Development trend of Korean Coffee Market in China? Basic information of Chinese coffee market?

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A large-scale cafe expansion is in the pipeline.

Seesaw announced last month that it had received 45 million yuan of A-round investment from Baifu Holdings of Hony Capital. The founder of another Shanghai boutique coffee brand, Yingji Coffee, said in a recent interview that it was preparing a 30 million yuan round of Pre-A financing. As for GREYBOX, which entered the Beijing International Trade Kerry Center at the end of last year, the parent company behind it is roseonly, which has completed 190 million yuan of C round financing.

This kind of popularity also appeared five years ago, but the protagonist is not these boutique coffee brands with the halo of "consumption upgrading", but cafes with Korean background.

"by 2015, there will be 5000 chain stores in China, and then they will be listed in Hong Kong."

"by 2015, there will be 1500 chain stores in China, and then they will be listed in Hong Kong."

"by 2015, there will be 1000 chain stores in China."

By 2015, it will become a world-famous coffee chain brand.

This is the process of Korean coffee brand "Coffee with you" from high-profile promotion to gradual decline in 2012.

It is also close to Hollis, Man Coffee, Zoo Coffee, MangoSix, Tushan Coffee and so on. Almost all of them entered China around 2012 and worked with Chinese investors to try to encroach on the Chinese coffee market in a frenzied expansion. These most representative Korean coffee shops opened more than 800 stores in China during the fastest expansion in 2014 and 15 years.

In China's attractive market, coffee consumption is indeed growing. Coffee consumption in China is growing at a rate of 15% a year, compared with a global average of 2%, according to the London International Coffee Organization. Starbucks, the most successful company in the market, has also accelerated its expansion at the rate of opening a new store every day over the past year or two and has sunk to more and more second-and third-tier cities.

There is also an increase in female consumers in first-tier cities. In the consumption of ground coffee, business consumption is the mainstream, and Starbucks, which accounts for about 40% of the market share, is mainly aimed at business groups. A huge advantage of Korean cafes was that Korean TV dramas were in vogue at that time.

In 2012, a "King of the House" won the popularity of Hollis Coffee, and then Hollis Coffee entered China in a high profile; then "you from the Stars" became a hit, and the coffee accompanied you to recruit Kim Soo-Hyun.

Five years later, Hollis is now being collected by the supplier, and Zoo Coffee has been completely taken over by Chinese investors, busy with "de-Hanization". The most radical coffee has gone missing with your headquarters. the headquarters of the Kaitai Building on the East fourth Ring Road in Beijing has been empty. there are links to branches such as the United States, Japan, the Philippines, Mongolia and Cambodia, but can not find any information about Chinese companies.

However, the franchisee is still in business, but that grand plan must be gone.

For China's ambitious new round of boutique coffee, the lessons of Korean cafes are noteworthy. This is a typical case of what factors can mess things up when investors are eager to break into the Chinese market.

Korean cafes want to attract new consumers, but they do not create new consumer demand.

If you have ever visited a Korean cafe, you will find that it is a completely different space from Starbucks. They are often very large, hundreds of square meters or even thousands of square meters, and most of the furniture is cloth sofas, and there may be floor-to-ceiling windows and lovely plush toys placed everywhere, creating a more casual and warm atmosphere.

Wuhan Coffee Shop

So the target consumers of Korean cafes are couples, friends or families who meet and chat, and they want to use a larger and more comfortable space for consumers to stay in the store for as long as possible. Xin Zixiang, the founder of Man Coffee, once said that he believes that these consumers who stay in the store will certainly "call friends" and bring more consumers.

This is exactly the opposite of the strategy adopted by Starbucks, which focuses on the business customer base. Starbucks has a small store and few seats, and they encourage customers to take out rather than sit in the store. Korean cafes hope that people will stay longer and consume more products. So in addition to coffee, tea, cakes, sandwiches and other common categories in coffee shops, Korean coffee shops also have sweeter drinks such as fruit shakes, ice cream, muffins and waffles, as well as bread pastries baked on the spot, with an average of 76 kinds of products. compared with 41 commercial coffee shop brands.

They are more likely to attract female consumers. In fact, the beautiful food and sweet style design made the Korean cafe once a mecca for girls to take selfies. But that was when South Korean TV dramas were popular, and even now, some of your coffee stores still have portraits of Kim Soo-Hyun, who is clearly out of date in the eyes of Chinese consumers. As more Korean cafes carry Korean fashion and trend symbols, without the stimulation of continuous popular Korean dramas, there is no basis for a sense of existence.

A bear waiting for coffee.

Those young women who were initially attracted to the past are more of a kind of fresh consumption, and they are not typical coffee consumers in the first place. And China's main coffee consumers, that is, white-collar workers, are basically trained by Starbucks. It is also difficult for these people to be attracted to Korean cafes.

In the 1960s, the picture of the "teahouse" in Korea came from: East Asia Daily.

Their success in South Korea's home market has more to do with culture. In the 1930s, Korean "teahouse culture" prevailed, and such a teahouse could be found in almost every alley. Although it is called a teahouse, it mainly sells coffee and has become a leisure space for people to get together in the 1960s. In the 1980s, this old-fashioned teahouse injected some modern elements and appeared in universities, urban areas and residential areas. At this time, the teahouse already had a new name-"Coffee Shop", and it was no longer just selling coffee. The products became more and more abundant, such as black tea, shaved ice, plum tea and so on.

It is against this background that Hollis opened its first store in South Korea in 1998 and became the earliest chain brand. Although Starbucks entered South Korea as early as 1999, the coffee consumption market in South Korea was more mature at that time, and they also had a relatively stable customer base.

Hollis Coffee No.1

Although China's coffee consumption market has been growing rapidly, instant coffee still dominates, with bottles accounting for nearly 28%, while Starbucks, Costa, Pacific Coffee and Korean cafes, including the emerging boutique coffee, are competing for only 2% of the freshly ground coffee market, according to Euromonitor. In the freshly ground coffee market, the core consumer group is still white-collar workers.

Not only can not compete for the original coffee consumers, but also failed to retain new consumers, generally speaking, Korean cafes failed to create a new consumer demand, the final result may be "why go to a coffee shop to eat dessert" embarrassment.

The Great Leap forward expansion overestimated market demand.

At its peak, Coffee with you had more than 600 stores in China, expanding crazily under the banner of "catching up with Starbucks", setting a record of 200 stores a year. "Coffee with you has a clear plan for the future," it wrote on its website. "Coffee will try to open 1000 stores in China by the end of 2014, and it will continue to grow rapidly in the future. The state at that time is that 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. "

Now, in retrospect, it seems a little ridiculous. From a more rational point of view, coffee with you overestimates the market demand. Even in South Korea, which consumes an average of 140 cups per person per year in big cities (far more than China's current 20 cups), only more than 700 coffees have been opened with you in the more than nine years since its establishment.

More comparable is Starbucks. In the 10 years since it entered China in 1999, it has maintained the pace of opening only 30-50 new stores a year. The expansion of the Chinese market began to accelerate in 2012, the year Korean cafes entered the Chinese market, but that year Starbucks opened 204 new ones. By comparison, coffee does "catch up" with Starbucks in terms of your expansion speed. This is quite aggressive for a new brand that does not have any accumulation.

Korean cafes have not ignored second-and third-tier cities that are considered to have great potential, but demand in these low-tier cities is also overestimated. Since 2011, Starbucks has only begun to open more stores in second-tier cities than in first-tier cities, but it mainly focuses on the more mature areas of Jiangsu, Zhejiang and Shanghai, such as more than 300 Starbucks stores in Suzhou, Ningbo and other second-tier cities. It was not until 2015 that Starbucks began to infiltrate some third-and fourth-tier cities, accounting for 5 and 18 of the 23 "new members" in 2015, respectively.

As Starbucks' second largest market in the world, if there is more space, Starbucks will not be "conservative" in this market. It is not that Starbucks takes all winners, but that as the most successful coffee brand in the Chinese market, its expansion strategy reflects the current market situation to a large extent.

There is no problem with the franchise system, but the lack of a standardized product and service system is a big problem.

In order to achieve rapid expansion, coffee accompanies you to join the mode of single store from the very beginning. If the franchisee pays the full franchise fee at one time, he can directly own all the operation and management rights of the store. Take a 200m2 storefront in Beijing as an example, the franchise fee is about 3 million yuan, plus store decoration, equipment, etc., the total investment in the early stage is about 3 million-5 million yuan.

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.

Starbucks previously implemented a regional franchise system in China, choosing Meida Starbucks, Unified Starbucks and Meixin Starbucks in Beijing, Shanghai and Guangzhou respectively, authorizing them to develop the local market. But then gradually withdrew the franchise of the franchisor. In 2003, Starbucks headquarters' stake in Shanghai Unified Starbucks increased to 50%; its stake in Maxine Starbucks also increased to 51%. In 2006, it acquired 90% of Beijing Meida, which means full direct operation.

Costa Coffee Hangzhou Lixing Store Photo from: Sohu

Costa and Pacific Coffee are also cautious in terms of expansion. Pacific Coffee uses a single city exclusive agent, and the requirement for urban agents is 10-15 stores per city. On the other hand, Costa adopts the expansion mode of regional agency by "bundling" large enterprises, and cooperates with Yueda Group and Hualian Group in the southern and northern markets respectively. Although it raises the entry threshold of the cooperative object, it gives the greatest protection to the brand image.

In fact, the franchise system is a common means to achieve rapid and large-scale expansion. McDonald's is the most adept at using this model in the catering industry, which accounts for 90% of its franchise in the domestic market in the United States. But the key is that it has a standardized product and service process system, and even so, McDonald's has been operating directly for quite a long time in China.

Coffee with your Brazilian barbecue rice picture from: Dianping

Korean cafes do not have a standardized system. When we visit the coffee shops that accompany you this time, we will find that the menu of each shop is a little different. Some stores sell Pizza, and some also have Fried Spareribs. This situation happened long before coffee accompanied you in China "lost contact". Coffee accompanies you for the lax management of joining stores, and many stores also act alone in terms of promotion, group buying and so on. In the later stage, most of the coffee franchisees with you are basically in a state of "self-control". Even the key links such as the purchase of coffee beans and food processing are taken care of by the stores themselves, and some stores have even sold food such as covered rice. Of course, the taste of coffee can not be guaranteed. "one hundred Coffee accompanies you with one hundred flavors" is a common evaluation of consumers. Many people in the industry attribute the rapid decline of Korean cafes to their joining model.

The mode of big store increases the difficulty of site selection, and the lack of sufficient passenger flow forms a vicious circle.

After China's commercial real estate began to accelerate in 2007, Starbucks and Costa, which follow commercial real estate, have more room for development. As a latecomer, Korean coffee is difficult to grab any good resources, coupled with the big store model, it is even more difficult.

However, shopping malls and office buildings in first-tier cities are not ideal sites for Korean cafes because they are too expensive. Pacific Coffee CEO Lanyi has said that from the average level of the industry, the coffee shop with an area of 150m2 is the best. For Korean cafes, which are often hundreds of square meters, the rental cost of commercial centers is too high, and they are mainly concentrated in residential areas, universities and parks. As a result, up to 69% of Korean cafes in first-tier cities are located in the suburbs. Second-and third-tier cities are more likely to settle in urban areas, accounting for 87% of the total urban location.

Coffee accompany you once called on the franchisee on the official website: "A prime location, the rent is frighteningly high, in fact, as long as it is managed properly, B and C lots can also make money." Why do you have to cling to a big tree? Entrepreneurs must put every penny on the cutting edge. Renting a store on the road costs tens of thousands of yuan a month, but if it is in a street only more than ten meters from the road, customers will not mind taking a few more steps, and the rent may be much lower. "

Shanghai Hongquan Road Coffee accompany you Photo from: Dianping

The coffee on Shanghai Hongquan Road is with you in a residential area. The shop has a total of two floors, which is spacious and does not face the street. Business in this coffee shop has always been good, and guests continue to come on weekday afternoons, and the waiter says there are sometimes no seats on weekends. But this is largely due to the special location of Hongquan Road.

Hongquan Road, where Korean restaurants and saunas are clustered together, is known as Korean Street, and many Koreans live here. "you from the Stars" is the place where people rush to "pull the grass" when it is hot, but now the street is not as hot as it used to be. Most of the guests in this store are Koreans, and although the coffee headquarters with you is now out of touch with the Chinese market, Koreans who live here are still willing to patronize this coffee shop.

Generally speaking, the location of coffee accompany you seems to be relatively casual, for those wholly-owned stores, coffee accompany you will not even be involved in the location process. Starbucks, by contrast, has a comprehensive system of site considerations, which measures average local education, average family size, average income, the number of cars passed within an one-to-eight-mile range, the proportion of people during the day and night, security information, business composition and many other data.

Patrick O'Hangen, the global market planning manager, also revealed at the Esri user conference held in San Diego that Starbucks now uses an internal mapping and business intelligence platform called Atlas to decide where to open new stores and comprehensively analyze the population, flow of people, competition, transportation, business and other information around the business circle.

The street corner is one of Starbucks' favorite places. Photo from: Jane Shu

In the large shop model of Korean cafes, it is difficult to find a suitable property itself, but there is not enough passenger flow, which leads to a vicious circle.

In the end, the Korean cafe was like a gust of wind, leaving a mess. Coffee accompanies you, Zoo Coffee, Hollis have frequently run away from franchisees, and there are also franchisees who have been "cheated" by the company. Among the "unfaithful persons" on the website of the Supreme people's Court of China, there are 28 records related to coffee accompanying you in China, among which the performance of the person subject to execution is "all unfulfilled".

Some people think that the massive expansion of Korean cafes is just a means to "circle money". There is even a saying that coffee accompanies you not really want to do business in China, but to go public. It is also said that the money that accompanies you in the Chinese circle has been sent to the Korean headquarters. However, the development of coffee with you in South Korea has not been satisfactory. According to the Korea Fair Trade Commission, the closure rate of coffee with you reached 14.6% (140) in 2015, ranking first in the industry.

The franchisee protested in front of the coffee shop. Photo from: Ka Men

Contradictions with partners also exist all the time. As early as the end of 2014, there were rumors of high-level infighting between China and South Korea in the Chinese company. Also fully taken over by Chinese investors is Zoo Coffee, which an insider, who spoke on condition of anonymity, confirmed to the Curiosity Daily, and Zoo Coffee is actively promoting de-Koreanization.

Korean cafes are not completely wiped out in China, and the slightly more serious coffee is OK. It has no stores in South Korea. It is a Korean brand established in China by Korean Xin Zixiang. Diffuse coffee is more cautious in the choice of partners and opening stores, and generally requires the other party to have the strength to undertake at least 10 stores. The management mode of "direct operation + cooperative operation" ensures the quality of store management to a certain extent. Xin Zixiang also said that he would open 3000 stores in 10 years and said he would expand at the rate of 100 stores a year. However, with the collective decline of Korean coffee in the market, the development of diffuse coffee has also changed from "fast" to "stable".

The new round of boutique coffee brands with the halo of "consumption escalation" will say that they are completely different from those Korean coffees, and practitioners always come up with this set of data to cheer themselves up: Beijing, Shanghai, Guangzhou and other first-tier cities consume an average of 20 cups per person per year, compared with 200 cups in Japan and 140 cups in South Korea. And China's freshly ground coffee market has grown rapidly in recent years, with an average of more than 20%.

Chinese Food and Beverage report (White Paper 2017) issued by Meituan

According to the China Food and Beverage report (White Paper 2017) released by Meituan Dianping, 14807 cafes closed in 2016, and 90 per cent of the closures occurred in the second half of the year. In terms of number, Shanghai has the largest number of cafes in the country, with Beijing, Shanghai, Guangzhou and Shenzhen accounting for 16.4% of the total number of cafes in the country. Shanghai fell by 6 per cent last year and Beijing by 20 per cent.

The report said, "the opening speed of personality cafes has exceeded the growth rate of customer base, the price of boutique coffee is high, the threshold for popularization is high, and the current situation of small customer base is faced." At present, most of the people who enter the market are individual entrepreneurs, and there is a general lack of basic business skills in store management, personnel training, standard construction and so on. " New entrants need to be vigilant that there may be more problems when income and expansion are blocked.

Starbucks on the fifth floor of iapm. Photo from: iapm website

The iapm mall on Huaihai Middle Road in Shanghai looks like a microcosm of China's coffee market. Starbucks has three stores here, which control the flow of people from cinemas, subway stations and office buildings, while Costa is located on the second floor, opposite Starbucks, and the boutique coffee Seesaw is located on the third floor facing the elevator, which is also the passageway to the office building. In May, the stayreal cafe opened by Ashin is next to Costa.

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