Analysis of Chinese Coffee Market which coffee brands are ranked by Starbucks in China's coffee market

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In September, Luckin Coffee reached a strategic cooperation with Tencent after exceeding 1000 stores across the country. Subsequently, Starbucks announced a comprehensive strategic cooperation with Alibaba, and Starbucks' takeout service, "Special Star delivery", a delivery service between Starbucks and ele.me, began trial operation in some stores in Beijing and Shanghai. The coffee industry is ushering in a new round of retail dividends, and will Starbucks, with takeout wings, make Chinese people fall in love with coffee?

1. Current situation of Chinese traditional Coffee Market

two。 New Retail status of Coffee

3. Future Development Direction and trend of New Coffee Retail

Current situation of Chinese traditional Coffee Market

Classification and proportion of coffee

This year, the emergence of Luckin Coffee's "Internet +" model has had a great impact on China's entire coffee market. Among the existing coffee categories, instant coffee accounts for the largest proportion, of which Nestl é and Maxwell are the most representative. In addition to instant coffee, we divide coffee into four main product lines as a whole: instant coffee, instant coffee, freshly ground coffee and fine coffee.

So in terms of China, Nestle is the largest coffee seller and brand in China. Globally, Nestl é accounts for more than 40% of the market, followed by Maxwell and Starbucks. So many coffee shops that open boutique coffee and freshly ground coffee will take Starbucks as a benchmark and analyze Starbucks products and pricing strategies as well as store locations. But in fact, the leader of this market is still Nestl é, and Starbucks only ranks third.

Current situation of coffee bean market

Nowadays, coffee beans are mainly divided into two categories: Arabica and Robusta. Basically, most freshly ground coffee brands will say that they choose Arabica coffee beans for their coffee.

As of 2017, global coffee bean production totaled 9.5 million tons, and the market is growing steadily every year. But China's coffee bean production is growing at an annual rate of more than 15%, which means that the growth rate of Chinese coffee bean production is higher than the world average. The main reason is that Chinese coffee chains represented by Starbucks are ploughing the Chinese market, and they all set up coffee bean production bases in Yunnan.

Yunnan is very famous for its tea, the most famous is Pu'er tea, but in fact, that land is also very suitable for growing coffee. Starbucks invested heavily in coffee production bases in Yunnan as early as 2012, which is why China's coffee bean production is growing faster than the world average.

Coffee beans are divided into Arabica and Robusta, in fact, most instant coffee and instant coffee tend to use Robusta coffee beans in the production process, because the cost of Robusta coffee beans is lower.

Instant coffee and instant coffee have developed to the current scale, and its coffee has reached the production standard of full industrialization. To set up a factory in a certain place, it is necessary to consider from the point of view of production cost. We must hope that the raw material cost of coffee beans will be lower. Another more important reason is that instant coffee is coffee powder, which evaporates all moisture in the production process, so you can't taste too much coffee when you drink it, so there is no need to use coffee beans of such good quality as Arabica.

Why are Arabica coffee beans only suitable for growing in Yunnan, China? Because Arabica coffee beans have two requirements: one is altitude, and the other is temperature. The higher the altitude, the more obvious the changes of temperature and precipitation. It may rain in the morning and warm up in the evening, or if the temperature is higher in the morning, it will rain in the evening. In this case, in the same period of time, coffee beans can absorb more nutrients and have a stronger flavor, which makes them more suitable for subsequent baking and processing. This is why today's boutique coffee tends to choose Arabica beans.

Boutique coffee is very popular now, because the traditional freshly ground coffee will add milk or concentrated syrup, which will remove the original coffee flavor, more just the taste of the drink. On the other hand, fine coffee has only water and coffee beans, which can retain the stronger flavor of coffee beans. Instant coffee and instant coffee are essentially a processed product, freshly ground coffee is relatively healthier, but sometimes can not drink the taste of coffee, while fine coffee retains the original taste of the coffee itself. With the upgrading of consumption, more and more attention will be paid to freshly ground coffee and Starbucks.

Traditional coffee sales channel

With the popularity of Tmall and Taobao a few years ago, online sales of instant coffee and instant coffee can reach about 20% and 25% of total coffee sales. In the past, the turnover in one day of Singles Day was equivalent to that of a chain enterprise, but the market for instant coffee and instant coffee accounted for only 20%, 25%, and the remaining 75% was still spent offline. The offline coffee market is mainly distributed in Shang Chao, traditional supermarkets such as RT-Mart, Wal-Mart and TESCO, or convenience stores such as the whole family and seven eleven.

Currently, the sales channels of ground coffee and boutique coffee are relatively single, mainly concentrated in some independent coffee shops, such as Starbucks, costa, Pacific and so on. In fact, Starbucks, which currently ranks first in this market, accounts for more than 50%. The second place is Shangdao Coffee, which accounts for about 20%, and the third place is costa. There is no mention of Lucky here, because Lucky is a new brand in 2018, so there is no way to judge its business situation for the whole year. According to normal estimates, Ruixing's turnover in 2018 may surpass costa and rank third in the freshly ground coffee category.

New Retail status of Coffee

New retail brand size and sales channels

At present, the new coffee retail brands in China are Starbucks, Luckin Coffee, McDonald's, CooffeeBox and so on. Their respective scale and market situation can be understood through the following table:

Details of new retail coffee brands

Ruixing: since the launch of the coffee delivery service in early 2018, it has more than 1300 stores in the entire Chinese market in less than a year. In the 20 years since Starbucks entered China, it has only 3500 stores so far, while Lucky can open 1300 stores in more than 10 months, an average of more than 1300 stores a month.

Starbucks: concentrate on sending the current pilot project in the core cities of Beijing, Shanghai and Guangzhou. from the internal point of view of Starbucks, CEO Kevin Johnson defines it as the entire concept of the fourth space, because in the traditional sense, Starbucks has always defined itself as the third space, and the definition of the fourth space is only in China in the world, and other countries have not yet begun. The reason for this is that Lucky's rapid development this year has really made Starbucks feel the pressure of its peers.

Coffee Box: do not have their own independent APP, all orders are in the official account of Wechat or Mini Program. Coffee Box recently got financing to start its own Coffee Box brand and start a coffee delivery business based on customer data accumulated from making takeout for Starbucks and costa. The development model is completely different from that of Ruixing, which pursues scale and opens stores quickly. At this stage, Coffee Box is more concerned about whether the turnover of each store can be profitable or not, and wants to gain a foothold in this market.

McDonald's: brand-McCoffee, operated by the domestic team, has deviated from the American model. With the development of freshly ground coffee in recent years, the McCoffee platform is greatly limited and sales are stagnant. With the rise of Internet coffee, McDonald's has changed its business logic: making coffee delivery service-- preparing to transform the kitchen in all 2500 McDonald's in China, adding coffee and cake equipment, which will be delivered directly to customers by takeout brothers. to meet the promotion of McCoffee.

At this stage, we see the McCoffee business online. The week before, there was a free event for the first cup, but it was only on trial for about three months, so its operation is not particularly clear. However, the delivery platform of McCoffee still needs to be paid attention to, because the traditional McDonald's has McDonald's. Based on the Mak Le delivery platform, the logistics and distribution of McCoffee is very stable, which is completely different from Starbucks and Ruixing. McCoffee is its own team, while Lucky's logistics mainly establishes cooperation with SF, while Starbucks relies on the help of Ali. So at this point, McDonald's has its unique advantages, in category control, delivery time control, it is better able to manage its own team.

Future Forecast of New Coffee Retail

Look at the New Retail from Lucky, Starbucks and McDonald's

First of all, as far as Lucky is concerned, there is no money in the whole operation at present. Because it is now facing a problem, as a new brand must constantly rely on discounts, order-free, full reduction, reduce their own customer price activities to attract customers to continue to buy. At the same time, it is different from traditional retail stores such as Starbucks and McDonald's, it does not have a better exposure facade offline, so customers can only learn about the Lucky brand through mobile phone dissemination or advertising.

Lucky at this stage only through the spokesman or discount activities and its cooperation with the Imperial Palace and other IP to ensure its brand awareness. On the one hand, it has to meet the rapid expansion of stores, on the other hand, it has to constantly invest money in the operation side, so the current pressure is still very great. Of course, it has also won its reputation, and its popularity at this stage, including the feedback from some of my friends, is good.

Starbucks is paying attention now, but the price is more expensive. First of all, there is no discount on the product, and then there is an additional charge of 9 yuan for delivery and 1 yuan for packing. Originally, the coffee in Starbucks is already more expensive in the coffee brand, reaching 40 yuan per cup. If you add the express fee, the unit price is nearly 50, this price is relatively high.

Of course, Starbucks is now engaged in some activities, such as if you are concentrating on ordering coffee on the delivery platform, you can give a coupon to the offline store, and you can go to the store to buy a specified item with the voucher. Although it also has such an early promotion, it is currently the most expensive of all the new retail coffee brands, and its performance remains to be seen.

McDonald's is somewhere between the two. The unit price of McCoffee itself is about 20 yuan, so its products will also charge you a distribution fee of 9 yuan, and the whole unit price is about 35 yuan. This unit price has reached the price of the set meal for McDonald's, which used to sell meat, French fries and so on, while coffee essentially sells water. The label that people put on McDonald's still stays in the hamburger restaurant to sell Coke. It is also a question whether customers will pay for a cup of coffee at such a price.

Therefore, from the point of view of Starbucks, Lucky and McDonald's, the current new retail market for coffee is still relatively chaotic, and there is no particular brand that has a particularly strong advantage.

In fact, every brand will have some problems of its own, and many customers will question that the traditional Starbucks is defined as the third space for customers, but will it affect my coffee drinking environment after you start a new takeout? Will so many takeout boys wait for coffee drinks affect the waiting time of customers in the store? These are all in conflict with the operation of traditional stores.

If these problems are not solved, Starbucks will not open its delivery business on a large scale nationwide, so this stage still belongs to the stage of internal adjustment and testing.

The problems faced by the new retail of coffee

For new coffee retailers, products like Frappuccino and cream have no way to maintain their original shape in the logistics process, so there are many products that cannot be sold online.

It is very important for Starbucks, Lucky and McDonald's to design some unique products for online platforms to distinguish them from offline. If the products sold online and offline are the same, or if only some basic models can be purchased online, the attractiveness of customers will certainly be greatly reduced.

McDonald's logistics is delivered by Mai Le. Lucky is a traditional express delivery company like Shun Feng. Starbucks is working with Ali, a professional takeout platform. The entire logistics service and logistics time are very important. Because even if a cup of coffee has a special incubator, if it is transported for more than half an hour, it will have a great impact on the temperature and taste of the coffee, which is also a practical problem faced by the new retail coffee at present.

However, because 2018 is indeed the first year of new coffee retail, in terms of the Internet, Tmall and Taobao have been growing very fast in the past decade, so we, as employees, have also seen this market in the next three years. Coffee delivery business is bound to show explosive and rapid growth. In such a growth, companies and brands will encounter real problems. Whoever can give priority to solving these problems will be able to take the lead in the new battlefield, which is the actual difficulties faced by business operators today.

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