffee brands are mostly based on joining or co-operation as their main expansion model, of which 10% of the coffee accompanies you and only 4% of the company is operated directly by Zoo coffee.

And the franchisee has not been able to get any benefits. According to media reports, taking the 200ping storefront in Beijing as an example, the upfront investment includes franchise fees, unified decoration and equipment fees totaling 300-5 million yuan, and the operation has to distribute income to the company according to 51% of the monthly proportion, plus a monthly management fee of 4%. In order to cut costs, franchisees often choose to manipulate in private, which also leads to damage to the reputation of the parent company and speed up the process of bankruptcy.

With no follow-up, no hope of expansion and lack of diligence, the Korean cafe in 2017 also came to an end with a complete failure. The coffee is no longer high-profile, zoo coffee is busy "de-hanlization", and coffee with you in China except to join the store, has been found nowhere to be found, and founder Jiang Xun was found to have committed suicide at home in 2017.

Channel Revolution-will New Retail + Coffee be the Future?

When instant coffee and freshly ground coffee become the norm, will there be new opportunities in the solidified coffee market? The emergence of a new retail concept gives an affirmative answer.

"Young" intelligent coffee machine

The intelligent coffee machine that appeared around 2015 is one of them. in the flexible form of cabinets, intelligent coffee machines can appear anywhere in office buildings, shopping malls and so on. It takes about a minute to get a cup of fresh and cheap freshly ground coffee.

Different from the automatic coffee machine with traditional brewing function, the intelligent coffee machine can customize different tastes of coffee according to user preferences in addition to category selection, and real-time monitor material supply through background management system data to save labor costs.

However, no matter in terms of hardware or software, there are no obvious barriers to intelligent coffee machine so far; from the financing situation, there have been less than 10 financing events of intelligent coffee machine since 2015, and most of the projects are still in front of round A, the volume is small. At present, with the tuyere of retail terminals such as unmanned shelves and unmanned convenience stores, as well as the upturn of new retail coffee, intelligent coffee machines are also getting more and more attention. There will be an uphill battle over capital and spot in the future.

The Battle of the strong-Internet Coffee

In addition, the recent frequent movements of Internet coffee is also a category worthy of attention. Since the end of 2017, luckin coffee, founded by Qian Zhiya, the former Shenzhou Group COO, has gained a lot of popularity through massive advertising and buy five get five free promotions endorsed by Tang Wei and Zhang Zhen. Its iconic small blue cup and 30-minute delivery "slow must pay" has become one of the topics in the office coffee consumption scene. At the same time, the team that is good at offline operations is also amazing in terms of the speed of opening stores-124 stores have been opened in three months, with an average of about two new stores opened every day.

Another company, Lian Coffee coffee box, is a veteran by comparison. Founded in 2012, Lian Coffee, which started with Starbucks delivery, has been transformed into a fully self-owned coffee delivery service brand in 2015.

Lien Coffee is undoubtedly better at social marketing than luckin coffee's advertising endorsements-coffee coupons can be given as gifts, just like the social gifts launched by Starbucks and Wechat in 2017. Sharing coupons, "Universal Coffee", "growing Coffee" and other games are also refreshing.

In addition, away from the concept of freshly ground coffee, luckin coffee, the champion of WBC (World Barista Competition), claims to be moving towards boutique coffee. On the other hand, Lian Coffee, which is constantly iterating through sku, introducing "bulletproof coffee" and new non-caffeinated beverages, is developing into a specialty beverage service.

But as coffee delivery service providers, both non-proprietary distribution companies face the same weakness. The problems of distribution timeout and dumping caused by uncontrollable distribution services are difficult to avoid, which is bound to affect the word-of-mouth of the overall product. Luckin coffee makes up for it by increasing store density and adopting SF distribution. However, in their vision, consumer-to-store take away is always a better solution than distribution, but this can only be achieved based on sufficient store density. Founder Qian Zhiya has said that luckin coffee is still groping for 1 billion yuan to build 500 offline stores by June 2018.

Even coffee has made great efforts in packaging, leak-proof cup design and thermal insulation distribution box can maximize the complete flavor of coffee, but the addition of the store is also a key step in the future. Even Coffee said it would start a "ubiquitous" rapid scale expansion after it received financing from the B+ Round 158 million in March 2018.

Whether it is intelligent terminals, stores + distribution, new retail + coffee wants to present a human-centered consumption channel revolution, in the coffee consumption market with an annual growth rate of up to 16%. How to make the purchase threshold of consumers close to zero has become the most concerned issue for entrepreneurs.

Dry this cup of coffee! Who is on the record of life and death in the trillion market?

A list of the main players in China's coffee market

From the marketing war to solve the cognitive problem to the scale war to solve the consumption scene problem, and then to the terminal war to solve the channel problem, the Chinese coffee consumption market has experienced four revolutions. In the future, with the sustained and rapid development of the coffee market, the competition around boutique and terminal consumption will continue. How will the players respond? Who will be the winner of the new wave?