The evolving Cafe in China

Evolving Chinese Cafe

Is the coffee shop blooming everywhere a big explosion of demand accumulated for many years, or a market bubble?

Xin Zixiang, president of Man Coffee, has been very busy recently because he wants to open many new stores. He not only oversees the 20 new stores under construction, but also plans for the 60 stores that have been contracted and will be built. Since the first store was settled in Wangjing, Beijing three years ago, Man Coffee has opened 26 stores nationwide, covering Chengdu, Hangzhou, Shanghai, Wuhan, Taiyuan, Fuzhou, Zhengzhou and other cities, with 14 stores in Beijing alone. "In 10 years, we want to open 3000 homes," said Xin Zixiang, a Korean who is not tall and always has a cigar in his hand. He is very optimistic about the Chinese cafe market and makes bold remarks.

It is undeniable that Xin Zixiang is not the only one optimistic about China's coffee shop market. Starbucks, the coffee chain giant, says it will open 1500 stores in China by 2015, nearly doubling its current size. Costa, which has opened stores fastest in China, also proposed a plan to open 250 new stores within three years this year. Pacific Coffee, backed by China Resources Real Estate, also opened its 100th store in Beijing Xiushui Street earlier this year.

Cafes focused on niche markets are also beginning to emerge. Garage coffee, 3W coffee, beta coffee and so on are specially aimed at Internet people, Beijing fish eye coffee, Shanghai quality restaurant coffee is focused on promoting fine coffee, there are coffee delivery service and even coffee, more strange is, there is a shirt shop called "Kedney Shirt" also sold coffee...

According to statistics, there are currently 13600 cafes in the country, and this number is growing every day, and the growth rate of the Beijing market is as high as 18%. In Hangzhou, more than 10 coffee shops were opened in May, while according to the statistics of Hangzhou City Coffee Western Food Association, the average number of new coffee shops in Hangzhou in previous years was only 20~30.

China's coffee shop industry is really hot. But is this a demand explosion that has accumulated for years, or is it a market bubble?

Pathfinder survivors (10.880,-0.65,-5.64%)

Turn back the clock 15 years and coffee shops in Beijing weren't even a business, because for most Chinese, coffee shops were a distant place from their lives.

It was at that time that Zhuang Songlie opened the first carved time cafe on Chengfu Street at the east gate of Peking University, selling freshly ground coffee. At that time, like most Chinese, Zhuang Songlie actually didn't know much about coffee making. Sometimes he had to rely on foreigners who came to the store to guide him from time to time. This is Beijing in 1997.

Big Cat, the barista at Fisheye Cafe, came into contact with freshly ground coffee as early as the 1990s, thanks to his work experience in foreign companies. "At that time, coffee powder can only be bought at Friendship Mall. It is packed in the same jar as milk powder. A can costs one or two hundred yuan. Coffee pots are even more difficult to buy. They are all imported goods. The smallest American coffee pot costs three to four hundred yuan, which is equivalent to a month's salary." Big Cat recalled,"Ask friends to chat about things, either go to the teahouse or go to Sanlitun bar, there is really no coffee shop to go to."

Shangdao Coffee, which originated from China Taiwan, also entered Hainan in 1997 and expanded rapidly in the form of chain franchise. Up to now, there are more than 1300 stores all over the country. Before Starbucks came in, it had 90 percent of the Chinese cafe market. But strictly speaking, Shangdao Coffee is not a real coffee shop. Shangdao Coffee not only sells coffee, but also sells tea drinks in various pots. The food includes all kinds of Chinese rice, not desserts and sandwiches in ordinary cafes. The layout is mainly private rooms, not open spaces in ordinary cafes.

The real entry of cafes into Chinese life began with Starbucks entering the Chinese market in 1999. In addition to selling coffee, Starbucks has spared no effort to convey "coffee culture" to Chinese people and cultivate the habit of drinking coffee among Chinese young people.

"Starbucks is more of a brand than coffee," Schultz wrote in his autobiography,"Inject Heart." It is dedicated to providing consumers with a sense of romance. This romantic feeling is reflected in the romantic color Starbucks gives to coffee beans and makes everything in the store romantic and pleasant: jazz music, art photos posted on the walls, chair styles... This "romance" was labeled "petty bourgeoisie" by the Chinese in the early days, and it has a fatal appeal to young Chinese in the new era.

"In China, in the past 10 years, because of the painstaking efforts of pathfinders such as Starbucks and Costa, a wave of people have formed the habit of drinking coffee and labeling themselves with coffee. Both spiritual and material enjoyment have become labeled." Delivery coffee service "even coffee" investor wang jiang summary. His other well-known identity is the CEO of mobile Internet app developer Vitality Tianhui, whose app flight steward was recently invested by Ctrip, reportedly investing no less than 100 million yuan.

An interesting phenomenon is that carving time, Shangdao coffee and Starbucks, the pathfinders of the Chinese cafe industry, have survived, which is rare in other industries.

Mobile Internet pushes the third space

Coffee shops are becoming more and more of a place to drink coffee.

"There is no place in China to sit and chat with friends," Xin said, adding that even without coffee, there would be other cafes to provide such a place, known as the "third space." "There are teahouses in China, but the prices of tea in teahouses vary greatly. There are several hundred yuan for a cup, and there are also dozens of yuan for a cup. This is a very complicated problem." Xin Zixiang said that coffee is different. A cup of coffee costs dozens of yuan. Everyone knows it is this price before entering. There is no burden.

Zhuang Songlie once summed up the secret of coffee shop management, he believes that "openness and communication are the basic rules in coffee shops".

On this point, Douban CEO A Bei has a metaphor,"I always think Douban is like a line of 'carving time'," he said, people like coffee not because a certain coffee is the best in the world, or food is the best in the world, just because it creates a space to sit down and talk.

Over the years, Social networks such as Douban and Weibo have been working to create social spaces on the Internet in which people have relationships that require a real space to carry, and cafes are the most similar form. With the advent of WeChat, this migration has become more convenient and faster.

Wang Jiang now has a new method of organizing a bureau, that is, send a message on WeChat,"Tonight at XX place, chat coffee shop together, want to leave a message below", a few people will sign up soon. In addition, WeChat can also be very convenient to establish groups, which is very suitable for organizing multi-person parties.

The development of mobile Internet not only makes communication between people more frequent, but also changes people's office habits.

"Fanben" is a mobile Internet start-up company, they rented a more than 100 square meters office in Jianwai SOHO, very comfortable layout. A large open room, placed in the middle of a few desks, all bring their own computers to work. The most eye-catching is a group of green sofas beside the French windows, where they often rest and hold meetings. Even so, they often went downstairs to the zoo coffee shop and found a coffee shop to work overtime every Sunday afternoon.

In recent years, young people have disliked the traditional "partitioned" office environment because it feels very depressing and is not conducive to communication. They prefer the open office environment of cafes.

Cisco conducted a survey in 2011 specifically on the state of the mobile office. According to the report, employee mobility has become a common phenomenon in most businesses. 32% of employees rely on at least one mobile device during the day. More and more smooth 3G, WiFi wireless network and ubiquitous cloud service make it convenient for them to work efficiently at home, in hotels and even on trains and cars. There is no geographical restriction, time is controlled by themselves, and there is no restriction that they could not work without office before.

IDC predicts that 800 million employees in Asia Pacific will be mobile by 2015. A recent Gartner report predicts that approximately half of the world's enterprises will enable BYOD(Bring Your Own Device) initiatives and no longer provide computing devices to employees by 2017.

"We have outlets under every desk and multiple WiFi networks." Xin Zixiang told Commercial Value. To cater to this mobile office demand, the tables at Man Coffee are large and the chairs are soft and comfortable. "Starbucks tables are too small. You put a glass of water and a computer, and you find it very cramped. You're worried that you'll spill the water."

Is it a good business?

Although coffee shops are hot, not every one is a good business.

"60 to 70 percent of coffee shops fail in the first year," Big Cat recounted data he got from coffee machine suppliers. Independent coffee shops need to purchase coffee machines from domestic coffee machine suppliers, but according to suppliers, within a year after selling coffee machines, many people contact to help sell used machines.

"It's actually a very special thing that fish eyes can survive, and there's luck in it, because Sanlitun Village gave a relatively favorable rent price at that time." However, this year's rent has risen to the point that fish eyes cannot afford it, so they have to move to Sanlitun SOHO opposite with lower rent not long ago. Even so, according to Big Cat, Fisheye has not earned much money in recent years, and can only guarantee that he will not lose or earn.

Start-up cafes focused on market segments are also not optimistic. Point Technology has reported on nearly 20 start-up cafes in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu, Hangzhou and other places. Most of these cafes opened at the end of 2011 and early 2012, but except Guangzhou Beta, which is slightly profitable, other cafes are not profitable.

There have also been frequent reports of cafe closures everywhere. At present, Xiamen has far more than 2000 large and small cafes, which has become one of the cities with the highest density of coffee shops in China. But at the same time, most of Xiamen cafes are in a state of loss, and the real profit is no more than 30%.

In Qingdao, statistics show that there were 300 cafes in 2012, but 8 of the 10 coffee shops were losing money, and 10% of them would close down every year.

Xin Zixiang believes that the reason for this is still because of Chinese consumption habits. "In the United States, go to Starbucks for breakfast and order a sandwich and then a cup of coffee, and then want to drink it in the office a few hours later, just like Chinese hot pot, eat and want to eat, especially addictive." Whether it's Korea or China, it's not as addictive as the United States, where you can't go a day without coffee."

Starbucks 'business model is to open stores in crowded places and win by volume every day. Starbucks 'first store in Jinan reportedly sold a record 3000 cups of coffee a day, which is unimaginable and unattainable for any other coffee shop.

For most coffee shops, simply selling coffee is not enough.

The expansion of diffuse coffee is amazing, and some people even call it a "phenomenon". A store with an investment of 2 million yuan can recover its cost within 2 years, according to Xin Zixiang, and its profit margin is as high as 30%~40%, which is much higher than Starbucks '9.5%. It's all very simple. The best product sold at coffee is not coffee, but chocolate muffins. A muffin costs 38 yuan, which is higher than coffee but much lower than coffee.

"Actually, Coffee Man is more like a restaurant. Three meals a day, including afternoon tea, can be eaten in it. Why is it called a cafe? Why not a restaurant? Because coffee is a pricing tag, thanks to Starbucks, the price of 30 yuan for a cup of coffee is acceptable to the Chinese. In that case, if I open a coffee shop and sell coffee for 30 yuan, food can be sold for 50 or 60 yuan. This Arpu value is very high." Wang Jiang was right. As an investor in the coffee delivery service even coffee, he has studied the coffee industry.

Zhuang Songlie discovered this in the process of managing carving time. "At first there was almost no food," he wrote in Time Catcher."Later, it was discovered that eating was more profitable, and then the menu began to expand slowly." Now, in addition to coffee, there are salads, sandwiches, pizza and other foods.

Even so, not all foods are suitable for sale in cafes. Man Coffee mainly sells waffles, desserts and Korean burgers, and does not sell rice. Zhuang Songlie once insisted on not selling rice. "Fresh, healthy, less processed" is the standard coffee shop food should have, he said. Diffuse coffee is directly open kitchen, all food preparation process is transparent can see.

"Chinese people always think when they buy something, is this fresh? Could it be yesterday's stuff for sale today? So we might as well make it all on site." Xin Zixiang said this was his business secret.

Behind the different forms of coffee shops are profound observations of social needs at different times and various attempts made under commercial drive. In any case, the result is that more and more Chinese are walking into cafes and picking up this culturally charged brown drink.

This article is transferred from Sina Finance

(Responsible Editor: )